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EPO JUDGMENT AFTERMATH: AMGEN STOCK UP 8%, GENETICS INSTITUTE CLIMBS 7%

Executive Summary

Both Amgen and Genetics Institute were winners on the stock market following the March 14 Boston federal court order that requires the two companies to enter royalty-free cross-licensing of their recombinant erythropoietin products. Amgen was up 4-1/4 (7.9%) in March to 61-3/4 and rival Genetics Institute rose 2-1/2 (6.9%) to 38-3/4. Although the decision may effectively pave the way for the end of Amgen's Epogen market monopoly, investors stayed bullish on the stock. Apparently, the "Street" is buying into the belief that the huge market potential for EPO will more than sustain two competing products. Alex. Brown's David Webber reiterated his good-for-everybody analysis March 15 when he predicted that the EPO market could reach $250 mil. next year with Chugai-Upjohn capturing 20-30% of the dialysis market. Some Amgen and Genetics Institute investors could also have been in a buying mode as a hedge while they await the final disposition of the case (see T&G-15). The EPO rivals were two of 18 pharmaceutical gainers in March on the "F-D-C" OTC Monthly Index; however, gainers were nearly matched by decliners (15) and the index for the drug component was flat for the month (up 0.3%). Five stocks, Nova being the most heavily-weighted, were unchanged. Invitron nosedived 68.8% from 4 to 1-1/4 after majority owner Monsanto announced March 22 that it was looking to sell its stock. Invitron's tumble began in early February when SmithKline Beecham reported that it was discontinuing development of a soluble CD4 product for AIDS. In response, Invitron has announced that it will undertake a severe operational retrenchment. A same-week announcement that Ortho has acquired worldwide rights to Xomazyme-CD5 and -CD7 put Xoma squarely in the ranks of decliners with a 2 point drop (9.6%) to 18-3/4. Although Alex. Brown's Webber gave Xoma a "strong buy" recommendation, most investors saw the partnership as putting greater pressure to perform on Xoma's gram negative sepsis treatment Xomen-E5. Competitor Centocor's stock, in comparison, gained 1-5/8 (5.4%) to 31-5/8. * Zenith Labs was down 12.5% to 5-1/4. The company agreed to pay Bristol-Myers Squibb $1.2 mil. over three years as part of a settlement of the cefadroxil monohydrate patent dispute. On the bright side, Enzon (up 11.8% on a 1-1/8 point gain to 10-5/8) was buoyed by the March 23 approval of the orphan drug Adagen for severe combined immunodeficiency ("bubble boy") patients. Adagen's clearance by FDA strengthens the credibility of Enzon's Pegnology system that is the cornerstone of the company's pipeline. A $25.7 mil. stock placement also gave Enzon a boost. Cal Bio rebounded from the recent woes (up 22.2% to 8-1/4) brought on by Lilly's dropping the Nazlin nasal insulin project on positive analyst recommendations as a long-term growth stock.
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