Updated from 4:42 p.m. EDT

If the biotech sector starts rocking tomorrow, you can thank

Amgen

(AMGN) - Get Report

.

The No. 1 biotech firm posted strong second-quarter profits Wednesday, bolstered by rising sales of its new infection-fighting drug, Neulasta.

And even better, Amgen -- now even larger since its $10 billion acquisition of Immunex

closed just over a week ago -- boosted sales guidance for some of its drugs and reduced the amount of earnings dilution it expects to suffer in 2003 from the Immunex merger.

Second-quarter net profits rose 28% to $412 million, or 38 cents per share. Amgen earned $322 million, or 30 cents per share, in the year-ago quarter. Amgen's bottom line results beat Wall Street consensus estimates by 4 cents per share, as compiled by Thomson Financial/First Call.

Total product sales rose 30% to $1.1 billion in the quarter, compared with product sales of $859 million in the second quarter last year. Total revenue was $1.25 billion.

Before its earnings release, Amgen shares closed Wednesday up $1.49, or 4%, to $37.09. Investors piled in after hours, bidding Amgen up another $4.06, or 11%, to $41.15 on Instinet.

The strong Amgen results, coupled with a better-than-expected

report from

Gilead Sciences

(GILD) - Get Report

. and

one from

Chiron

(CHIR) - Get Report

. tonight, have bloodied biotech sector watchers finally singing a happy tune.

"The Amgen quarter was simply great," said Banc of America Securities biotech analyst Mike King. "They beat my estimates on every line item. I think this should really get the entire sector moving." King rates Amgen market performe, and his firm doesn't have a banking relationship with the firm.

Second-quarter sales of Aranesp, the company's longer-acting anemia drug, totaled $56 million in the quarter, within the range of Wall Street estimates and up 44% from first-quarter sales of $39 million. Last week, the FDA approved an expansion of Aranesp's label to include treatment of anemia in chemotherapy patients.

The drug already was approved for use in patients with chronic kidney disease. The expanded Aranesp label is expected to accelerate the drug's sales growth. It will now

compete directly against Procrit, the anemia drug marketed by

Johnson & Johnson

(JNJ) - Get Report

.

Epogen, Amgen's older anemia drug, racked up $570 million in second-quarter sales, a 10% increase from the year-ago quarter. Amgen reiterated previous guidance for the Epogen-Aranesp franchise of sales growth in the low-20% range this year, compared with 2001.

Moving over to Amgen's other big drug franchise, second-quarter sales of Neupogen, used to boost white blood cell counts and fight infections in cancer patients, rose 7% to $363 million, compared with sales of $340 million in the year-ago quarter.

Neupogen sales growth has fallen into the single digits, but that was expected because doctors are moving patients over to the company's longer-acting version of the drug, Neulasta, which was launched in April. Neulasta sales are very strong out of the gate, totaling $110 million in the second quarter, well above the most bullish Wall Street estimates, which had sales coming in around $92 million. Amgen said it believed Neulasta sales were primarily demand driven, although inventory stocking also pushed the number higher.

Last April, Amgen raised its Neupogen/Neulasta sales growth target to the midteens from single-digit growth. Wednesday, the company boosted its forecast again, this time to a sales growth in the mid-20% range.

With the Immunex merger complete, Amgen now gains control of the rheumatoid arthritis drug Enbrel, which has been plagued by well-publicized supply constraints. Wednesday, Amgen cut its 2003 Enbrel sales estimate to a range of $1.2 billion to $1.4 billion, down from its previous forecast of $1.6 billion. The reduction was widely expected by biotech analysts and fund managers.

Amgen said second-quarter Enbrel sales totaled $192 million, down 11% from first-quarter sales of $216 million. Immunex had previously warned of a second-quarter Enbrel shortfall due to manufacturing issues that kept the drug out of patient hands in April and May. (Enbrel sales do not figure in Amgen's second-quarter results because the Immunex merger closed after the third quarter began.)

On its conference call, Amgen said it expects to seek FDA approval by the end of the summer for a new Enbrel plant in Rhode Island. If all goes well, that manufacturing facility could start producing product by the early next year, which would meet Wall Street expectations.

Enbrel's supply problems have forced a reduction in 2002 sales guidance to a range of $800 million to $850 million, from previous estimates of $900 million to $1 billion, but most analysts are looking past this and focusing more on 2003 sales. Amgen needs to solve the Enbrel supply problem once and for all because the drug is already losing market share to Johnson & Johnson's Remicade, and next year, it's expected to face tough competition from D2E7, a highly anticipated new rheumatoid arthritis drug coming from

Abbott Laboratories

(ABT) - Get Report

.

Wednesday, the company acknowledged that it lost Enbrel patients this quarter, but it hopes to win them back starting in the fourth quarter when the drug's supplies increase.

Looking forward, Amgen said it expects 2002 earnings to grow at a mid-20% rate, compared with previous guidance of a low-20% rate. That forecast excludes the impact of the Immunex acquisition. Analysts are expecting Amgen to earn $1.31 per share in 2002, compared with $1.18 per share in 2001.

Amgen wouldn't give specific 2003 guidance, but did say it expects earnings dilution from the Immunex merger, on a pro forma basis, will be less than 5%, slightly better than its previous forecast. While Enbrel sales will be lower, Amgen executives said that would be more than recouped by higher-than-expected cost savings from the merger.

Lazard Freres biotech analyst Joel Sendek has been taking a conservative stance on Amgen, with a hold rating, but after Wednesday's conference call he had few complaints.

"This should be good for the whole biotech industry," Sendek said. "In our view, the two most important companies in the sector, Amgen and Genentech, had pretty good quarters. At this point, the whole sector has been moving down as a single wave, but we believe you'll start to see certain companies doing better than others. If Amgen continues with this kind of performance, it should be one of the better performers." Sendek's firm doesn't have a banking relationship with Amgen.