Court Upholds Amgen’s Patent on Anemia Drug : Medicine: The decision solidifies its position as the nation’s No. 1 biotech company and will encourage other firms to protect scientific discoveries.

In a major legal victory for Amgen, a federal appeals court in Washington late Tuesday upheld the company’s patent on a valuable biotechnology drug while invalidating a rival patent by Genetics Institute Inc. The decision secures a monopoly for Amgen on a potential $400-million-a-year drug market and solidifies the Thousand Oaks company’s position as the nation’s dominant biotechnology concern.

The news rocketed Amgen’s stock to a record close Wednesday of $113 per share, up $12 for the day. Meanwhile, Genetics Institute’s stock plunged $21.75, to close at $40.25 per share. Trading in both stocks was temporarily halted after news of the court decision.

The drug is erythropoietin, or EPO, a protein that circulates in the bloodstream and triggers production of red blood cells. But patients with kidney disease can’t produce enough oxygen-carrying red blood cells and so are chronically anemic, often bedridden and need regular blood transfusions and dialysis treatments to remove impurities from their blood. But EPO acts as a remarkable tonic, restoring their lost energy and enabling patients to lead more or less normal lives.

“We’re certainly delighted,” Gordon Binder, Amgen’s chief executive, said of the court verdict. “It vindicates the decision to defend our patent. No one defends your patents unless you do. . . . And I think in this case it vindicates the pioneers.”

Gabriel Schmergel, chief executive of Genetics Institute, said in a statement: “Of course we are very disappointed with the decision of the circuit court. . . . Until we have an opportunity to fully analyze the decision, the company is not in a position . . . to state what further action it intends to take.”

In December, 1989, a federal court in Boston upheld both the Amgen and Genetics Institute EPO patents, saying each company had infringed the other’s patent. But Amgen appealed the case.

Tuesday’s court decision was a surprise, however, because roughly 70% of the time the federal appeals court upholds the lower court’s patent decisions. Peter Drake, a biotechnology analyst with Vector Securities in Chicago, said: “This is an enormously positive development for Amgen. Wall Street was not looking for this kind of ruling.” Drake had expected the appeals court to uphold both patents and force Amgen to share its EPO market. Drake said that now Amgen’s EPO sales would grow to $400 million a year by 1995, while its after-tax profit margins from EPO would be a fat 25%.

Jim McCamant, editor of Medical Technology Stock Letter in Berkeley, was pleasantly surprised by the court decision. He said Amgen did the key scientific work, while Genetics Institute’s EPO patent was “a trivial advancement. The court decision is great news for the industry.” Patent lawyers said the court opinion will encourage other biotechnology firms to fight for patents on key scientific discoveries.

The court decision is the second good piece of news for Amgen recently. Two weeks ago, the U.S. Food and Drug Administration gave the company the go-ahead to sell its second biotechnology drug, called granulocyte colony-stimulating factor, or G-CSF, which fights off infections in chemotherapy patients. Drake said that EPO is already the best-selling biotech drug in the world but that G-CSF will eventually surpass it.

Cancer chemotherapy treatments routinely destroy white blood cells, leaving patients vulnerable to infections, raging fevers and possible death. But G-CSF dramatically boosts a person’s ability to fight off infections, and some 225,000 chemotherapy patients in this country could be treated with the new drug. Analyst David Stone, with Cowen & Co. in Boston, expects Amgen’s G-CSF sales to hit $550 million by 1995. But Amgen has a rival. Immunex Corp., a Seattle concern, recently won FDA approval to sell a competing white blood cell drug called GM-CSF.

Nevertheless, surging EPO sales, plus the G-CSF approval, have made Amgen one of the hottest stocks in America. Early last year Amgen’s stock traded for as little as $21.50 a share; with Wednesday’s close of $113 a share, the value of all the company’s stock is $4.5 billion, by far the largest of any biotechnology company.

The EPO court decision is a blow not only to Genetics Institute, based in Cambridge, Mass., but also to drug giants Upjohn Co. in Kalamazoo, Mich., and Chugai Pharmaceutical Ltd. of Japan, whose joint venture has been licensed to sell Genetics Institute’s version of EPO in this country. But analyst Stone said the court decision made it unlikely that Chugai-Upjohn would ever sell EPO in the United States.

There is a legal loophole whereby Chugai-Upjohn, if it somehow won FDA approval to sell EPO in this country, could import the drug from Japan and sell it here without infringing Amgen’s patent. But legislation is expected to be reintroduced in Congress this year that, if passed, would block imports of such biotechnology drugs.

In addition, Amgen has applied to the U.S. Patent Office for broader EPO patents covering the drug and the biotechnology process that manufactures it. Binder said he hoped the appeals court decision “will clear up the issues . . . and our future patents will be granted promptly.”

Biotechnology is the science of re-splicing genes that contain the hereditary instructions for life. Scientists splice together genes so that the engineered cells keep copying, or cloning, substances that can be produced in large amounts in the laboratory.

EPO occurs in tiny amounts in the body and was discovered by scientists in 1906. The problem had been how to get hold of enough of it. Then in 1983, Fu-Kuen Lin, an Amgen scientist, was the first to isolate the EPO gene. By some clever gene-splicing with hamster cells, Lin cloned EPO in the laboratory. In October, 1987, Lin, on behalf of Amgen, was awarded a patent covering the so-called host cell that starts the EPO biotechnology manufacturing process.

By comparison, Genetics Institute’s patent covered only a purified form of EPO separated from urine. Not enough of the drug can be produced for commercial use through this method. Still, Genetics Institute essentially argued that no matter how EPO is produced, it fell under its patent.

Although Genetics Institute filed for a patent more than a year after Amgen, Genetics Institute was awarded its EPO patent first, in June, 1987, thus setting up the legal showdown.

The obvious medical benefits of EPO made it a drug worth fighting for. John Cole, a kidney dialysis patient in Lorain, Ohio, last year told The Times that since he started taking EPO, “I have the energy to do whatever I want,” he said. “The drug is one of the most important things that ever happened to me.”

James Geriak with Lyon & Lyon, a Los Angeles biotech patent attorney, said that the Amgen appeals court ruling was not a landmark decision but that the court seemed to have been swayed by the “fundamental unfairness in letting a smaller scientific contributor (Genetics Institute) block the larger contributor.”

The court decision also vindicates George Rathmann, Amgen’s retired chairman and its co-founder. It was his strategy to push ahead with the case, despite widespread opinion within the industry that it was risky not to split the EPO market with Genetics Institute, especially at a time when Amgen was a tiny research and development company without any drugs to sell.

Binder said yesterday, “I guess the question is whether we were smart or lucky. . . . I think luck plays a role in life. But people who prepare the best have the most luck.”

When EPO was approved for sale in June, 1989, Amgen won a seven-year monopoly on its sale to dialysis patients as part of the Orphan Drug law, a government program that encourages development of drugs that treat rare illnesses. More than 80,000 kidney dialysis patients are now treated with Amgen’s EPO.

EPO is a ubiquitous drug, however, and is helpful in combating anemia in other diseases including those undergoing chemotherapy and patients with rheumatoid arthritis. Johnson & Johnson has been licensed by Amgen to sell EPO for all other markets in the United States, except for kidney dialysis. The two partners, though, are locked in a legal battle over various damages relating to the development of EPO and other biotechnology projects. That case is still ongoing.

Johnson & Johnson’s stock closed Wednesday at $87.625, up $4.25 for the day.

Amgen’s Victory A court decision upholding an important drug patent sent Amgen’s stock soaring and causedthe stock of rival Genetics Insititute to dive. Amgen Close: $113.00 Up: $12.00 Genetics Institute Close: $40.25 Down: $21.75 AMGEN INC. Amgen Inc. is a biotechnology concern based in Thousand Oaks. The company was founded in 1980 and sells two biotechnology-produced drugs. One treats anemia in kidney patients; the other drug fights infections in chemotherapy patients.

Year ended March 31 1990 1989 1988 Revenue (millions) $199.02 $78.11 $53.33 Net income (millions) $19.12 ($8.16) $1.73

Assets: $443.86 million Employees: 1,200 Shares outstanding: 39.57 million 12-month price range: $27.375-$113 Book value: $7.50 (per share) Wednesday close (OTC): $113, up $12