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Amgen, Inc.

Amgen, Inc.

1 Amgen Center Drive
Thousand Oaks, California 91320-1799
U.S.A.
Telephone: (805) 477-1000
Fax: (805) 477-1010
Web site: http://www.amgen.com

Public Company
Incorporated:
1980
Employees: 20,100
Sales: $14.3 billion (2006)
Stock Exchanges: NASDAQ
Ticker Symbol: AMGN
NAIC: 325412 Pharmaceutical Preparation Manufacturing

A SLOW START IN BIOTECHNOLOGICAL RESEARCH

THE RACE TO MARKET EPO: 1989

AN INTERNATIONAL MARKET SHARE WITH NEUPOGEN

MAPPING THE HUMAN GENOME

THE GOAL FOR 2001

BETWEEN BIG PHARMA AND BIOTECH

PRINCIPAL SUBSIDIARIES

FURTHER READING

Amgen, Inc.v stands out in the biotechnology industry as one of the only businesses to transform itself from a drug development company into a pharmaceutical manufacturer while simultaneously maintaining steady sales. The largest independent biotechnology company in the United States, Amgen owes its transformation mostly to two gene-spliced drugs, Neupogen and Epogen. The company continues to develop human biopharmaceutical products using proprietary recombinant DNA technology.

A SLOW START IN BIOTECHNOLOGICAL RESEARCH

Amgen was formed in 1980 by a group of scientists and venture capitalists with a $19 million private-equity placement from venture capital firms and two major corporations. It began operations in 1981 in Thousand Oaks, California, in close proximity to thriving research centers at three nearby universities, among them the University of CaliforniaLos Angeles (UCLA) and the California Institute of Technology. The companys impressive scientific advisory board included several members of the National Academy of Sciences; its first chairman and CEO was George B. Rathmann, former vice-president for research and development (R&D) in the diagnostics division of Abbott Laboratories.

Through public stock offerings in 1983, 1986, and 1987, the company raised the capital needed to pursue its research, yet in its first five years, Amgen recorded losses. By 1986 it showed a humble profit, but 96 percent of its revenues that year came not from products, but from interest income and research partnerships with major drug companies. At this time, Amgen had five genetically engineered drugs undergoing human testing, the most promising of which was erythropoietin, or EPO, a synthetically produced hormone that promotes red blood cell production. The drug was targeted for people with kidney disease on dialysis, a process that lowers the kidneys natural production of EPO. The product proved to be a marvel of genetic engineering: In January 1987, an article in the New England Journal of Medicine detailed the positive results of a study involving EPO and 25 kidney-dialysis patients.

Because the worldwide market for patients with kidney failure was about $350 million a year in the mid-1980s, and because there were then fewer than 200,000 kidney-dialysis patients in the United States, Amgens EPO was accorded orphan drug status by the Food and Drug Administration (FDA), an exclusive seven-year marketing rights privilege. However, many argued that EPO was not just a drug for those suffering kidney failure; its applications for anemia, a common side effect of certain treatments for cancer, arthritis, and AIDS, were unlimited. The drug could also be used to reduce the need for blood transfusions during surgery.

With those uses in mind, in 1985 Amgen sold Johnson & Johnson the right to market EPO for treatment of anemia in the United States and for all uses in Europe. The previous year, Amgen had formed a joint venture with Kirin Brewery Company, Ltd., of Japan, according Kirin the right to manufacture and market EPO in Japan. Amgen, with rights to the U.S. dialysis market, began building an EPO manufacturing facility near its headquarters even before the company was granted its first patent for its recombinant human erythropoietin, named Epogen. Two days after receiving the patent in October 1987, Amgen filed with the FDA.

While awaiting FDA approval on Epogen, Amgen continued to develop other drugs, including a vaccine against hepatitis B, three products to stimulate the bodys disease-fighting system, and two kinds of interferon, or antiviral substances. In 1985 Amgen became the first company to genetically engineer granulocyte colony-stimulating factor (G-CSF), part of the family of substances that compel cells in the bone marrow to produce disease-fighting white blood cells. Researchers were hopeful it would help fight bacterial infections and certain types of cancer, as well as offset the effects of radiation and chemotherapy.

THE RACE TO MARKET EPO: 1989

As the first company to isolate and patent the human gene responsible for making EPO and to reproduce the drug in large quantities by transplanting the isolated gene into the ovarian cells of hamsters, Amgen had patent rights to genetically engineered EPO. One of Amgens competitors, Genetics Institute (GI), was the first to isolate a purified strain of the protein and had received a patent on natural, highly purified EPO. The two companies sued each other for patent infringement in an acrimonious battle due to its high stakes. GI had licensed its patents to Chugai Pharmaceutical Company, which planned to market EPO in the United States through Upjohn Company. Amgen subsequently asked the International Trade Commission (ITC) to block imports of Chugais EPO, but an ITC judge declined to do so in January 1989.

While Amgen was awaiting the FDAs green light, Johnson & Johnsons Ortho Pharmaceutical Corporation slapped Amgen with a lawsuit over what Ortho claimed would be spillover sales resulting from nondialysis use of Epogen. Ortho sought an injunction to delay marketing EPO until a dispute over terms of the two companies joint venture was settled. At the same time, several U.S. senators were trying to change the orphan drug law and claimed that EPO should not qualify for exclusivity because it had huge moneymaking potential. Amgen determined that EPOs annual tab for dialysis patients would run $6,000. Medicare would pick up the bill for dialysis patients, most of whom were hit by the huge cost of dialysis itself.

These legal tangles caused further delay in FDA approval of Epogen, which allowed competitors to pull ahead in their efforts to market the drug and meant financial losses for Amgen, which was poised to begin immediate shipments to patients with end-stage renal, or kidney, disease. In March 1989, a federal judge ruled that Ortho and Amgen had to submit a joint application for FDA approval of EPO, suggesting that cross-licensing might be a solution. Meanwhile, GI was nearing the finish line in its own labs.

COMPANY PERSPECTIVES

Amgen is a leading human therapeutics company in the biotechnology industry. For more than 25 years, the company has tapped the power of scientific discovery and innovation to advance the practice of medicine.

Amgen pioneered the development of novel products based on advances in recombinant DNA and molecular biology and launched the biotechnology industrys first blockbuster medicines. Today, as a Fortune 500 company serving millions of patients, Amgen continues to be an entrepreneurial, science-driven enterprise dedicated to helping people fight serious illness.

On June 1, 1989, the FDA approved Amgens EPO for treatment of anemia in kidney-dialysis patients. The next day Amgen shipped its first batch of the drug to UCLA Medical Center. By the end of June, it had sold nearly $17 million worth of the drug, its first product after nine years in business. Legal wrangles continued,

KEY DATES

1980:
Amgen is formed by a group of scientists and venture capitalists.
1981:
The company begins operations in Thousand Oaks, California.
1983:
Amgen completes its initial public offering of stock.
1984:
Amgen gives Kirin Brewery Company the right to manufacture and market Epogen in Japan.
1985:
Amgen sells Johnson & Johnson the right to market Epogen for treatment in the United States and for all uses in Europe; the company also becomes the first to genetically engineer granulocyte colony-stimulating factor (G-CSF).
1986:
Amgen holds a second public stock offering; the company shows a humble profit.
1987:
Amgen completes a third stock offering; the company receives its first patent for Epogen.
1989:
Amgen enters into a number of legal battles with other biotech and pharmaceutical firms for the rights to manufacture and market Epogen; the Food and Drug Administration (FDA) approves Epogen for treatment of anemia in kidney-dialysis patients; Amgen receives its first U.S. patent on recombinant G-CSF.
1991:
The FDA approves Amgens new antianemia drug Neupogen; total sales of Neupogen exceed $260 million.
1992:
Amgen becomes the first biotech company to top $1 billion in sales; Kevin Sharer becomes president and COO.
1993:
Amgens revenues reach $1.4 billion; the company doubles its planned R&D expenditures.
1994:
The FDA approves Neupogen for use in bone marrow transplants; Amgen purchases Synergen; the company is also awarded a national medal of technology for development of Epogen.
1997:
Amgen launches Infergen, a drug used to treat patients with chronic hepatitis C; the company also receives a license for Stemgen, a drug that generates the growth of stem cells and leads; changes in Medicare reimbursement policy lead to an unanticipated reduction in the rate of growth of Epogen.
1998:
A high number of deaths are reported among heart patients using Epogen.
1999:
Amgen invests in Abarelix, developed by Prae-cis Pharmaceuticals to reduce testosterone levels as part of treating prostate cancer; the companys shares rocket 140 percent by the first quarter.
2000:
Kevin Sharer, president and COO, becomes the companys next CEO, replacing Gordon M. Binder.
2001:
The FDA approves Amgens new antianemia drug called Aranesp.
2002:
Amgen completes the biggest acquisition in biotech history, purchasing Immunex for $15 billion from Wyeth Pharmaceuticals; delays in the production of Enbrel, a treatment for pain caused by rheumatoid arthritis, create a waiting list of 30,000 patients and an 88 percent decrease in gross profits.
2003:
Amgens sales total $7.9 billion; sales of Aranesp double in the last quarter.
2004:
The FDA approves Amgens new parathyroid drug Sensipar; the company also enters into a partnership with Abgenix to develop a new colon cancer treatment called panitu-mumab, its first treatment aimed directly at cancer.
2005:
Amgens profits increase by 55 percent.
2006:
The company unveils plans to market panitu-mumab as Vectibix.
2007:
Trials of Vectibix are stopped when early results suggested that the drug actually decreased the chances of survival; somere searchers claim Epogen and Aranesp increase the risks of heart problems and tumor growth.

but Amgen had the market to itself. GIs version of EPO awaited FDA approval. Around this time, CEO Rathmann passed his title to longtime CFO Gordon M. Binder, the author of Amgens deal with Kirin Brewery.

In 1990 the U.S. House of Representatives cleared a measure amending the orphan drug law, but EPO was exempt due to furious lobbying by both GI and Amgen. A federal magistrate ruled that Amgen was infringing on GIs patent, and vice versa; the ruling seemed again to aim at a cross-licensing agreement. Encouraged, GI stepped up its attack on Amgen by asking a federal court to freeze the companys profits on EPO sales, and sought an injunction to stop Amgen from producing the drug. The courts decision held that both companies had valid patents and that each was guilty of infringing on the others patent. The decision allowed Chugai to use Amgens patented genetic coding to produce the drug in Japan, then import and sell it. Meanwhile, Amgens product sales went from $2.8 million in 1989 to roughly $140 million in 1990. In March 1990, a federal judge ordered Amgen and GI to exchange royalty-free cross-licenses on EPO. In a significant setback for Amgen, the judge ruled that GIs product, Marogen, was also covered by the orphan drug status.

AN INTERNATIONAL MARKET SHARE WITH NEUPOGEN

Meanwhile, expectations were great for Amgens new drug, Neupogen. In clinical studies, G-CSF performed well, and the initial market for Neupogen was calculated to be twice that of Epogen. The hope was that the drugs use would extend beyond chemotherapy patients to include others who would benefit from increased immunization. Since G-CSF was not an orphan drug, many other biotechnology companies were simultaneously racing to bring their version of the product to market. Amgen received the first U.S. patent on recombinant G-CSF in 1989, and FDA approval for Neupogen was issued in February 1991. Amgen retained full domestic marketing rights to the drug, while Kirin Brewery had exclusive license for sales of G-CSF in Japan, Korea, and Taiwan.

In March 1991, Amgen received more good news: A federal court of appeals issued the final verdict in Amgens ongoing struggle with Genetics Institute over EPO, and the decision favored Amgen. The judge blocked GI from selling its version of the antianemia drug, ruling that GI had failed to demonstrate just how it made the purified form of EPO from human urine, the factor by which GIs product differed from Amgens. Thus, Amgen was given a legal monopoly over domestic EPO sales.

Amgen had shipped about $53 million of Neupogen by May 1991. Total sales for the drug for 1991 exceeded $260 million, and the company became known as a biotechnology leader. Amgen closed 1992 as the first biotech company to top $1 billion in sales and the only one to near the status of independent global pharmaceutical company. In the fall of 1992, Amgen tapped Kevin W. Sharer, president of the telephone giant MCI Communications Corporation, to fill the post of president and COO, and in 1993, Amgen announced an expansion of its R&D investment to nearly double what its 1992 expenditure had been. New research focused on blood-cell growth factors, soft-tissue growth factors, and neurobiology, inflammation, and nucleic acid therapeutics. The company also began exploring growth factors to help heal burns, surgical wounds, bone damage, and other injuries. As of early 1993, Amgen had more than 90 percent of the white blood cell stimulator market in the United States and no competition in the red blood cell stimulator market. Neupogens growth potential remained considerable. That year, Amgens revenues reached $1.4 billion, with Neupogen sales increasing 32 percent to provide 52 percent of the companys annual total sales of $719 million.

Throughout 1994, the growth rate of Amgens products continued to increase. Neupogen sales reached $829 million after the FDA approved its use in bone marrow transplants. Epogen sales also increased 23 percent to reach $729 million once the FDA boosted the target hematocrit level for chronic renal failure. Amgen agreed with Kirin Brewery to develop and market megakaryocyte growth and development factor (MGDF) as a platelet stimulator. It also joined with Amcell Corp. in commercializing certain cell separation products developed by Amcell in a strategic extension of Amgens clinical research with stem cell factor and Neupogen. In December 1994, Amgen purchased Synergen, acquiring that companys product pipeline, and was awarded a national medal of technology for development of Epogen, the first biotechnology company and only one of five corporations ever to receive this highest presidential tribute for the commercial application of technology.

Throughout this period of growth, Amgens legal battles continued. In 1991, Amgen was ordered to pay Johnson & Johnsons subsidiary, Ortho Pharmaceutical Corporation, $164 million in damages for selling Epogen in violation of their 1985 EPO marketing agreement during the 19 months it took for Ortho to bring its product to the market. However, in a turnaround case in 1992 Johnson & Johnson was ordered to pay Amgen $90 million for failing to comply with another aspect of the same 1985 agreement. According to the contract, Johnson & Johnson was to develop both a hepatitis B vaccine and interleukin 2, and Amgen was to receive royalties from those products. Johnson & Johnson failed to meet those obligations.

Legal battles claimed much of Amgens time through 1998. In 1995, the battle between Amgen and GI took another turn. The European Patent Office Board of Appeals had upheld a Kirin-Amgen patent on EPO in 1994. A district court in Massachusetts barred GI from asserting its U.S. patent, upholding the 1990 decision in favor of Amgen. The longstanding dispute with Johnson & Johnsons Ortho subsidiary was resurrected again in 1998 when a judge ordered Amgen to pay $200 million to remedy its violation of the sales agreement, while at the same time accepting Amgens method for calculating spillover sales and ordering Johnson & Johnson to pay Amgens $100 million expenses for the lengthy dispute. A second dispute with Johnson & Johnson cropped up shortly afterward over whether NESP (novel erythropoiesis stimulating protein), a new, longer-acting version of EPO, qualified as a new or improved drug. The court eventually awarded all rights to the new version of Epogen to Amgen, making NESP its first big drug success since 1991. Then, Transkaryotic began testing its own rival to Epogen, moving to reopen and challenge a patent infringement suit.

MAPPING THE HUMAN GENOME

Bringing new products to market required investments in genomics, which involved mapping and understanding human genetic structure. Amgens R&D budget increased accordingly throughout the 1990s: from $182 million in 1992 to $663 million in 1998. The company hoped to optimize its potential for developing and delivering product candidates, including those targeting neurodegenerative and inflammatory diseases, cancer support, and endocrine disorders, such as obesity and diabetes.

In 1995 Amgen continued its research on MGDF with Kirin, while on another front the two companies obtained license rights on thrombopoietin (TPO), a platelet stimulator, from Denmarks Novo Nordisk, putting them ahead of Genentech in the race to introduce a TPO product. That year, too, Amgen joined with NPS Pharmaceuticals in developing the latters Norcalcin to treat hyperparathyroidism in dialysis patients and continued research on the fat mouse obesity gene licensed from Rockefeller University. Sales for the year were $1.8 billion.

The year 1996 saw breakthroughs in testing on another Amgen product, Infergen, used to treat patients with chronic hepatitis C. Scientists at Amgen also identified a novel, naturally occurring protein with potential applications in osteoporosis and cloned a gene essential to the growth and proliferation of most cancer cells. The company stepped up clinical development of several new medicines: glia-derived neuro-factor (GDNF) with applications to Parkinsons; recombinant leptin as an anti-obesity drug; keratinocite growth factor (KGF) for preventing side effects of chemo and radiation therapy; and development with Kirin for NESP. On the business front, the company enjoyed a solid year financially with revenues exceeding $2 billion, an increase of 15 percent from the year before. Net income increased 26 percent to $680 million. Amgen licensed Yamanouchi Pharmaceutical the right to develop, manufacture, and commercialize Amgens consensus interferon (CIFN), a novel, nonnaturally occurring type one interferon, except in the United States and Canada.

THE GOAL FOR 2001

The launch of Infergen in October 1997 set Amgen on track toward achieving its goal of releasing five new products in five years. The company filed and received license applications for Stemgen, a drug that generated the growth of stem cells and led to a faster recovery of blood cells after chemotherapy, and made clinical trial progress on MGDF, KGF, leptin, and NESP. It also in-licensed the worldwide rights to Guilford Pharmaceuticals FKBP-neuroimunophilins, oral compounds that showed signs of treating neurodegenerative disorders, including Parkinsons and Alzheimers. Yet despite Amgens laboratory successes, the year was one of mixed financial results. A significant change in the governments Medicare reimbursement policy led to an unanticipated reduction in the rate of growth for Epogen, which nonetheless brought in $1.1 billion. Worldwide Neupogen sales at $1 billion were also negatively affected by the strengthening of the U.S. dollar, the continued tightening of healthcare budgets in some European countries, and the improved antiviral therapies that reduced the incidence of depleted white blood cell levels in AIDS patients. In 1998 Amgen received further bad news when it was discovered that the standard dose of Epogen could be reduced by a third if injected under the skin rather than being administered intravenously. Far more tragic, though, was the news that a high number of deaths were reported among heart patients who used Epogen.

Still Amgen continued to build upon its foundation in 1998 and 1999. R&D efforts were driven by internal research, in-licensing, and selective acquisition activities. In 1999 it invested in Abarelix, developed by Praecis Pharmaceuticals to reduce testosterone levels as part of treating prostate cancer. It also applied for FDA approval for an experimental drug to treat rheumatoid arthritis. During this time, Amgen shares rocketed 140 percent by the first quarter of 1999. With sales of its hallmark drugs Epogen and Neupogen, as well as Intergen still rising, and first quarter 1999 earnings up 32 percent, Amgen was prepared to enter the next century as the biggest biotechnology company in the world.

BETWEEN BIG PHARMA AND BIOTECH

Amgen greeted the new century with a variety of new developments and high hopes. In May 2000, Kevin Sharer moved from his post as president and COO to become the companys next CEO, replacing Gordon M. Binder who had announced his retirement the previous year. Amgen was also forging ahead into new territory. Just as sales of EPO and Neupogen had started to decline in 2000, a number of new drugs appeared at the end of Amgens research pipeline. One of the most promising, a new antianemia treatment called Aranesp, was approved for use by the FDA in September 2001. Late in 2001, Amgen also initiated the largest acquisition in the history of biotech. By July 2002, it had successfully acquired Seattle-based Immunex for $15 billion from Wyeth Pharmaceuticals.

This move provided Amgen with an enhanced portfolio of drugs, including Enbrel, a treatment for pain caused by rheumatoid arthritis. Possession of Enbrel brought Amgen into further competition with Johnson & Johnson, whose Procrit targeted the same condition. Of much greater concern, however, were persistent shortages of Enbrel. Though Amgen acted quickly to ramp up production, 30,000 patients were on a waiting list for the drug by the end of 2002. Problems with Enbrel ultimately dragged down earnings for 2002, resulting in an 88 percent decrease in gross profits even though its sales in the cancer and anemia markets were up 20 percent.

By 2003, Amgens earnings had rebounded. Its $7.9 billion in sales was larger than any of its biotech competitors. The company was also competitive against its Big Pharma rivals. Sales of Aranesp doubled in the last quarter of 2003, while those of Johnson & Johnsons Procrit declined by 12 percent. However, Amgen was increasingly a victim of its own success. Industry observers worried that Amgens research pipeline was not as robust as it should be and was too engaged in supportive care. Though the American Stock Exchange Biotech index shot up 70 percent between 2003 and 2004, Amgens stock rose only 13 percent. Response to the 2004 FDA approval of its new parathyroid drug Sensipar was similarly muted. In response to concerns, Amgen inaugurated its first research and development day on March 23 at which it sought to raise awareness about its R&D efforts. It also entered into a partnership with Abgenix to develop a new colon cancer treatment called panitumumab, its first treatment aimed directly at cancer.

In 2005, the company had five drugs with annual sales over $1 billion, 20 new products in its research pipeline, and profits that had increased by 55 percent. By 2006, it was investing $1 billion in new facilities and was planning to market panitumumab as Vectibix. A columnist in the May 1, 2006, issue of PR Week noted that Amgen had reached Big Pharma proportions while still maintaining the entrepreneurial spirit of a biotech. However, concerns continued to dog the company. Its earnings in the first quarter of 2006 did not meet the high expectations that had been set by its success. Meanwhile, the firms latest potential blockbuster drug, demosumab, which prevented bone loss from osteoporosis and other diseases, did not appear to be moving to market as quickly as analysts hoped. Once it arrived, Mercks Fosamax promised to provide stiff competition.

Amgens most serious setbacks came in 2007. Trials of Vectibix were stopped when early results suggested that the drug actually decreased the chances of survival. Equally troubling were claims that EPO and Aranesp, two of Amgens best selling products, increased risks of heart problems and tumor growth. In March, the FDA mandated more dire warning labels for the two drugs and the Centers for Medicare and Medicaid limited payment for their use. In response, Amgen scaled back its operating expenses, delaying completion of an Irish facility and sparking rumors that its state-of-the-art laboratory complex in Seattle, dubbed Helix, was likewise endangered. Amid so much bad news, there were also a few bright spots including at least one promising new drug, ILY101, intended to treat a condition related to kidney disease and, possibly, ease Amgens own near-term woes.

Carol I. Keeley
Updated, Daniel Thurs

PRINCIPAL SUBSIDIARIES

Amgen Colorado, Inc.; Amgen Development Corporation; Amgen Fremont; Amgen Holding, Inc.; Amgen, Inc.-Government Affairs Office; Amgen Manufacturing, Limited (Puerto Rico); Amgen Australia Pty Ltd.; Amgen Canada, Inc.; Amgen GmbH (Austria); Amgen Kabushiki Kaisha (Japan).

FURTHER READING

Amgen Inc., Wall Street Journal, January 13, 1993, p. B4.

Amgen Patent Claim on Drug for Anemia Is Rejected by Court, Wall Street Journal, May 1, 1990, p. A8.

Amgen Wins Ruling in Its Patent Dispute, Wall Street Journal, April 18, 1990, p. A12.

Andrews, Edmund, Drug Ruling Is a Setback for Amgen, New York Times, March 15, 1990, p. D1.

________, Rival Seeking to Freeze Amgen Profits on Drug, New York Times, January 31, 1990, p. D5.

Armstrong, Larry, Churning Out Earnings As the Economy Starts to Slow, Business Week, July 31, 1989, p. 30.

________, Two Rising Stars, Business Week, April 3, 1992.

Blood Money, Economist, April 20, 1991, p. 86.

Crowe, Deborah, Amgen Shows Some Signs of Slipping Off the Cutting Edge, Los Angeles Business Journal, July 31, 2006.

Flynn, Julie, The Hormone Thats Making Amgen Grow, Business Week, March 16, 1987, p. 96.

Giltenan, Edward, Bioprofits, Forbes, January 7, 1991, p. 10.

Gonzalez, Angel, and Amy Martinez, Will Finances Delay Amgen Project? Seattle Times, July 16, 2007, p. C1.

Hamilton, Joan, Amgen Is HotAnd Bothered, Business Week, January 23, 1989, p. 40.

________, A Drug That Could Replace TransfusionsIf It Ever Reaches the Market, Business Week, March 27, 1989, p. 60.

________, The Gene Jockeys Are Finally Seeing Some Green, Business Week, July 2, 1990, p. 77.

Jacobs, Paul, The Cutting Edge: Amgen Faces Hazards to Its Health, Los Angeles Times, November 30, 1998, p. C1.

Leptin in Clinicals for Obesity, Applied Genetics News, June 1996.

Looking for the Biotech Blockbusters, Fortune, July 7, 1986, p. 109.

Marcial, Gene, Biotech Fans Love Amgens One-Two Punch, Business Week, August 13, 1990, p. 104.

Mitchell, John, Life with Amgen: A Four Part Series, Thousand Oaks (Calif.) Star, September 1317, 1998.

Noah, Timothy, U.S. Aide Urges Cut in Payments on Amgen Drug, Wall Street Journal, June 15, 1990, p. B4.

Palmer, Jay, Trader, Barrons, March 11, 1991, p. 71.

Petruno, Tom, Amgen: Getting the Worst of Both Worlds, Los Angeles Times, February 1, 1993, p. D1.

Pollack, Andrew, Focus of Attention in Biotechnology, New York Times, May 24, 1991, p. D6.

Rundle, Rhonda, Amgen Inc. Is Expected to Be Awarded $90 Million from Johnson & Johnson, Wall Street Journal, September 10, 1992, p. B8.

________, Amgen Wins Biotech Drug Patent Battle, Wall Street Journal, March 7, 1991, p. A3.

________, FDA Approves Amgen Cancer Drug, but Rivals Loom, Wall Street Journal, February 22, 1991, p. B1.

Savitz, Eric, Fulfilling Their Promise, Barrons, September 25, 1989.

Stipp, David, Genetics Institute, Japanese Firm Seek Injunction Against Amgen in Patent Case, Wall Street Journal, January 31, 1990, p. B2.

Teitelman, Robert, Amgen: Biotechs Next Big Attraction? Financial World, January 26, 1988, p. 12.

Uncorking the Genes, Barrons, May 5, 1986.

Vinas, Tonya, Medicine Man: Can Amgen CEO Kevin Sharers Formula for Success Invigorate Your Company? Industry Week, January 2005, p. 28.

Weintraub, Arlene, Amgen Opens the Secret Curtain, Business Week, March 22, 2004, p. 82.

Weintraub, Arlene, and Amy Barrett, Can Amgen Go Toe-to-Toe with the Big Boys? Business Week, December 31, 2001, p. 50.

Weintraub, Arlene, and David Shook, A Blood Booster for Amgen? Business Week, December 4, 2000, p. 104.

Weintraub, Arlene, and Michael Arndt, An Ache at Amgen? Business Week, December 9, 2002, p. 69.

Welling, Kathryn, The Conversion of Paul, Barrons, September 7, 1987.

Wyatt, Edward, What Price Promise? Barrons, April 10, 1989.

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Amgen, Inc.

Amgen, Inc.

Amgen Center
1840 Dehavilland Drive
Thousand Oaks, California 91320-1789
U.S.A.
(805) 499-5725
Fax: (805) 499-9315
Web site: http://www.amgen.com

Public Company
Incorporated: 1980
Employees: 1,700
Sales: $2.71 billion (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: AMGN
NAIC: 325412 Pharmaceutical Preparation Manufacturing

Amgen, Inc. stands out in the biotechnology industry as one of the only businesses to transform itself from a drug development company into a pharmaceutical manufacturer while simultaneously maintaining steady sales. The largest independent biotechnology company in the United States, Amgen owes its transformation mostly to two gene-spliced drugs, Neupogen and Epogen. The company continues to develop human bio-pharmaceutical products using proprietary recombinant DNA technology.

A Slow Start in Biotechnological Research: 1980s

Amgen was formed in 1980 by a group of scientists and venture capitalists with a $19 million private-equity placement from venture capital firms and two major corporations. It began operations in 1981 in Thousand Oaks, California, in close proximity to thriving research centers at three nearby universities, among them UCLA and the California Institute of Technology. The companys impressive scientific advisory board included several members of the National Academy of Sciences; its first chairman and CEO was George B. Rathmann, former vice-president for research and development in the diagnostics division of Abbott Laboratories.

Through public stock offerings in 1983, 1986, and 1987, the company raised the capital needed to pursue its research, yet in its first five years, Amgen recorded losses. By 1986 it showed a humble profit, but 96 percent of its revenues that year came not from products, but from interest income and research partnerships with major drug companies. At this time, Amgen had five genetically engineered drugs undergoing human testing, the most promising of which was erythropoietin, or EPO, a synthetically produced hormone that promotes red blood cell production. The drug was targeted for people with kidney disease on dialysis, a process that lowers the kidneys natural production of EPO. The product proved to be a marvel of genetic engineering: In January 1987, an article in the New England Journal of Medicine detailed the positive results of a study involving EPO and 25 kidney-dialysis patients.

Because the worldwide market for patients with kidney failure was about $350 million a year in the mid-1980s, and because there were then fewer than 200,000 kidney-dialysis patients in the United States, Amgens EPO was accorded orphan drug status by the FDA, an exclusive seven-year marketing rights privilege. However, many argued that EPO was not just a drug for those suffering kidney failure; its applications for anemia, a common side effect of certain treatments for cancer, arthritis, and AIDS, were unlimited. The drug could also be used to reduce the need for blood transfusions during surgery.

With those uses in mind, in 1985 Amgen sold Johnson & Johnson the right to market EPO for treatment of anemia in the United States and for all uses in Europe. The previous year, Amgen had formed a joint venture with Kirin Brewery Company, Ltd. of Japan, according Kirin the right to manufacture and market EPO in Japan. Amgen, with rights to the U.S. dialysis market, began building an EPO manufacturing facility near its headquarters even before the company was granted its first patent for its recombinant human erythropoietin, named Epogen. Two days after receiving the patent in October 1987, Amgen filed with the FDA.

While awaiting FDA approval on Epogen, Amgen continued to develop other drugs, including a vaccine against hepatitis B, three products to stimulate the bodys disease-fighting system, and two kinds of interferon, or antiviral substances. In 1985 Amgen became the first company to genetically engineer granulocyte colony-stimulating factor (G-CSF), part of the family of substances that compel cells in the bone marrow to produce disease-fighting white blood cells. Researchers were hopeful it would help fight bacterial infections and certain types of cancer, as well as offset the effects of radiation and chemotherapy.

The Race to Market EPO: 1989

As the first company to isolate and patent the human gene responsible for making EPO and to reproduce the drug in large quantities by transplanting the isolated gene into the ovarian cells of hamsters, Amgen had patent rights to genetically engineered EPO. One of Amgens competitors, Genetics Institute (GI), was the first to isolate a purified strain of the protein and had received a patent on natural, highly purified EPO. The two companies now sued each other for patent infringement in an acrimonious battle due to its high stakes. GI had licensed its patents to Chugai Pharmaceutical Company, which planned to market EPO in the United States through Upjohn Company. Amgen subsequently asked the International Trade Commission (ITC) to block imports of Chugais EPO, but an ITC judge declined to do so in January 1989.

While Amgen was awaiting the FDAs green light, Johnson & Johnsons Ortho Pharmaceutical Corporation slapped Amgen with a lawsuit over what Ortho claimed would be spillover sales resulting from non-dialysis use of Epogen. Ortho sought an injunction to delay marketing EPO until a dispute over terms of the two companies joint venture was settled. At the same time, several U.S. senators were trying to change the orphan drug law and claimed that EPO should not qualify for exclusivity because it had huge money-making potential. Amgen determined that EPOs annual tab for dialysis patients would run $6,000. Medicare would pick up the bill for dialysis patients, most of whom were hit by the huge cost of dialysis itself.

These legal tangles caused further delay in FDA approval of Epogen, which allowed competitors to pull ahead in their efforts to market the drug and meant financial losses for Amgen, which was poised to begin immediate shipments to patients with end-stage renal, or kidney, disease. In March 1989, a federal judge ruled that Ortho and Amgen had to submit a joint application for FDA approval of EPO, suggesting that cross-licensing might be a solution. Meanwhile, GI was nearing the finish line in its own labs.

On June 1, 1989, the FDA approved Amgens EPO for treatment of anemia in kidney dialysis patients. The next day Amgen shipped its first batch of the drug to UCLA Medical Center. By the end of June, it had sold nearly $17 million worth of the drugits first product after nine years in business. Legal wrangles continued, but Amgen had the market to itself. GIs version of EPO awaited FDA approval. Around this time, CEO Rathmann passed his title to longtime CFO Gordon M. Binder, the author of Amgens deal with Kirin Brewery.

In 1990 the U.S. House of Representatives cleared a measure amending the orphan drug law, but EPO was exempt due to furious lobbying by both GI and Amgen. A federal magistrate ruled that Amgen was infringing on GIs patent, and vice versa; the ruling seemed again to aim at a cross-licensing agreement. Encouraged, GI stepped up its attack on Amgen by asking a federal court to freeze the companys profits on EPO sales, and sought an injunction to stop Amgen from producing the drug. The courts decision held that both companies had valid patents and that each was guilty of infringing on the others patent. The decision allowed Chugai to use Amgens patented genetic coding to produce the drug in Japan, then import and sell it. Meanwhile, Amgens product sales went from $2.8 million in 1989 to roughly $140 million in 1990. In March 1990, a federal judge ordered Amgen and GI to exchange royalty-free cross-licenses on EPO. In a significant setback for Amgen, the judge ruled that GIs product, Marogen, was also covered by the orphan drug status.

An International Market Share with Neupogen

Meanwhile, expectations were great for Amgens new drug, Neupogen. In clinical studies, G-CSF performed well, and the initial market for Neupogen was calculated to be twice that of Epogen. The hope was that the drugs use would extend beyond chemotherapy patients to include others who would benefit from increased immunization. Since G-CSF was not an orphan drug, many other biotechnology companies were simultaneously racing to bring their version of the product to market. Amgen received the first U.S. patent on recombinant G-CSF in 1989, and FDA approval for Neupogen was issued in February 1991. Amgen retained full domestic marketing rights to the drug, while Kirin Brewery had exclusive license for sales of G-CSF in Japan, Korea, and Taiwan.

In March 1991, Amgen received more good news: A federal court of appeals issued the final verdict in Amgens ongoing struggle with Genetics Institute over EPO, and the decision favored Amgen. The judge blocked GI from selling its version of the anti-anemia drug, ruling that GI had failed to demonstrate just how it made the purified form of EPO from human urinethe factor by which GIs product differed from Amgens. Thus, Amgen was given a legal monopoly over domestic EPO sales.

Company Perspectives:

Fulfilling Amgens mission to be the world leader in developing and delivering cost-effective therapeutics based on advances in cellular and molecular biology depends upon the companys ability to make continued progress in unlocking the power of cellular and molecular biology to develop products that satisfy the unmet medical needs of patients worldwide.

Amgen had shipped about $53 million of Neupogen by May 1991. Total sales for the drug for 1991 exceeded $260 million, and the company became known as a biotechnology leader. Amgen closed 1992 as the first biotech company to top $1 billion in sales and the only one to near the status of independent global pharmaceutical company. In the fall of 1992, Amgen tapped Kevin W. Sharer, president of the telephone giant MCI Communications Corporation, to fill the post of president and COO, and in 1993, Amgen announced an expansion of its research and development investment to nearly double what its 1992 expenditure had been. New research focused on blood-cell growth factors, soft-tissue growth factors, and neurobiology, inflammation, and nucleic acid therapeutics. The company also began exploring growth factors to help heal burns, surgical wounds, bone damage, and other injuries. As of early 1993, Amgen had more than 90 percent of the white blood cell stimulator market in the United States and no competition in the red blood cell stimulator market. Neupogens growth potential remained considerable. That year, Amgens revenues reached $1.4 billion, with Neupogen sales increasing 32 percent to provide 52 percent of the companys annual total sales of $719 million.

Throughout 1994, the growth rate of Amgens products continued to increase. Neupogen sales reached $829 million after the FDA approved its use in bone marrow transplants. Epogen sales also increased 23 percent to reach $729 million once the FDA boosted the target hematocrit level for chronic renal failure. Amgen agreed with Kirin Brewery to develop and market megakaryocyte growth and development factor (MGDF) as a platelet stimulator. It also joined with Amcell Corp. in commercializing certain cell separation products developed by Amcell in a strategic extension of Amgens clinical research with stem cell factor and Neupogen. In December 1994, Amgen purchased Synergen, acquiring that companys product pipeline, and was awarded a national medal of technology for development of Epogen, the first biotechnology company and only one of five corporations ever to receive this highest presidential tribute for the commercial application of technology.

Throughout this period of growth, Amgens legal battles continued. In 1991, Amgen was ordered to pay Johnson & Johnsons subsidiary, Ortho Pharmaceutical Corporation, $164 million in damages for selling Epogen in violation of their 1985 EPO marketing agreement during the 19 months it took for Ortho to bring its product to the market. However, in a turnaround case in 1992 Johnson & Johnson was ordered to pay Amgen $90 million for failing to comply with another aspect of the same 1985 agreement. According to the contract, Johnson & Johnson was to develop both a hepatitis B vaccine and interleukin 2, and Amgen was to receive royalties from those products. Johnson & Johnson failed to meet those obligations.

Legal battles claimed much of Amgens time through 1998. In 1995, the battle between Amgen and GI took another turn. The European Patent Office Board of Appeals had upheld a Kirin-Amgen patent on EPO in 1994. Now a district court in Massachusetts barred GI from asserting its U.S. patent, upholding the 1990 decision in favor of Amgen. The longstanding dispute with Johnson & Johnsons Ortho subsidiary was resurrected again in 1998 when a judge ordered Amgen to pay $200 million to remedy its violation of the sales agreement, while at the same time accepting Amgens method for calculating spillover sales and ordering Johnson & Johnson to pay Amgens $100 million expenses for the lengthy dispute. But a second dispute with Johnson & Johnson cropped up shortly afterward over whether NESP, (novel erythropoiesis stimulating protein), a new, longer-acting version of EPO, qualified as a new or improved drug. The court eventually awarded all rights to the new version of Epogen to Amgen, making NESP its first big drug success since 1991. Then, Transkaryotic began testing its own rival to Epogen, moving to reopen and challenge a patent infringement suit.

Mapping the Human Genome: 1990s

Bringing new products to market required investments in genomics, which involved mapping and understanding human genetic structure. Amgens R & D budget increased accordingly throughout the 1990s: from $182 million in 1992 to $663 million in 1998. The company hoped to optimize its potential for developing and delivering product candidates, including those targeting neurodegenerative and inflammatory diseases, cancer support, and endocrine disorders, such as obesity and diabetes.

In 1995 Amgen continued its research on MGDF with Kirin, while on another front the two companies obtained license rights on thrombopoietin (TPO), a platelet stimulator, from Denmarks Novo Nordisk, putting them ahead of Genentech in the race to introduce a TPO product. That year, too, Amgen joined with NPS Pharmaceuticals in developing the latters Norcalcin to treat hyperparathyroidism in dialysis patients and continued research on the fat mouse obesity gene licensed from Rockefeller University. Sales for the year were $1.8 billion.

The year 1996 saw breakthroughs in testing on another Amgen product, Infergen, used to treat patients with chronic hepatitis C. Scientists at Amgen also identified a novel, naturally occurring protein with potential applications in osteoporosis and cloned a gene essential to the growth and proliferation of most cancer cells. The company stepped up clinical development of several new medicines: glia-derived neuro-factor (GDNF) with applications to Parkinsons; recombinant leptin as an anti-obesity drug; keratinocite growth factor (KGF) for preventing side effects of chemo and radiation therapy; and development with Kirin for NESP (novel erythropoiesis stimulating protein). On the business front, the company enjoyed a solid year financially with revenues exceeding $2 billion, an increase of 15 percent from the year before. Net income increased 26 percent to $680 million. Amgen licensed Yamanouchi Pharmaceutical the right to develop, manufacture, and commercialize Amgens consensus interferon (CIFN), a novel, non-naturally occurring type one interferon, except in the United States and Canada.

The Goal for 2001

The launch of Infergen in October 1997 set Amgen on track toward achieving its goal of releasing five new products in five years. The company filed and received license applications for Stemgen, a drug that generated the growth of stem cells and led to a faster recovery of blood cells after chemotherapy, and made clinical trial progress on MGDF, KGF, leptin, and NESP. It also in-licensed the worldwide rights to Guilford Pharmaceuticals FKBP-neuroimunophilins, oral compounds that showed signs of treating neurodegenerative disorders, including Parkinsons and Alzheimers. Yet despite Amgens laboratory successes, the year was one of mixed financial results. A significant change in the governments Medicare reimbursement policy led to an unanticipated reduction in the rate of growth for Epogen, which nonetheless brought in $1.1 billion. Worldwide Neupogen sales at $1 billion were also negatively affected by the strengthening of the U.S. dollar, the continued tightening of healthcare budgets in some European countries, and the improved antiviral therapies that reduced the incidence of depleted white blood cell levels in AIDS patients. In 1998 Amgen received further bad news when it was discovered that the standard dose of Epogen could be reduced by a third if injected under the skin rather than being administered intravenously. Far more tragic, though, was the news that a high number of deaths were reported among heart patients who used Epogen.

Still Amgen continued to build upon its foundation in 1998 and 1999. Research and development efforts were driven by internal research, in-licensing, and selective acquisition activities. In 1999 it invested in Abarelix, developed by Praecis Pharmaceuticals to reduce testosterone levels as part of treating prostate cancer. It also applied for FDA approval for an experimental drug to treat rheumatoid arthritis. During this time, Amgen shares rocketed 140 percent by the first quarter of 1999. With sales of its hallmark drugs Epogen and Neupogen, as well as Intergen still rising, and first quarter 1999 earnings up 32 percent, Amgen was prepared to enter the next century as the biggest biotechnology company in the world.

Principal Subsidiaries

Amgen Australia Pty Ltd.; Amgen N.V.; Amgen Canada Inc.; Amgen Greater China Ltd.; Amgen GmbH (Germany); Amgen S.A. (France); Amgen S.p.A. (Italy); Amgen K.K. (Japan); Amgen B.V. (Netherlands); Amgen-Biofarmaceutica (Portugal); Amgen S.A. (Spain); Amgen (Europe) AG (Switzerland); Kirin-Amgen, Inc. (Switzerland); Amgen Limited (U.K.); Amgen Sales Corporation (West Indies).

Further Reading

Amgen Inc., Wall Street Journal, January 13, 1993, p. B4.

Amgen Patent Claim on Drug for Anemia Is Rejected by Court, Wall Street Journal, May 1, 1990, p. A8.

Amgen Wins Ruling in Its Patent Dispute, Wall Street Journal, April 18, 1990, p. A12.

Andrews, Edmund, Drug Ruling Is a Setback for Amgen, New York Times, March 15, 1990, p. D1.

_____, Rival Seeking to Freeze Amgen Profits on Drug, New York Times, January 31, 1990, p. D5.

Armstrong, Larry, Churning Out Earnings As the Economy Starts to Slow, Business Week, July 31, 1989, p. 30.

_____, Two Rising Stars Business Week, April 3, 1992.

Blood Money, Economist, April 20, 1991, p. 86.

Flynn, Julie, The Hormone Thats Making Amgen Grow, Business Week, March 16, 1987, p. 96.

Giltenan, Edward, Bioprofits, Forbes, January 7, 1991, p. 10.

Hamilton, Joan, Amgen Is HotAnd Bothered, Business Week, January 23, 1989, p. 40.

_____, A Drug That Could Replace TransfusionsIf It Ever Reaches the Market, Business Week, March 27, 1989, p. 60.

_____, The Gene Jockeys Are Finally Seeing Some Green, Business Week, July 2, 1990, p. 77.

Jacobs, Paul, The Cutting Edge: Amgen Faces Hazards to Its Health, Los Angeles Times, November 30, 1998, p. C1.

Leptin in Clinicals for Obesity, Applied Genetics News, June 1996.

Looking for the Biotech Blockbusters, Fortune, July 7, 1986, p. 109.

Marcial, Gene, Biotech Fans Love Amgens One-Two Punch, Business Week, August 13, 1990, p. 104.

Mitchell, John, Life with Amgen: A Four Part Series, Thousand Oaks Star, September 1317, 1998.

Noah, Timothy, U.S. Aide Urges Cut in Payments on Amgen Drug, Wall Street Journal, June 15, 1990, p. B4.

Palmer, Jay, Trader, Barrons, March 11, 1991, p. 71.

Petruno, Tom, Amgen: Getting the Worst of Both Worlds, Los Angeles Times, February 1, 1993, p. D1.

Pollack, Andrew, Focus of Attention in Biotechnology, New York Times, May 24, 1991, p. D6.

Rundle, Rhonda, Amgen Inc. Is Expected to Be Awarded $90 Million from Johnson & Johnson, Wall Street Journal, September 10, 1992, p. B8.

_____, Amgen Wins Biotech Drug Patent Battle, Wall Street Journal, March 7, 1991, p. A3.

_____, FDA Approves Amgen Cancer Drug, but Rivals Loom, Wall Street Journal, February 22, 1991, p. B1.

Savitz, Eric, Fulfilling Their Promise, Barrons, September 25, 1989.

Stipp, David, Genetics Institute, Japanese Firm Seek Injunction Against Amgen in Patent Case, Wall Street Journal, January 31, 1990, p. B2.

Teitelman, Robert, Amgen: Biotechs Next Big Attraction?, Financial World, January 26, 1988, p. 12.

Uncorking the Genes, Barrons, May 5, 1986.

Welling, Kathryn, The Conversion of Paul, Barrons, September 7, 1987.

Wyatt, Edward, What Price Promise?, Barrons, April 10, 1989.

Carol I. Keeley

updated by Carrie Rothburd

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Amgen, Inc.

Amgen, Inc.

Amgen Center
1840 Dehavilland Drive
Thousand Oaks, California 91320-1789
U.S.A.
(805) 499-5725
Fax: (805) 499-9315

Public Company
Incorporated: 1980
Employees: 1,700
Sales: $645.3 million
Stock Exchanges: NASDAQ
SICs: 2834 Pharmaceutical Preparations

Amgen, Inc. stands out in the biotechnology industry as one of the only businesses to transform itself from a drug-development company into a pharmaceutical manufacturer while maintaining steady sales. The largest independent biotechnology company in the United States by 1993, Amgen became a billion-dollar company after five initial years in the red. This transformation was due mostly to two gene-spliced drugs. Amgen continues to develop human bio-pharmaceutical products using proprietary recombinant DNA technology.

Amgen was formed in 1980 by a group of scientists and venture capitalists. The companys impressive scientific advisory board included several members of the National Academy of Sciences. Amgens first chairman and CEO was George B. Rathmann, a former vice president for research and development in the diagnostics division of Abbott Laboratories.

With a $19 million private-equity placement from venture capital firms and two major corporations (including Abbott Laboratories), Amgen began operations in 1981. Its Thousand Oaks, California, location assured proximity to thriving research centers at three nearby universities, including UCLA and the California Institute of Technology. Through public stock offerings in 1983, 1986, and 1987, the company raised the capital needed to pursue its research. In its first five years, Amgen recorded losses. In 1986 it showed a humble profit, but 96 percent of its revenues that year came not from products but from interest income and research partnerships with major drug companies.

By 1986 Amgen had five genetically engineered drugs undergoing human testing, the final step before filing for Food and Drug Administration (FDA) approval. The most promising of these drugs was erythropoietin, or EPO, a hormone that promotes red blood cell production. EPO is usually produced by the kidneys to prevent anemia by inducing cells in the bone marrow to produce red blood cells. The drug was targeted for people with kidney disease who are dependent on dialysis, a process that lowers the kidneys natural production of EPO. The product proved to be a marvel of genetic engineering: a synthetic form of a natural hormone that stimulates production of red blood cells. In January of 1987 an article in the New England Journal of Medicine increased excitement over EPO by detailing positive results of a study involving 25 kidney-dialysis patients.

Because the total worldwide market for patients with kidney failure is about $350 million a year, the market for EPO would seem to have a ceiling. In addition, since there were fewer than 200,000 kidney-dialysis patients in the United States at the time, Amgens EPO was accorded orphan drug status by the FDA. Orphan drug status conferred an exclusive seven-year marketing rights privilege to the first company to develop a drug that benefits fewer than 200,000 people. Its purpose was to create an incentive for researchers to develop drugs that seemed not to promise much profit. But EPO was not just a drug for those suffering kidney failure; many argued that its applications for all causes of anemia were unlimited. Anemia was a common side effect of certain treatments for cancer, arthritis, and AIDS. The drug could also be used to reduce the need for blood transfusions during surgery.

With those uses in mind, in 1985 Amgen sold Johnson & Johnson the right to market EPO for treatment of anemia in the United States and for all uses in Europe. The previous year, Amgen had formed a joint venture with Kirin Brewery Company, Ltd of Japan, capitalized at $24 million, with Kirin gaining the right to manufacture and market EPO in Japan. Amgen, with the rights to the U.S. dialysis market firmly in its pocket, stood to benefit first as this was the first area of use under review by the FDA.

In the biotechnology industry of the 1980s, five to ten years and an average of more than $150 million were needed to develop a product. Products needed to be tested extensively, put through stiff regulatory approval, manufactured, and marketed before an idea began to repay its investors. In the early 1980s, capital to fund new products to promising new companies like Genentech, Cetus, Genetics Institute, and Amgen was plentiful. Nine years later, however, few of the companies that started off as genesplicers were still in business, and many of the smaller companies had merged with larger competitors to stay alive.

The primary method by which biotech companies raised the cash they needed to develop promising drugs was to make deals to swap potential profits and technology. Amgen was unusual both in its attractive agreements with large companies and in its luck. It retained the right to manufacture and sell its EPO to dialysis patients in the United States and began building an EPO manufacturing facility near its headquarters even before the company was granted its first patent for its recombinant human erythropoietin, which it named Epogen. Two days after receiving the patent in October of 1987, Amgen filed with the FDA.

While awaiting approval, Amgen continued to develop other drugs, including a vaccine against hepatitis B, three products to stimulate the bodys disease-fighting system (interleukin 2), and two kinds of interferon (antiviral substances). In 1985 Amgen became the first company to genetically engineer a substance called granulocyte colony-stimulating factor (G-CFS). As part of the family of substances that compel cells in the bone marrow to produce disease-fighting white blood cells, researchers were hopeful it would help fight bacterial infections and certain types of cancer, as well as offset the effects of radiation and chemotherapy. G-CFS was undergoing testing on cancer patients in chemotherapy in 1987.

Meanwhile, Amgen was about a year ahead of its closest rivals in the race to market EPO. However, one of Amgens competitors, Genetics Institute (GI), had also received a patent on EPO, and the two companies sued each other for infringement. Amgens patent covered rights to genetically engineered EPO, while GIs patent covered rights to natural, highly purified EPO. Although EPO is a hormone that occurs naturally, it can be manufactured through recombinant DNA technology in quantities that are commercially viable. The first company to isolate and patent the human gene responsible for making EPO, as well as the first to reproduce the drug in large quantities, was Amgen. It reproduced the drug by transplanting the isolated gene into the ovarian cells of hamsters. GI, on the other hand, was the first to isolate a purified strain of the protein. GIs patent was for the compound itself. The battle became acrimonious due to the high stakes: GI had licensed its patents to Chugai Pharmaceutical Company. The Japanese firm planned to market EPO in the United States through Upjohn Company. Amgen asked the International Trade Commission (ITC) to block imports of Chugais EPO while the patent war continued. An ITC judge declined to do so in January of 1989.

While Amgen was awaiting the FDAs green light, Johnson & Johnsons Ortho Pharmaceutical Corporation slapped Amgen with a lawsuit. Ortho sought an injunction to delay marketing of EPO until a dispute over terms of their joint venture was settled. The issue was what Ortho claimed would be spillover sales. It could take another year or so before approval was granted for non-dialysis use, but because physicians often prescribe drugs outside their approved uses, it seemed likely that EPO would be used to treat many different forms of anemia before Ortho was able to claim the profits. At the same time, several U.S. senators were trying to change the orphan drug law and claimed that EPO should not qualify for exclusivity because it had huge money-making potential. The law in general, senators claimed, allowed manufacturers to reap large monopoly profits. Before its prize child even came on the market, Amgen was being fired upon on all sides by those convinced of EPOs potential.

These legal tangles caused further delay in FDA approval of the drug, which allowed competitors to pull ahead in their efforts to market the drug. The delay in approval also meant financial losses for Amgen. The company was poised to begin immediate shipments to patients with end-stage renal, or kidney, disease. These patients often require blood dialysis several times a week, and frequent blood transfusions on top of that to keep red blood cell counts at healthy levels. The company determined that EPOs annual tab for dialysis patients would run $6,000. Medicare would plck up the bill for dialysis patients, most of whom are hit by the huge cost of dialysis itself.

In March of 1989 a federal judge ruled that Ortho and Amgen must submit a joint application for FDA approval of EPO. Other aspects of that legal battle continued: The feud between Amgen and GI over patent rights suggested that cross-licensing might be a solution. Meanwhile, GI was nearing the finish line in its own labs. Intensifying the race was the orphan drug award, a seven-year monopoly on sales to the winner.

On June 1, 1989, the FDA approved Amgens EPO for treatment of anemia in kidney-dialysis patients. The next day Amgen shipped its first batch to UCLA Medical Center. By the end of June, it had sold nearly $17 million worth of the drug. After nine years in business, Amgen was finally selling its first product. While legal wrangles continued, Amgen had the market to itself. GIs version of EPO was still awaiting FDA approval. Around this time, CEO Rathmann passed his title to longtime CFO Gordon M. Binder, the author of Amgens deal with Kirin Brewery.

In 1990 the U.S. House of Representatives cleared a measure amending the orphan drug law, but EPO was exempt due to furious lobbying by both GI and Amgen. A federal magistrate ruled that Amgen was infringing on GIs patent, and vice versa; a ruling which accorded no clear victory but seemed again to aim at a cross-licensing agreement. Encouraged, GI stepped up its attack on Amgen by asking a federal court to freeze the companys profits on EPO sales and sought an injunction to stop Amgen from producing the drug. The courts decision held that both companies had valid patents and that each was guilty of infringing on the others patent. The decision allowed Chugai to use Amgens patented genetic coding to produce the drug in Japan, then import and sell it without infringing any patents. Meanwhile, Amgen was ringing up profits. Product sales went from $2.8 million in 1989 to roughly $140 million in 1990.

In March of 1990 a federal judge ordered Amgen and GI to exchange royalty-free cross-licenses on EPO. The judge ruled that GIs product, called Marogen, was also covered by the orphan drug status. The ruling was considered a significant setback for Amgen. In June of 1990, an official from the Department of Health and Human Services told a house subcommittee that dialysis centers across the country were earning a more than 40 percent profit on administered EPO. Amgens pricing of the drug also came under scrutiny. The company had accrued up $190 million in sales in EPOs first year on the market.

Meanwhile, expectations were great for Amgens new drug, Neupogen. This G-CSF (granulocyte colony stimulating factor) was a protein that stimulated white blood cell production and was being tested to combat chronic white blood cell deficiencies in cancer patients undergoing chemotherapy. In the process of chemotherapy, not only are cancerous cells destroyed, but so are healthy white blood cells. Since white blood cells are the primary component of the bodys immune system, damaging them increases a patients risk of incurring a potentially fatal infection.

Amgen retained much greater marketing rights for Neupogen than for Epogen. Amgen received the first U.S. patent on recombinant G-CSF in 1989 and FDA approval for Neupogen was issued in February of 1991. In clinical studies G-CSF performed resoundingly well. The hope was that the drugs use would extend beyond chemotherapy patients to include others who would benefit from increased immunization. Since G-CSF was not considered an orphan drug, many other biotechnology companies were racing to bring their own version of the product to market. The speculation was that Neupogen could launch Amgen into the arena of international drug companies. The initial market for Neupogen was calculated to be twice that of Epogen, with Amgen retaining full domestic marketing rights to the drug. Kirin Brewery had exclusive license for sales of G-CSF in Japan, Korea, and Taiwan.

In March of 1991 Amgen received more good news: A federal court of appeals issued the final verdict in Amgens ongoing struggle with Genetics Institute over EPO, and the decision favored Amgen. GI was blocked from selling its version of the anti-anemia drug. The judge ruled that GI had failed to demonstrate just how it made the purified form of EPO from human urinethe factor by which GIs product differed from Amgens. It was a severe setback for GI, which had been battling the patent dispute for two years in hopes of bringing its product to market. Thus, Amgen was given a legal monopoly over domestic EPO sales.

Amgen had shipped about $53 million of Neupogen by May of 1991, and in the process the company became known as a biotechnology leader. Amgen was cautious, however, to avoid the fate that rocked Genentech in 1988 when its genetically engineered heart attack drug, TPA, failed to live up to the fanfare preceding its release. That incident caused Genentechs stock to plunge, knocking it off balance. Genentech eventually sold a majority of its stock to Hoffmann-La Roche, Co.

The few outstanding lawsuits over EPO began to reach settlements. In 1991 Amgen was ordered to pay Johnson & Johnsons subsidiary, Ortho Pharmaceuticals Corporation, $164 million in damages for violation of their 1985 EPO marketing agreement. Orthos rights to market the drug for all therapeutic uses other than dialysis were sabotaged by the fact they did not bring their brand to market at the same time as Amgens Epogen brand. Epogen was ultimately sold and used for purposes under Orthos jurisdiction during the 19 months it took for Ortho to bring its product to the market. The judge ruled that Amgen frustrated Johnson & Johnsons attempts to win regulatory approval for its EPO brand.

Conversely, in 1992 Johnson & Johnson was ordered to pay Amgen $90 million for failing to comply with another aspect of the same 1985 agreement. According to the contract, Johnson & Johnson was to develop both a hepatitis B vaccine and interleukin 2, and Amgen was to receive royalties from those products. Johnson & Johnson failed to meet those obligations. The net result of the two-part case was that Amgen would pay Johnson & Johnson around $85 million.

Thus, Amgen became the only biotech company to near the status of independent global pharmaceutical company. Looking back over the other firms that had begun with the same goal, most had folded or entered alliances with more established pharmaceutical giants in order to survive. In fall of 1992, Amgen tapped Kevin W. Sharer to fill the long-vacant post of president and COO. At the time, Sharer was president of the telephone giant MCI Communications Corporation. In 1993 Amgen announced an expansion of its research and development investment to nearly double what its 1992 expenditure had been. New research focused on blood-cell growth factors, soft-tissue growth factors, and neurobiology, inflammation, and nucleic acid therapeutics. The company was also exploring growth factors to help heal burns, surgical wounds, bone damage, and other injuries. In addition, Amgen has applied recombinant technology to produce a vaccine for the potential prevention of hepatitis B and has pursued other products with immunologic possibilities against certain cancers and infectious diseases.

Amgen closed 1992 as a billion-dollar company. As of early 1993, Neupogen still had no competition in the market, and its growth potential remained considerable. Conversely, Epogen use among dialysis patients had reached its ceiling. Amgen entered into a multi-year collaboration with Regeneron Pharmaceuticals Inc. in 1990 to develop and commercialize two neurotrophic substances which were still in development by the end of 1993.

Principal Subsidiaries:

Amgen Australia Pty Ltd.; Amgen N.V.; Amgen Canada Inc.; Amgen Greater China Ltd.; Amgen GmbH (Germany); Amgen S.A. (France); Amgen S.p.A. (Italy); Amgen K.K. (Japan); Amgen B.V. (Netherlands); Amgen-Biofarmaceutica (Portugal); Amgen S.A. (Spain); Amgen (Europe) AG (Switzerland); Kirin-Amgen, Inc. (Switzerland); Amgen Limited (U.K.); Amgen Sales Corporation (West Indies).

Further Reading:

Amgen Inc., Wall Street Journal, January 13, 1993, p. B4.

Amgen Patent Claim on Drug for Anemia Is Rejected by Court, Wall Street Journal, May 1, 1990, p. A8.

Amgen Wins Ruling in Its Patent Dispute, Wall Street Journal, April 18, 1990, p. A12.

Andrews, Edmund, Rival Seeking to Freeze Amgen Profits on Drug, New York Times, January 31, 1990, p. D5; Drug Ruling Is a Setback for Amgen, New York Times, March 15, 1990, pp. Dl, D8.

Armstrong, Larry, Churning Out Earnings as the Economy Starts to Slow, Business Week, July 31, 1989, p. 30; Two Rising Stars, Business Week, April 3, 1992.

Blood Money, Economist, April 20, 1991, pp. 86-87.

Ex-Official of Amgen Sues Others, Charging Insider Stock Trading, Wall Street Journal, May 15, 1991, p. A5.

Flynn, Julie, The Hormone Thats Making Amgen Grow, Business Week, March 16, 1987, pp 96-97.

Giltenan, Edward, Bioprofits, Forbes, January 7, 1991, pp. 10-11.

Hamilton, Joan, Amgen is HotAnd Bothered, Business Week, January 23, 1989, pp. 40-41; A Drug That Could Replace TransfusionsIf It Ever Reaches The Market, Business Week, March 27, 1989, pp 60-61; The Gene Jockeys are Finally Seeing Some Green, Business Week, July 2, 1990, p. 77.

Looking for the Biotech Blockbusters, Fortune, July 7, 1986, pp. 109-110.

Marcial, Gene, Biotech Fans Love Amgens One-Two Punch, Business Week, August 13, 1990, p. 104.

Noah, Timothy, U.S. Aide Urges Cut in Payments on Amgen Drug, Wall Street Journal, June 15, 1990, p. B4; House Panel Clears Measure Amending Orphan Drug Law, Wall Street Journal, June 22, 1990, p. B4.

Palmer, Jay, Trader, Barrons, March 11, 1991, p. 71.

Petruno, Tom, Amgen: Getting the Worst of Both Worlds, Los Angeles Times, February 1, 1993, p. Dl.

Pollack, Andrew, Focus of Attention in Biotechnology, New York Times, May 24, 1991, p. D6.

Quickel, Stephen, Say, Can You Spare a Biobuck?, Business Month, November 1989, pp. 91-92.

Rundle, Rhonda, FDA Approves Amgen Cancer Drug, but Rivals Loom, Wall Street Journal, February 22, 1991, p. Bl; Amgen Wins Biotech Drug Patent Battle, Wall Street Journal, March 7, 1991, p. A3; Amgen Posts a More Than Fivefold Rise in Net Income for its Fourth Quarter, Wall Street Journal, May 2, 1991, p. A4; Amgen Told to Pay $154 Million to Johnson & Johnson Subsidiary, Wall Street Journal, July 2, 1991, p. B4; Amgen Inc. is Expected to be Awarded $90 Million from Johnson & Johnson, Wall Street Journal, September 10, 1992, p. B8; Amgen Picks MCis Sharer as President, Tapping Talent Outside the Industry, Wall Street Journal, October 19, 1992, p. B5.

Savitz, Eric, Fulfilling Their Promise, Barrons, September 25, 1989.

Serwer, Andrew, Biotech Stocks are Poised to Pay Off in the 1990s, Fortune, March 12, 1990, pp 25-28.

Stavro, Barry, Amgen Stock Soars as FDA Approves Antibacterial Drug, Los Angeles Times, February 22, 1991, pp. D1-D2; Investors Tracking Insiders Stock Sales for Clues on Amgen, Los Angeles Times, March 26, 1991, p. Dl.

Stipp, David, Genetics Institute, Japanese Firm Seek Injuction Against Amgen in Patent Case, Wall Street Journal, January 31, 1990, p. B2.

Sugawara, Sandra, Going-It-Alone Gives Way to Partnerships in Biotech, Washington Post, August 25, 1992, pp. Cl, C4.

Teitelman, Robert, Amgen: Biotechs Next Big Attraction?, Financial World, January 26, 1988, pp. 12-13.

Uncorking the Genes, Barrons, May 5, 1986.

Welling, Kathryn, The Conversion of Paul, Barmns, September 7, 1987.

Wyatt, Edward, What Price Promise?, Barmns, April 10, 1989.

Yoder, Stephen, Trade Associations for Biotechnology Becomes Unspliced, Wall Street Journal, March 28, 1990, p. B8.

Carol I. Keeley

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"Amgen, Inc." International Directory of Company Histories. 1995. Encyclopedia.com. 28 May. 2016 <http://www.encyclopedia.com>.

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