Amgen/Abgenix: All About a Drug

Amgen is using its cash to buy near-term products-the fundamental reason behind its purchase of Abgenix. Indeed, the irony to this transaction is that while the promise of genomics generated the money Abgenix needed to stay alive, the product that ultimately made Abgenix's fortune is an antibody to an entirely pre-genomic target, the fourth in its target class to make it to market, and the second antibody to do so.

Talk about the power of products. The epoetin alfa (Epogen and Aranesp) and G-CSF/filgrastim (Neupogen and Neulasta) franchises still generate more than 75% of Amgen Inc. 's $12 billion or so annual sales almost two decades since their original introductions. There's little in Amgen's pipeline, it seems, to replace these, at least in the near-term. And Amgen is as threatened as any biologics maker by the possibility of biosimilars—both branded, like Roche 's Epogen-like NeoRecormon and Aranesp-competitor CERA, and truer biogenerics, not to mention other improved versions or even small-molecule alternatives from companies like FibroGen Inc. 's FG-2216. (See "Biosimilars: The Time Has Come," in this issue, Also see "Biosimilars: The Time Has Come" - In Vivo, 1 January, 2006. and "Biogenerics Are Happening: Slowly, Product-by-Product," The RPM Report, January 2006 Also see "Biogenerics Are Happening: Slowly, Product-By-Product" - Pink Sheet, 1 January, 2006..)

So Amgen has been using its cash—regularly replenished thanks to 42% operating margins—to buy pipeline and thus near-term earnings. That was the reason it paid $18 billion for Immunex Corp....

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