Amgen Stock Drops 12% on Profit News

Amgen Inc. stock on Tuesday fell 12% after the Thousand Oaks-based biotechnology company said profit is being hurt more than expected by new federal health insurance rules affecting reimbursement for one of its two drugs.

Second-half sales of Epogen, used to treat anemia in people with kidney disease, will grow less than the 15% rate seen in the first half, the company said in a regulatory filing. It had warned that lower payments from Medicare would slow Epogen’s sales, but analysts had expected the decline in growth to have leveled off by now. Epogen sales rose 21% last year.

Epogen’s slowdown will hurt profit because Amgen doesn’t have enough big drugs in the pipeline to make up for sales of its two products, investors said. Its only other drug on the market is Neupogen, used to treat a weakened immune system. Last year Epogen’s sales were $1.07 billion and Neupogen’s were $1 billion.

“Amgen is still the bellwether biotech firm, but it won’t have the stellar growth that it used to,” said Dennis Fischer, an analyst at Phoenix Duff & Phelps, which manages $500 million in drug stocks.

Amgen stock fell $6.94 to close at $50.19 in Nasdaq trading of 22.9 million shares, making it the most active issue in U.S. markets.

Amgen said it’s no longer comfortable with analysts’ earnings estimates this year of $2.80 to $2.85 a share; that led some analysts to lower their estimates and cut their rating on the stock.

Robert LeBoyer, an analyst at Brown Bros. Harriman in New York, cut his 1997 estimate for Amgen to $2.75 from $2.85 and his 1998 forecast to $3.05 from $3.15.

The federal Health Care Finance Administration changed its guidelines for treating anemia in kidney patients, so that patients whose red-blood-cell count exceeds a certain level during a 90-day period won’t be reimbursed for the cost of Epogen. Almost all of Epogen’s use falls under Medicare.

Under its previous rules, the government would reimburse when the count was above the level in certain cases, such as when the patients lived at high altitude or had certain heart disorders, said Lynne Connell, an Amgen spokeswoman.

Amgen warned investors in June that changes in Medicare payment guidelines could cut into Epogen sales. Many analysts thought the slower sales growth would plateau by July 1, the original deadline for the new guidelines to take effect.

But the government extended the deadline to Sept. 1, Amgen revealed in its filing. That means that many dialysis centers have yet to switch to the new guidelines and that more Epogen cutbacks are ahead.

Neupogen sales are slowing as well. Sales of the drug rose 8.5% last year and are expected to rise about 5% this year, analysts said, because of greater competition from protease inhibitors, the most powerful weapon to date against HIV, the virus that causes AIDS.

Amgen has two products under regulatory review: Infergen for hepatitis C and Stemgen to stimulate stem cells, or early-acting blood cells, in cancer patients undergoing chemotherapy. Each drug is expected to generate peak sales of $50 million, according to analysts.