Amgen Shares Fall 7.7% After Downgrade

Shares of Amgen Inc., the world’s largest biotechnology company, dropped Wednesday after an analyst downgraded the stock and cited concerns about three of the company’s key drugs.

Amgen’s shares closed down 7.7% after a report by UBS Warburg’s Meirev Chovav said there was “limited upside potential” in stock of the industry bellwether.

Her report followed a decision by Amgen, based in Thousand Oaks, to postpone until February a meeting in New York with analysts that had been scheduled for Nov. 21.

Most analysts on Wall Street recommend that investors buy Amgen stock. But Chovav cut her rating to “hold” from “buy” and said sales of three drugs may fall short of expectations.

Chovav said Wall Street estimates of $1.3 billion in sales for the rheumatoid arthritis drug Enbrel are too high because approval of Humira, a competing drug from Abbott Laboratories, could come before the end of the year -- four months sooner than expected.

She said $1.1 billion represents the “best-case scenario” for Enbrel sales in 2003 and it assumes that a factory in Rhode Island will receive FDA approval in the first quarter of next year. The factory, needed to ease a shortage of Enbrel, is scheduled for an FDA inspection next week.

Chovav said last week’s decision by the Centers for Medicare and Medicaid Services to lower the hospital outpatient payment rates for Aranesp will limit sales of the drug.

She said Aranesp, a second-generation anemia treatment, will be reimbursed at a disadvantage to Procrit, which is marketed by Johnson & Johnson under a license from Amgen. She estimated that Procrit will be reimbursed at 68.2% of its average wholesale price, while Aranesp would be reimbursed at 47.6% of its average wholesale price. The hospital outpatient market accounts for 10% of Aranesp’s current sales.

Finally, Chovav said that as much as $74 million in excess inventories of Neupogen may have accumulated in the second and third quarters, and that will result in lower fourth-quarter sales of the drug. Neupogen is used to prevent infections in cancer patients whose immune systems are compromised by chemotherapy.

Amgen spokesman Jeff Richardson said sales of Neupogen are driven by demand. “We don’t see any inventory issues.”

Amgen, in a statement late Tuesday, said it postponed its meeting with analysts because it couldn’t fully address concerns about Enbrel, Aranesp and a patent lawsuit with Transkaryotic Therapies of Cambridge, Mass. An appeals court decision is due soon in the case involving Epogen, Amgen’s best-selling drug. Richardson wouldn’t elaborate on the statement.

S.G. Cowan analyst Eric Schmidt said Amgen had legitimate reasons to postpone its meeting and that investors overreacted to the news. The timing was awkward, considering next week’s factory inspection, he said. And Amgen probably wasn’t ready to discuss its strategy on Medicare reimbursement, which he expects Amgen to fight on a “legislative, legal and lobbying level.”

In an interview this week, Amgen Chairman and Chief Executive Kevin W. Sharer said he was “cautiously optimistic” that the factory in West Greenwich, R.I., would receive FDA approval in first-quarter 2003. Amgen has stuck by that forecast since it announced the $9.6-billion purchase of Immunex, developer of Enbrel, last December.

Sharer said that although the company was “comfortable” with the deadline last year, meeting it will be a “heroic” accomplishment due to problems later discovered at the factory Amgen acquired in the Immunex deal.

Sharer said Amgen did its due diligence before buying Immunex and taking on the factory project, but likened the process to buying a car: “You don’t know what you have until you drive it.”

Amgen closed Wednesday at $46.81, down $3.87, on Nasdaq, in an otherwise strong session for major drug shares.