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Analysis: Amgen's Aranesp May Be Safe

Posted on: Tuesday, 20 February 2007, 21:00 CST

By STEVE MITCHELL

Amgen shares slipped Friday after it was revealed a trial involving Aranesp was halted early due to an increased risk of recurrence of tumors in cancer patients, but some analysts don't think the findings will affect the uptake of the drug or Amgen.

Danish researchers stopped the trial, known as DAHANCA, in October because non-anemic head- and neck-cancer patients receiving Aranesp exhibited a higher recurrence of tumors than those not receiving the drug. Shares of Amgen fell 2 percent to $66.73 Friday.

Chris Raymond, an analyst with R.W. Baird, said the price decline was driven by investors who were selling first and asking questions later.

It was a complete over-reaction, Raymond told United Press International.

He doesn't think the trial results will have any impact on Aranesp because the study, which was not sponsored by Amgen, involved the use of the drug in a setting where it is not used at all because it's too dangerous.

This is an area where zero commercial revenue is derived, so it met the test not to disclose it because it was commercially irrelevant, Raymond said. I don't understand why people are reading into this result as if there would be negative implications.

Aranesp is approved for use in cancer patients who develop anemia from undergoing chemotherapy, but DAHANCA involved patients who were not being treated with chemotherapy. The intent was to see if using Amgen to boost hemoglobin levels could help treat head and neck cancer by making radiation more effective.

Raymond said now is a good time to buy the stock on its weakness because he anticipates continued growth of Aranesp over the next couple of years. The drug will see growth of 14.5 percent this year and approximately 10 percent in 2008, according to his forecast.

One reason for the sell-off may have been the heightened sensitivity surrounding Aranesp due to a negative finding disclosed during Amgen's earnings call last month. The company said one of its trials found a higher risk of death in cancer patients receiving Aranesp.

This reopened the debate about whether there is a risk to the overall franchise, Raymond said, noting that he strongly believes the drug will continue to sell well.

Also, the way the story broke may have fueled investor concern. The Cancer Letter first reported the DAHANCA trial results Friday after finding them on a Web site. This may have given the appearance Amgen was attempting to hide a negative study because the company had apparently known about the negative results since December.

Raymond acknowledged Amgen could have done a better job of communicating this information to the public and investors but said it was reasonable for them to ignore it since they didn't sponsor the trial, aren't pursuing this indication for Aranesp and derive no commercial sales of the drug in this setting.

Amgen said in a conference call Friday it informed U.S. and regulatory authorities about the DAHANCA results last year but agreed it also should have communicated the results to investors and the public at the same time.

Friedman, Billings & Ramsey analyst Jim Reddoch also thinks the study findings will have little bearing on Aranesp and is leaving his sales estimates for the drug unchanged.

Reddoch noted in a research report issued Tuesday that the DAHANCA findings are very similar to a study published in the Lancet in 2003 by Henke et al. Most oncologists may remember this and may be less likely to overreact to these new findings.

It was well publicized at the time, Reddoch told UPI. I also don't think this protocol of sensitizing tumors with EPO really ever worked, he added.

However, the negative headlines for Amgen may continue, including Roche's anticipated launch of its Aranesp competitor, CERA, and follow-on biologic legislation in Congress, Reddoch said.

A potential positive is data on denosumab for treating bone metastases and osteoporosis that is expected to be released later this year, but that may be a long shot too.

The bone metadata this summer could be a positive sentiment driver, but it's probably going to take really good interim data at year end to really get investors excited about upside to the denosumab numbers already in analysts' models, Reddoch said.

We think Novartis' Aclasta is in the driver's seat for long-acting post-menopausal drugs because it can be given less frequently and it has already shown an advantage in hip and spine fractures, he said.

However, Credit Suisse analyst Dr. Michael Aberman thinks the DAHANCA findings could curtail some Aranesp use.

We believe that a portion of EPO use in (chemotherapy-induced anemia) may be at risk, Aberman stated in a research report. This is because some patients are given EPO despite having high hemoglobin levels, their Hb levels are not monitored regularly while they're on EPO, or they are kept on the drug for longer than recommended.

While we don't have specific data to quantify the amount of Aranesp at risk, we expect physicians and insurers to start pushing back on EPO use, Aberman said.

He added that he anticipates continued selling pressure from investors as they realize some Aranesp sales are at risk and question management's credibility.

Aberman did not respond to UPI's request for comment.

Source: United Press International

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