Amgen Opens The Secret Curtain

The biotech leader will host analysts and investors to drum up excitement for its pipeline -- and its stock. Will it work?

Amgen Inc. (AMGN ) is used to its perch at the pinnacle of biotechnology. Its $8.4 billion in sales last year dwarfed those of its nearest competitors. Yet when it comes to innovation, Amgen is no highflier. Its best-selling drug is its first one, Epogen -- an anemia treatment launched in 1989. So when Roger Perlmutter joined Amgen as head of research three years ago, his first mission was to recharge its innovation engine.

He filled its labs with experts in everything from cancer to brain diseases. And he set out to license promising molecules from other biotechs -- something Amgen had shied away from before. "This is not your father's Amgen," he swears. Perlmutter's message has yet to register with Amgen's most skeptical constituency: Wall Street. The American Stock Exchange Biotech index has skyrocketed 70% in the past 12 months. Yet Amgen's stock has crept up just 13% in that time, to $63 -- despite $2.4 billion in profits last year and a 51% jump in sales.

What's keeping investors on the sidelines is the nagging question of whether or not Amgen has enough important products in development to maintain strong growth."We need to see that the research pipeline has both breadth and depth," says Kris H. Jenner, manager of T. Rowe Price Health Sciences fund (PRHSX ).

Analysts may be surprised to learn just how broad Amgen's pipeline really is. Traditionally, the company has been secretive about its research, but Perlmutter and CEO Kevin W. Sharer have decided that it's time to lift the curtain. On Mar. 23, Amgen will stage its first-ever "research and development day" for analysts and investors, who hope to hear some concrete data on Amgen's lesser-known experimental drugs.

TARGETING PARKINSON'S. One frontier the company has explored is diseases of the brain and nervous system. Its most promising drug is a protein, GDNF, that is now in Phase 2 trials to treat Parkinson's disease, which afflicts roughly 1 million Americans. In the trials, GDNF is pumped directly into the part of the brain where the disease originates. Neither patients nor doctors know who's getting the drug, vs. a placebo -- but some of the main investigators say it's already obvious. "One of my patients had severe tremors in both arms, and now he's normal," says Michael Hutchinson, assistant professor of neurology at New York University, one of the test sites. "I don't think that's a placebo." Although Amgen won't comment on future plans, doctors say it may start a pivotal Phase 3 trial by yearend.

In pain treatment, as in Parkinson's disease, Amgen has been all but silent about promising developments. Perlmutter, a veteran of Merck & Co. (MRK ), says Amgen may soon be ready to start clinical trials for a drug to treat neuropathic pain, which occurs when injured nerves send faulty signals to the brain. For some patients, even the lightest touch can be excruciating. Such pain is common in the elderly and in people with diabetes -- making it one of the most hotly pursued targets in the pharmaceutical industry.

In each new endeavor, Amgen will be racing against some formidable rivals. For example, in the field of inflammation, both Amgen and its biggest competitor, Johnson & Johnson (JNJ ), are targeting an enzyme called p38. What makes this molecule so promising is that it may be responsible for touching off several inflammatory signals. So a drug that can disarm it may prove more effective than current products, such as Amgen's blockbuster Enbrel, used to treat rheumatoid arthritis. J&J paid $2.4 billion last year to acquire Scios Inc., whose first p38 drug is in Phase 2 trials.

J&J's purchase of Scios is just the latest chapter in a legendary rivalry between the pharma giant and Amgen. Ever since 1985, when Amgen handed J&J most of the rights to its flagship anemia treatment, the two have been engaged in a bitter marketing battle. Lately, Amgen has been gaining: Sales of its new, long-acting version of the drug, called Aranesp, more than doubled in the last quarter of 2003, to $500 million. Sales of J&J's drug, Procrit, fell 12% in the same period. Still, with assets such as Scios working in J&J's favor, Amgen will have to fight harder. "J&J has gotten better, faster, and more determined," concedes CEO Sharer.

Small successes aren't the answer to Amgen's challenges. Wall Street yawned when the company won Food & Drug Administration approval on Mar. 8 for Sensipar, a drug to treat a parathyroid condition.

What Amgen sorely needs is to build up its expertise in major treatment arenas such as cancer. The company shines in a supportive role, providing anemia- and infection-fighting drugs to patients undergoing chemotherapy. Now it's working on a variety of molecules to treat the disease itself, including a colon-cancer treatment that Amgen is developing in partnership with Abgenix Inc. (ABGX ). Like ImClone Systems Inc.'s (IMCL ) recently approved Erbitux, Amgen's drug is an antibody that inhibits EGF, a protein that causes some cancers to grow. The difference is, Amgen's is entirely human -- unlike Erbitux, which contains some mouse proteins -- so it may cause fewer allergic reactions than ImClone's product. Amgen began enrolling a Phase 3 trial in January, but it has yet to reveal the study's design. Analysts hope to hear more details at the March meeting.

A cultural change will also help Amgen. Under Perlmutter, the company has scotched its not-invented-here attitude and scoured lists of early-stage drugs it could license from biotech startups. Last year, it entered into a $125 million licensing deal with Tularik Inc. (TLRK ), a South San Francisco company working on several cancer treatments. CEO David V. Goeddel says he was stunned when Amgen's Perlmutter agreed to visit the company in person, spending a day getting to know its projects. Then he quickly cooked up the deal -- fending off a large pharma company that was also interested in Tularik. "Amgen moved extremely fast," Goeddel says. The partners have already discovered two potential cancer targets, one of which could be ready for preclinical trials in 2005.

CEO Sharer fully supports Perlmutter's mission to stoke Amgen's pipeline. Sometimes he jets off at a moment's notice to join Perlmutter in courting licensing partners. "It's very important that Amgen stay nimble," he says. "We have to be fast, decisive, and flexible." And there's one more task: convincing investors that a well-oiled research machine will keep Amgen ahead of the pack.

By Arlene Weintraub in Thousand Oaks, Calif.

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