Amgen, Inc.
Address:
Amgen Center
1840 Dehavilland Drive
Thousand Oaks, California 91320-1789
U.S.A.
Telephone: (805) 499-5725
Fax: (805) 499-9315
http://www.amgen.com
Statistics:
Public Company
Incorporated: 1980
Employees: 1,700
Sales: $2.71 billion (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: AMGN
NAIC: 325412 Pharmaceutical Preparation Manufacturing
Company Perspectives:
Fulfilling Amgen's mission to be the world leader in developing and delivering cost-effective therapeutics based on advances in cellular and molecular biology depends upon the company's 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.
Company History:
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 company's 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, Amgen's 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 body's 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 Amgen's 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 Chugai's EPO, but an ITC judge declined to do so in January 1989.
While Amgen was awaiting the FDA's green light, Johnson & Johnson's 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 EPO's 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 Amgen's 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, but Amgen had the market to itself. GI's version of EPO awaited FDA approval. Around this time, CEO Rathmann passed his title to longtime CFO Gordon M. Binder, the author of Amgen's 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 GI's 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 company's profits on EPO sales, and sought an injunction to stop Amgen from producing the drug. The court's decision held that both companies had valid patents and that each was guilty of infringing on the other's patent. The decision allowed Chugai to use Amgen's patented genetic coding to produce the drug in Japan, then import and sell it. Meanwhile, Amgen's 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 GI's product, Marogen, was also covered by the orphan drug status.
An International Market Share with Neupogen
Meanwhile, expectations were great for Amgen's 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 drug's 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 Amgen's 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 urine--the factor by which GI's product differed from Amgen's. 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 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. Neupogen's growth potential remained considerable. That year, Amgen's revenues reached $1.4 billion, with Neupogen sales increasing 32 percent to provide 52 percent of the company's annual total sales of $719 million.
Throughout 1994, the growth rate of Amgen's 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 Amgen's clinical research with stem cell factor and Neupogen. In December 1994, Amgen purchased Synergen, acquiring that company's 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, Amgen's legal battles continued. In 1991, Amgen was ordered to pay Johnson & Johnson's 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 Amgen's 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 & Johnson's 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 Amgen's method for calculating "spillover sales" and ordering Johnson & Johnson to pay Amgen's $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. Amgen's 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 Denmark's 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 latter's 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 Parkinson's; 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 Amgen's 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 Parkinson's and Alzheimer's. Yet despite Amgen's laboratory successes, the year was one of mixed financial results. A significant change in the government's 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 That's Making Amgen Grow," Business Week, March 16, 1987, p. 96.
Giltenan, Edward, "Bioprofits," Forbes, January 7, 1991, p. 10.
Hamilton, Joan, "Amgen Is Hot--And Bothered," Business Week, January 23, 1989, p. 40.
----, "A Drug That Could Replace Transfusions--If 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 Amgen's One-Two Punch," Business Week, August 13, 1990, p. 104.
Mitchell, John, "Life with Amgen: A Four Part Series," Thousand Oaks Star, September 13--17, 1998.
Noah, Timothy, "U.S. Aide Urges Cut in Payments on Amgen Drug," Wall Street Journal, June 15, 1990, p. B4.
Palmer, Jay, "Trader," Barron's, 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," Barron's, 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: Biotech's Next Big Attraction?," Financial World, January 26, 1988, p. 12.
"Uncorking the Genes," Barron's, May 5, 1986.
Welling, Kathryn, "The Conversion of Paul," Barron's, September 7, 1987.
Wyatt, Edward, "What Price Promise?," Barron's, April 10, 1989.
Source: International Directory of Company Histories, Vol. 30. St. James Press, 2000.
