Analysis: Amgen’s Aranesp Gets Hit Again

By STEVE MITCHELL

Amgen’s anemia line got more bad news as Aranesp and Epogen were hit with black-box warnings about an increased risk of death and tumor growth in certain situations.

Although this will most certainly result in a big hit to sales, analysts are split on whether the stock remains a good investment.

Chris Raymond, an analyst with R.W. Baird, acknowledges the news will cut sales but thinks Amgen can withstand the hit and still rates the stock outperform.

The main reason for this is that he thinks investors are overlooking Amgen’s pipeline potential, which he calls one of the most robust among large biotech companies.

It’s maybe not as bad as people are thinking, Raymond told United Press International.

In addition, there could be a silver lining to this cloud. The negative headlines for erythropoietin products could mean it will make it harder for Roche’s Mircera — which was expected to offer significant competition to Aranesp — to win approval or become established even if it is cleared for marketing.

Mircera has a half-life three times that of Aranesp, Raymond said. So with the heightened concern about raising hemoglobin levels too high with EPO products, there could be some risks to using a drug like that, he said.

For Aranesp, Raymond now forecasts reduced sales through 2010. He reduced his estimate for 2007 from $4.7 billion to $4.2 billion. The decline is even more dramatic in 2010, dropping from a forecast of $6.2 billion to $4.4 billion.

We’ve taken them down to a severity that represents a worst-case scenario, Raymond said.

There is some indication Aranesp may be picking up shares in renal and dialysis care settings, but that’s probably not enough to overcome these losses, he said.

The Aranesp concerns started last month after the results of the DAHANCA trial came to light. That study was halted early because cancer patients receiving Aranesp had a higher recurrence of tumors.

The bad news was further exacerbated recently when the Securities and Exchange Commission announced it launched a formal investigation into Amgen’s delay in publicly disclosing the DAHANCA results.

Late Friday the Food and Drug Administration said a black-box warning about increased risk of death and faster tumor growth were added to the labeling of Aranesp, Epogen and Johnson & Johnson’s Procrit. The warning also recommends physicians use the lowest possible dose of the medications and to keep hemoglobin levels below 12 g/dL.

Recently completed studies describe an increased risk of death, blood clots, strokes, and heart attacks in patients with chronic kidney failure when (erythropoiesis-stimulating agents) were given at higher than recommended doses, the FDA said in a statement. In other studies, more rapid tumor growth occurred in patients with head and neck cancer who received these higher doses.

The FDA said it was continuing to evaluate the safety of the drugs and noted that further labeling revisions may occur after the Oncologic Drugs Advisory Committee discusses the medications in May.

Jim Reddoch, an analyst with Friedman, Billings & Ramsey, rated Amgen market perform but advised not getting into the stock until it drops to the mid-50s. Amgen fell below $60 in trade Monday, hitting a 52-week low of $59.03, but rallied to close at $60.68.

The black box was not unexpected, but the recommendation to use as low a dose as possible was a negative surprise, Reddoch stated in a research report. We were also surprised to see a reference to increased risk of tumor progression.

The outcome of the Oncology Drugs Advisory Committee meeting and other events in May should help clarify the Aranesp forecast, but Reddoch said he was not reducing his Aranesp numbers any more than he already has. Reddoch previously lowered his Aranesp sales through 2012, cutting them from $4.5 billion to $4.3 billion for this year.

But Reddoch noted this could change, and he could decide to drop his estimates even lower if the kidney guidelines come down, if Medicare drops (anemia of cancer) coverage, or if it appears that doctors are backing away from Aranesp use more aggressively than we had thought.

He noted FBR recently conducted a survey of 20 oncologists that revealed that they planned to reduce their use of Aranesp in anemia of cancer by 35 percent on average even before the black-box warning was announced.

None of the physicians surveyed said they used Aranesp to enhance chemo or radiation in non-anemic cancer patients. This revelation could make trial 145 — a study involving chemotherapy-induced anemia in small-cell lung cancer patients that targets a high hemoglobin level — less relevant, Reddoch said.