Deals of the Week: Winter of Our Discontent

Seems like many folks in pharma land are channeling Richard the Third this week. (Alas, there is no son of York to make winter's discontent glorious summer.)

Certainly staffers at both AstraZeneca and Sanofi-Aventis are less than happy: both companies announced more job cuts this week. (AZ will lay-off some 300 R&D employees from its Alderly Park site while Sanofi plans to reduce its German sales staff by 380.) And, pity the poor VCs. The Star Ledger is reporting that VCs are accepting smaller returns on smaller deals and waiting longer to cash-out as a result of the global credit crunch and the flagging IPO market.

Finally, remember Trimeris? Back in December that company put its R&D activities on hold to review its strategic options. But management isn't moving fast enough for the company's largest shareholder, HealthCor. On Feb. 1, HealthCor officials wrote a letter to Trimeris executives asking for two board seats, stating: "We are not in favor of strategic transactions other than those involving a sale of the business." (Hmm. Maybe the HealthCor folks are actually channeling Carl Icahn...)

If you, too, are suffering the winter blues, fear not. The IN VIVO Blog has a cure. (WARNING: Side-effects may include motivational deficiency disorder, sudden on-set of snarkiness syndrome (SOSS), maniacal laughter, and IN VIVO Blog addiction. Hey, there are worse things...) You guessed it. It's that time again.

• Dynogen/Apex Bioventures Acquisition Corp.: On Wednesday, Dynogen and Apex Bioventures announced they have signed a definitive agreement that will allow Dynogen to become public through a merger with one of Apex Bioventure's subsidiaries. (In case you don't know, Apex Bioventures is a special purpose acquisition company--or SPAC--that raises money for the sole purpose of buying another entity. The key thing is the SPAC can't say whom its acquiring--or even considering acquiring--before it raises the money. SPACs have enjoyed a resurgence in popularity in the life sciences in recent years as an alternative to the IPO market or a reverse merger.) The move gives Dynogen plenty of cash--the press release says the company should have up to $65 million at the deal's closing. Dynogen will certainly need it. It's currently developing two Phase II-stage drugs for gastrointestinal disorders, including irritable bowel syndrome. And given pharma's own R&D heartburn in the space, Dynogen may need the additional data before a partner with deep-pockets will assume some of the development risk. In the past, SPACs have favored companies with a shorter runway to commercialization like Alsius and Precision Therapeutics so this combination will be interesting to watch.
  
• Amgen/Takeda: Hit by declining sales of its EPO franchise and growing competition, Amgen announced a monster two-part deal with Takeda this week. In Part I, Takeda gets Japanese rights to 12 of Amgen's pipeline assets in exchange for $200 million up-front, up to $340 million in development costs, and potentially $363 million in sales-linked milestones and royalties. The Japanese firm will also buy Amgen’s Japanese subsidiary for an undisclosed sum. In Part II, Takeda takes on worldwide rights to Phase III motesanib, a small molecule angiogenesis inhibitor for cancer, for another $100 million up-front and $175 million in additional success-based milestones. The deal embodies two major trends we’ve talked about: the need to cut unnecessary infrastructure and the importance of risk-sharing in the vein of Bristol-Myers Squibb's deals with AstraZeneca and Pfizer. (For a more in-depth look at the deal, see here and here.)
  
• GE Healthcare/ Whatman: On Monday, GE Healthcare announced it was buying Whatman, a global supplier of filtration products and technologies for approximately $713 million. That's a lot of money for a research tools business, even if Whatman posted 2007 revenues of more than $225 million. Still it's a far cry from the $8 billion GE planned to plunk down for Abbott's point-of-care and diagnostics businesses, a deal that was eventually scuppered. It's likely GE has realized it must resort to a serial acquisition strategy if it's to challenge Siemens for the title of global leader in IVD. And Whatman's filtration and sample prep technologies could play a key role in building better protein and DNA-based tests, an area in which GE is interested in bulking up. Meanwhile, we continue to ponder the fundamental connections between tool and test companies, something we wrote about here.
  
• GlaxoSmithKline/ Amira: Also on Monday, GSK and Amira teamed up to develop Amira's 5-lipoxygenase activating protein (FLAP) inhibitors in a deal that could be worth up to $425 million for the biotech. (But only if it meets all potential development and regulatory milestones. Makes you wonder what the up-front payment was, doesn't it?) Most of the flap...sorry, we couldn't resist...is about Amira's lead product, AM103, a once-daily, non-steroidal asthma treatment that just completed Phase I trials in November. This isn't the first monster deal Amira has inked. Back in 2006 it signed a deal with Roche worth up to $287 million to develop three anti-inflammatory candidates.

"West," by Flickr user Dreamer7112, used under a creative commons license.

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Perlmutter: We're Not Abandoning Japan

Signing over Japanese rights to 13 development assets and selling the Japanese subsidiary doesn’t mean Amgen is abandoning Japan, insisted Roger Perlmutter, EVP R&D, in a phone interview with IN VIVO Blog a few hours after the Big Biotech announced its $300 million up-front double-deal with Takeda (see our post below). “We’re just saying that partnering is the right way for us now."

But Perlmutter acknowledged that most Western firms haven’t exactly sailed into the world’s second-largest market, where local knowledge and relationships still count for a lot. “Japan is a very special market, requiring special expertise. The process of getting into Japan [for a foreign company] takes decades, and requires a large investment.”

The money bit’s the problem: Amgen can’t afford large investments, since its annus horribilis in 2007—which may be repeated, possibly even more horribly, in 2008. Indeed, Amgen’s taking a “more strategic look” at its wider international expansion plans, according to Perlmutter. In other words, Japan might not be the only place Amgen pulls back, or partners. “Things we had anticipated we could do…we now can’t do in the same time-frame.”

But at least there are scores of willing collaborators standing by. Takeda apparently won a highly competitive bidding process for the broad alliance announced today—perhaps made more attractive since Amgen hadn’t insisted on any particular structure. “We let potential partners suggest the best way to ally” in Japan, insists Perlmutter. (Given its sellers’ advantage, Amgen would have called the shots, mind you—it has kept a co-promote option in Japan, for instance, should its fortunes change down the line.)

Worldwide rights to Phase III cancer candidate motesanib weren’t originally part of Amgen's Japan proposal--these were being advertised separately. "The compound needed more investment," clarifies Perlmutter--not least, one assumes, to help distinguish this VEGF-targeting multikinase inhibitor from its on-market competitors. Still, Takeda’s interest in that, too, helped it secure the lot: one partner’s easier than two.

Perlmutter isn’t expecting any more multi-molecule, broad ranging deals like this one anytime soon. But the party still isn’t over for those seeking biotech pipeline assets, and who have the money to pay for them. Amgen's currently partnering some of its earlier-stage molecules, too, for which it expects more valuable cash. After all, noted Perlmutter, "not a lot of folk have assets like ours."

And while not a lot of folk face quite the same near-term revenue risks, they aren’t home free, either. Big Pharma will see products with $73 billion worth of US sales lose patent protection by 2012. Which means that the kind of out-licensing and risk sharing Amgen is now doing is likely to be increasingly common among other large drug companies, too.

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Amgen Cashes out of Japan; Follows Bristol's Risk Sharing Example

It’s a sign of the times when Amgen starts licensing its drugs to mid-sized Japanese pharma.

Sure, we knew that troubled Amgen, hit by declining sales of EPO drugs and growing competition--including from forthcoming biogenerics--was looking for ways to cut costs. It had already last year declared workforce culls and its intention to partner certain R&D assets.

But this double-deal with Takeda, announced this morning, is still worth a second look. In Part I, Takeda gets Japanese rights to 12 of Amgen’s pipeline assets in exchange for $200 million up front, up to $340 million in development costs—not just for Japanese, but for worldwide development—plus up to $362 million in sales-linked milestones, and royalties. The Japanese firm will also buy Amgen’s Japanese subsidiary for an undisclosed sum.

That regional deal’s interesting enough: Amgen, while touting its wider international expansion outside of the US, is exiting Japan. It wouldn't be the first; other companies have acknowledged that this tough market is best tackled by locals, who’ll pay dearly for access to assets. Amgen's move is also about cutting infrastructure—a trend, and need, that we’ve talked about in the context of Big Pharma’s unwieldy bureaucratic machines (and Amgen, too, is increasingly compared to Big Pharma, as we noted in this IN VIVO feature.)

Part II is the most telling bit of this deal, though. For another $100 million upfront and $175 million in additional success-based milestones, Takeda takes on worldwide rights to Phase III motesanib, a small molecule angiogenesis inhibitor for cancer. It'll pay double-digit royalties on Japan sales, but will also cover 60% of ongoing development expenses outside of Japan, and share profits on a 50-50 basis.

This, in case you hadn't noticed, is Amgen doing risk- and cost-sharing, big time—like Bristol Myers Squibb did via monster deals in early 2007 with AstraZeneca and with Pfizer. Amgen's not only got itself a partner in a market that's now clearly non-core, but has also secured a good chunk of its ex-Japan costs, too, on all 13 molecules.

Amgen didn’t used to do out-licensing, at least, not until a lonely deal with InteKrin last January. Now it knows it has to: it needs the cash to help cushion some of the EPO blow (which may yet get worse following the next ODAC meeting in March) and, with commitments to cut 14% of staff, it doesn’t have the development muscle to deal with its entire pipeline in-house.

Not that motesanib is the crown jewel; far from it. It'll hardly be the first tyrosine kinase inhibitor to market, after all--hence Bear Stearns analyst Mark Schoenebaum's comment that the motesanib terms are particularly good for Amgen, since "we believe that the molecule's future is bleak."

Osteoporosis candidate denosumab is the company’s big hope—some say its only life-line—and Japanese rights to that went to Daiichi Sankyo last year, for what may now appear a rather paltry $20 million up front and $150 million contribution towards global development costs.

But Takeda’s nevertheless doing ok here. Twelve of the 13 Amgen assets are large molecules, granting the Japanese company its own foothold in biologics door, following similar moves by compatriots Astellas and Eisai Co. (along with most Western Big Pharma). Many of those were acquisition-driven, though (read more about the various strategies here).

By effectively signing a regional Japanese deal, Takeda gets to cut its teeth in biologics development alongside experts—albeit paying a price for that privilege—and will likely enjoy the comfort of ex-Japan approvals for some of the compounds before taking on the task itself at home.

And worldwide rights to motesanib—a small molecule—ticks another of the boxes on Takeda’s wish-list: international expansion. All Japanese firms (at least, all the larger ones) are desperate to expand outside their domestic market because of sluggish growth and harsh price cuts. That’s in large part what drove Eisai’s $3.3 billion cash acquisition of US spec pharma MGI Pharma in December 2007—a headline-grabbing transaction that Takeda will have badly wanted to answer to, if not, this time at least, out-do. (Read more about Eisai/MGI here.)

Photo "Pharma Spam Tower" by Flickr user shimown used under a Creative Commons license

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While You Were Eating Chili and Drinking Beer

Sometimes coming up with a headline for our weekend roundup can be difficult. This was not one of those times.

While we went with what we figured was the most universal of Super Sunday experiences, we had choices. Also considered: While You Were Watching It For the Ads, While You Were Giants, While You Were Eli-d, While You Weren't Going Undefeated, While You Were Choking, While You Were Jumping Off the Pats' Bandwagon, While You Were Participating in the Unauthorized Use of Game Footage Without the Express Written Consent of the NFL, and While You Were Praying There Would Be No Tom Petty Wardrobe Malfunction.

Some of us here at the IN VIVO Blog are Eagles fans (no, really, we probably haven't mentioned it before) and so the only suitable Superbowl outcome would have been for both teams to get disqualified somehow. But alas, at least it was a tight game.

Believe it or not there was more than Super Sunday and Super Tuesday prognosticating going on this weekend. Or so we heard.

• Amgen and Takeda inked a broad alliance to develop and commercialize 13 Amgen products in Japan. In a second and related deal, Takeda becomes Amgen's worldwide partner for the Phase II oncology candidate AMG-706 (motesanib). Amgen gets up-front payments of $200 million and $100 million respectively, and a further hundreds of millions in milestones and R&D expense sharing, plus royalties on Japan sales (and worldwide 50/50 profit sharing on motesanib). Takeda is also acquiring Amgen's Japanese subsidiary Amgen KK.
  
• From the Financial Times: a preview of GSK's forthcoming results this week with one key question--can the Big Pharma get FDA approval for Cervarix? We weighed in on this question on Friday.
  
• [Self Promotion Alert] The line-up for our Pharmaceutical Strategic Outlook conference in New York (March 18-20) keeps on getting better.

Photo from Flickr user jwinfred used under a Creative Commons license

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Close But No Cigar

The kind of thing that strikes you as interesting if you are reading a new book about linguistics (pictured right) while keeping tabs on Wall Street's assessment of Amgen Inc.'s prospects going forward: what exactly does "close" mean?

Amgen surprised Wall Street by announcing at the JP Morgan conference that its full year 2007 earnings per share would end up "close" to the low end of its initial forecast of $4.30-$4.50 for the year. After a dismal year of regulatory and commercial setbacks, including the company's first ever layoffs, analysts did not expect the company to come near to hitting those numbers.

They dutifully revised upward their projections for the fourth quarter--but Amgen still beat their consensus when it reported earnings of $4.29 per share for the full year. That is as close as you can get to the initial baseline forecast of $4.30, right?

That at least is how it looks to people who follow the company closely.

But not everyone sees it that way. At least one Wall Street observer--a reporter for CNBC--looked at Amgen's JP Morgan announcement and read it as if the guidance itself were still in force, and Amgen's prediction of coming close to the low end as a warning that it would be in the $4.31-$4.35 range. So $4.29 per share was a disappointment. (Check out this exchange between a CNBC reporter and Amgen.)

Guess you've got to pick your words carefully....

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Amgen Braces for Another Review of EPO Safety: How Bad Will it Be?

Investors loved what they heard from Amgen CEO Kevin Sharer at the JP Morgan conference in San Francisco.

The stock price jumped nicely when he announced that the company’s cost-cutting plan is paying off already, with earnings per share for 2007 expected to come in well above Amgen’s revised guidance—and in fact almost in line with the low end of the company’s original forecast for the year before the EPO disaster unfolded.

Investors also responded to Sharer’s assurance that EPO sales have stabilized now that the market has had time to adjust to new restrictions on coverage imposed by the Centers for Medicare & Medicaid Services in the chemotherapy induced anemia market.

You have to feel good for people at Amgen to see a bit of positive news after a dreadful year. (How bad was 2007 for Amgen? The 5% jump after Sharer’s January 8 presentation brought the company back within range of $50 per share—which is where the stock was five years ago. Ouch.)

What we took away from the presentation, though, was not quite as rosy. The company is bracing for another potential hit to the EPO franchise when it goes back before the Oncologic Drugs Advisory Committee to review still more negative safety data about EPO. (Amgen markets epoetin as Epogen and darbepoetin as Aranesp; the company also manufactures Johnson & Johnson’s epoetin brand Procrit.)

It was ODAC that really started Amgen’s headaches in 2007 when it made unexpectedly harsh recommendations about restricting use of EPO, so there is obviously reason for Amgen to be nervous.

Sharer stressed that Amgen is prepared for ODAC and urged investors to focus on how the company fared during a Cardio-Renal Drugs Advisory Committee discussion of EPO safety in the kidney failure market, rather than the ugly discussion that took place during an ODAC meeting in May.

But he also kept mentioning the meeting.

When he said “the ESA revenue picture is stable,” he added, “but obviously the dialogue isn’t over.” Then he talked about the timing of Amgen’s annual business review, which was supposed to take place in February—but, Sharer said, will now be “in the June timeframe.”

Why? “We want to make sure our team is fully focused on giving the very best preparation for the March ODAC. If we have the business review as we originally thought in February, that would be a conflict for the same people. I think you as shareholders and I certainly as management want those people focused on ODAC. So we’ll pick another date for you.”

“It will be obviously after ODAC and we will have more to talk about then.”

Hmmmm.

Here’s what we had had heard about the ODAC meeting before Sharer spoke.

(1) It would take place in March;

(2) FDA would in essence be asking the committee to support another relabeling of the drugs to bring the FDA label more explicitly in line with CMS’ coverage policy; and

(3) There would be discussion of additional post-marketing requirements, and in particular a demand by FDA for a placebo arm in a study the sponsors are proposing that would compare the historical dosing paradigm for EPO head-to-head against the intermittent model covered by CMS.

We asked both Amgen and FDA to confirm those details, but both said that they were not in a position to discuss anything about the advisory committee review because the date is not yet set.

Well, it sounds like our sources were right about the March date, at least.

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EPO Relabeling: Its Not the Black Box, Its What FDA Says About the Black Box

Whoever said actions speak louder than words hasn’t been paying attention to the regulatory response to drug safety issues involving the anemia therapies darbepoetin (Aranesp) and epoetin (Procrit, Epogen).

FDA unveiled strong new warnings on the EPO brands marketed by Amgen and Johnson & Johnson on November 8. The new warnings stress the dangers of using the agents too aggressively to elevate hemoglobin levels, and emphasize that there is no evidence that the drugs improve symptoms of anemia—they should only be used to reduce the risk of transfusion.

It is safe to assume that the new labeling will have absolutely no impact on how the drugs are actually used.

On the other hand, what FDA said about the new labeling will have an impact.

That’s because FDA used the relabeling to repeat its position that restrictive coverage rules implemented by the Centers for Medicare & Medicaid Services are “generally consistent” with the revised labeling.

FDA first made its position on the EPO drugs clear almost a month ago, in a letter to two powerful members of Congress. And in so doing, the agency ensured that the labeling change itself would be anti-climactic at best. That’s because it is CMS’ coverage policy—not FDA’s regulatory actions—that will drive use of the products going forward. (Although FDA still isn't done with EPO; what the agency does next probably won't make much of a difference to Amgen and J&J commercially, but will nevertheless be a key milestone in the implementation of the new drug safety law. You can read all about that in The RPM Report's November issue.)

The question of how the label matches the CMS coverage policy came up repeatedly during a media conference call hosted by FDA November 8. Office of Oncology Drug Products Director Richard Pazdur observed that the labeling says care should be taken that hemoglobin levels not exceed 12 g/dL. “This is not a target,” Pazdur stressed. “This is an upper boundary for safety.”

Office of New Drugs Director John Jenkins highlighted several elements of the labling, including the addition of a new chart summarizing results of six clinical trials showing an adverse impact on survival or tumor progression. The chart includes a column highlighting actual average hemoglobin levels achieved in the trial (data available for three of the six studies). Although the trials targeted hemoglobin levels above 12, actual measures achieved were below 12 in two of the three cases, including only 10.6 in one study that found an adverse survival outcome.

So, Jenkins observed, FDA has added to labeling a warning statement emphasizing that the available data cannot exclude a risk in patients whose hemoglobin levels are maintained below 12. In other words: FDA is saying the drugs are dangerous when used in patients with hemoglobin above 12, but the agency is not saying they are safe when used at levels below that.

Instead, Jenkins said, FDA's goal is to encourage conversations between doctors and patients about whether to use EPO “at all” and then to use “the lowest dose to prevent transfusion.”

Amgen and J&J, of course, see things a bit differently. In fact, they both formally asked CMS to reconsider the policy on November 8, the same day the new labeling was adopted.

Sharer responded to FDA's position that the CMS policy is consistent with the labeling. “I think the issue of consistency here is a bit of red herring," Amgen CEO Kevin Sharer said on an investor conference call to explain the new labeling. " I think the real issue is physician discretion. Clearly, the labeling gives physicians discretion here and the NCD does not. We see that as the point of policy that really needs to be focused on.”

Sharer, though, is not promising anything in terms of changes. "Our financial plan is to manage the company on the assumption that the NCD will stand.”

The reconsideration request certainly looks like a long shot. Sharer acknowledged that the submission does not have a lot of new data in the “literal use of the word data.” It does include a new study conducted in Germany showing now adverse outcomes in patients with Hodgkin’s lymphoma, and it includes some early data about signals of increased transfusions in the US resulting from the policy.

But what it mostly does is reargue the points addressed by CMS in the policy. “Over the course of this year, many different individuals, capable individuals and entities have looked at this data and come out in favor of giving the providers discretion,” Sharer said. “We think the weight of opinion of others looking at this data is very very important information.”

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Amgen Feels the Effects of CMS’ Long Shadow

To no one’s surprise, sales of Amgen’s flagship anemia product darbepoetin (Aranesp) dropped sharply in the third quarter, 23% worldwide, and 36% in the US. Given the tough new restrictions put on coverage of Aranesp and J&J’s epoetin brand Procrit in the key Medicare market, a big hit was inevitable.

Still, it is worth looking at the full impact of the Centers for Medicare & Medicaid Services coverage decision on Amgen’s third quarter results. (If you haven’t been following this, you can catch up by clicking here.)


Given the tight coverage policy, it is no surprise that EPO use is way down in the Medicare market directly controlled by CMS.

But the coverage policy is casting a much bigger shadow than that.

First, there is a spillover effect into the private insurance market for chemotherapy patients. Amgen EVP-commercial operations George Morrow reported that use of EPO in chemotherapy induced anemia patients is down 30%-40%--even though no private payors have adopted payment policies that are as restrictive as CMS’.

“Clinics and hospitals are struggling with 2-tier medical practice,” Morrow explained. “They do not want to treat all of their patients to the lowest common denominator—and here I am talking about the NCD with a hemoglobin of 10. On the other hand, they find it ethically discomforting and administratively burdensome, to implement one treatment protocol for Medicare patients in another widely diverging protocol for all other patients.”

Morrow is optimistic that the picture will brighten over time. “We are also seeing a steady increase in the adoption of differential treatment protocols, by largely more sophisticated clinics and hospitals, as oncologists reluctantly adapt themselves to the new reimbursement environment.”

There is another possibility: that private payors will begin to move more in line with CMS’ restrictions. That is the usual pattern: CMS leads and private payors follow.

The spillover from the coverage policy doesn’t stop there. Amgen is also seeing an impact on use of EPO in myelodysplastic syndrome, even though the company successfully persuaded CMS not to put new restrictions on that indication. “Even though reimbursement remains in place, physicians have reduced utilization,” Morrow reported.

It doesn’t stop there. “We are seeing some modest spillover of the ESA reimbursement concerns for colony stimulating factors or CSF. In other words, there is a generalized fear of not getting reimbursed leading to more cautious utilization.” That was a factor in holding back growth of pegfilgrastim (Neulasta), Morrow said. Sales were up 8% for the quarter, but underlying demand was flat.

“We are actively investigating and addressing any clinical or reimbursement issues that are inappropriately impacting Neulasta utilization,” Morrow said.

That impact comes on top of the effect Amgen already acknowledged from a loss of promotional support for the brand while the sales force addressed the concerns about EPO.

Amgen is still hoping it can find a way to force CMS to reconsider its position on EPO, but it acknowledges that to be a long shot. “As physician groups continue their dialogue with CMS, we hope a compromise can be reached that gives doctors sufficient latitude to make the best decisions, consistent with their understanding of the available science and their own clinical experience, while also meeting important CMS objectives,” Amgen CEO Kevin Sharer said.

Asked what kind of “compromise” he envisions, Sharer replied. “Its hard to say. Our financial plan is to manage the company on the assumption that the NCD will stand.”

That seems like a safe assumption. A Reuters interview with CMS Chief Medical Officer Barry Straube suggests that the agency isn’t going to budge any time soon.

J&J sure seems to be moving on. Amgen acknowledged during the call that reimbursement wasn’t the only issue affecting Aranesp this quarter: the product also lost market share against Procrit—a development that would have dominated the discussion of Amgen’s prospects a year ago when Aranesp was relentlessly taking over the market Procrit used to own.

Amgen CFO Bob Bradway explained that the share loss came in Public Health Service hospitals, “where our competitor offers some very steep discounts, discounts that we felt that we weren't going to match.”

Amgen isn’t happy that J&J is recapturing share in the EPO market, but there may be some comfort to the company in being able to talk about those issues. After a year dominated by regulatory and reimbursement issues for its flagship franchise, a year where the company was forced to consider what else it might turn to besides EPO, Amgen surely longs for the days when it only had to worry about the competition.

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FDA Sides With CMS in EPO Battle; Labeling Change Next

Rep. Stark is smiling; Amgen isn't

Amgen Inc.’s uphill climb to reverse restrictive coverage policies for darbepoetin (Aranesp) just got a little steeper.

The Centers for Medicare & Medicaid Services’ position that it will not pay for use of Aranesp or Johnson & Johnson’s competing EPO brand epoetin (Procrit) in patients with hemoglobin levels above 10 g/dL “is generally consistent with the available data and the published scientific literature.” So says the Food & Drug Administration in a letter sent to two prominent House Democrats: Oversight and Government Reform Committee Chairman Henry Waxman (D-Calif.) and Ways & Means/Health Subcommittee Chairman Pete Stark (D-Calif.).

The letter, signed by acting Assistant Commissioner for Legislation Stephen Mason, gives CMS a vote of support the agency desperately wanted. It looks like CMS is making its position stick—and that is a development that should matter to companies across the industry, not just Amgen and J&J. (Why? We have written extensively about that in The RPM Report—including this article just going to press. Not a subscriber? Click here to register for a free trial and check out our coverage.)

FDA’s letter ends any lingering hopes for a quick reversal of the coverage policy, despite an all-out campaign by Amgen and J&J to enlist support in Congress. Amgen seemed to have gained a lot of traction on Capitol Hill, especially in the Senate, where a non-binding resolution urging CMS to reconsider the policy passed at the start of September, and where many Hill watchers expected a binding resolution to be included in a Medicare bill this year.

But one of the critical arguments underpinning the Senate legislation has been the contention that CMS’ policy is consistent with the FDA approved directions for use for EPO. As currently written, FDA’s label says EPO should be used to maintain hemoglobin levels at the lowest level sufficient to avoid the need for transfusions, and not be used once hemoglobin rises above 12 g/dL. Amgen, J&J, and a whole bunch of oncologists think that means CMS’ policy—refusing to pay for use above 10—is inconsistent with the labeling.

CMS has stuck by its position despite the political pressure. But no one knew for sure what FDA thought or what it would say when it finalizes new labeling for the drugs to reflect advice from two advisory committees convened in May and September. (Here is our recap of the situation, including a nifty picture of Commissioner von Eschenbach holding the PDR.)

So Waxman and Stark asked. FDA still hasn’t finalized the labeling, but it did answer the critical question. “The current labeling advises that the hemoglobin not exceed 12 g/dL,” Mason wrote. “FDA considers this to be an upper safety limit for ESA dosing, not a target for therapy. FDA is aware that there has been some confusion about the dosing recommendations in the current approved labeling and will work to clarify that confusion as we complete labeling changes that we are currently discussing with Amgen.” (Amgen is the license holder for both Aranesp and Procrit, so J&J is not directly involved in the labeling discussions.)

“Transfusions are not normally given to patients whose hemoglobin is 10 g/dL or higher,” FDA said. So I guess we know what the new labeling will say--not that it matters anymore, since FDA's letter of support is far more important to the future of the anemia therapies than anything the labeling ultimately says.

Oh, and FDA didn’t stop there. “There is no evidence that ESAs result in improved survival, tumor control, health-related quality of life at any hemoglobin level in cancer patients undergoing chemotherapy,” the agency wrote. “ESAs were approved based on their effectiveness in reducing the need for red blood cell transfusions.”

Don’t expect Amgen to take that answer lying down. But the company has an even tougher road ahead if it hopes to change CMS' mind.

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EPO’s Future Back in FDA’s Hands

FDA Commissioner von Eschenbach: Whose Side is He On?

That sigh of relief you heard on Tuesday came from Amgen and Johnson & Johnson, when an FDA advisory committee declined to recommend significant changes in the labeling for EPO products in renal failure patients. As a commenter put it in response to our preview of the meeting, “history didn’t repeat itself.”

Probably just as important for the companies was the tone of the meeting. It was a tough meeting—any advisory committee focusing on safety concerns with your biggest products is going to be tough—but in general FDA officials avoided making inflammatory comments or otherwise suggesting that they are going to somehow make life even tougher for the anemia therapy sponsors.

After the meeting, a bunch of Wall Street analysts did something they haven’t done in a long time: they raised their forecasts for 2008 revenues from Aranesp, Epogen and Procrit, and Amgen’s stock responded accordingly.

So is the worst over?

Well, that depends. After the meeting, FDA officials said they plan to finalize the new labeling for the EPO therapies in a matter of weeks. The new labeling will address use of the drugs both in the renal failure/dialysis setting and in oncology.

And right now at least, the oncology setting is where the action is. Amgen, J&J and the oncology profession are waging an all fronts campaign to reverse the restrictive coverage policy put in place by the Centers for Medicare & Medicaid Services in that setting.

A key point of contention is whether CMS’ policy contradicts the FDA-approved labeling for the drugs. (The RPM Report has just published its latest coverage of that issue online. Not a subscriber? You can read the story for free by registering for a 10-day trial here.)

The argument that CMS is restricting access to FDA-approved uses of EPO clearly resonates politically. ASCO’s point about the conflict between CMS’ policy and the EPO label was cited in a “sense of the Senate” resolution urging reconsideration of the coverage decision.

So when FDA issues final labeling plenty of people will be paying close attention. The sponsors hope that FDA will reinforce their view that CMS’ treatment model is ridiculous—in particular, by repudiating the ceiling that CMS has set on hemoglobin levels for chemo patients. If that is how the final labeling reads, the pressure on CMS to reconsider its policy is sure to intensify.
Of course, there is another possibility: FDA could back up CMS instead.

FDA is not likely to insist on labeling that requires treatment exactly along the lines proposed by CMS, but FDA could try to tweak the labeling so that it more clearly states that treatment should maintain hemoglobin levels at the lowest level to prevent transfusions.

Or the agency could support CMS less formally, simply by stating publicly that the coverage policy is consistent with FDA approved labeling. FDA Commissioner Andrew von Eschenbach is an oncologist by training, the former head of the National Cancer Institute, and a prostate cancer survivor. With the political pressure on CMS ratcheting up, the Medicare agency is surely rooting for some show support from the commissioner of FDA.

But will they get it?

So far, there has been nothing. An FDA spokesperson says she is unaware of any plans for the agency or the commissioner to weigh in on the coverage policy, saying that falls outside the agency’s “central mandate to review drugs for safety and efficacy.”

The head of FDA’s Office of Oncology, Richard Pazdur, participated in the September 11 advisory committee review of EPO use in renal failure, but he did not use that forum to make any comments about the CMS coverage policy.

But stay tuned. The September 11 advisory committee review is definitely not the last word on EPO.

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EPO Fatigue: Amgen Hopes History Doesn’t Repeat Itself

Did you ever have a recurring nightmare? That is what Amgen Inc. and Johnson & Johnson want to avoid next week when another panel of expert advisors to the Food & Drug Administration weighs in on the safety profile of EPO therapy to treat anemia in chronic renal failure patients.

The Cardiovascular & Renal Drugs Advisory Committee will discuss the safety profile of Amgen’s Epogen and Aranesp, as well as J&J’s Procrit, on September 11.

Amgen has been making the rounds on Wall Street, assuring investors that it is ready for anything at the Cardio-Renal Committee.

Why? Because the last time an FDA advisory committee met to discuss those same products—the Oncologic Drugs Advisory Committee in May—it did not go well. The committee recommended much stronger restrictions on use of the drugs than anyone anticipated. And things got even worse a few days later, when the Centers for Medicare & Medicaid Services issued a proposed coverage policy that sharply limited the drugs.

CMS compromised a bit when it issued a final coverage policy in July, but not enough to spare Amgen. The new payment rules prompted a major restructuring by the company in anticipation of a big drop in Aranesp revenues.

Now Wall Street is wondering what to expect from the nephrologists when it is their turn to review EPO.

In recent weeks, Amgen has been making the rounds to large investors and analysts with to assure them that it has a solid game plan in place for the meeting. The company says it has seen FDA’s briefing materials and they don’t look surprising or onerous. (The public will be able to see those materials on Friday or Monday, on FDA’s website.)

What will Amgen do? Here is how SVP-North American operations Jim Daly described the company’s approach back in June. Asked during a Goldman Sachs conference what the company would do differently to prepare for the Cardio-Renal Panel, Daly replied: “I think we’ve learned a lot from ODAC, which is go in prepared for a scientific discussion but also be prepared for wherever it goes.”

“I think that community also needs to play a more proactive role, and the good news here is that the nephrology community already has been very active with the FDA. Their primary concern is that they are taking an oncology dosing paradigm and imposing it on nephrology patients, and it’s a very different disease state.”

Still, Daly said, “we need to be prepared in case the agenda goes into other areas, whether it be the cost of ESAs, whether it be the utilization patterns as a result of reimbursement, I think we need to be prepared to address those.” Daly recalled a “pointed moment” in the ODAC review when “one of the physicians said does anybody here know what community oncologists do and why they do it? And the response was no, but I do know they make $1,200 a dose, therefore we can’t leave the prescribing decision in their hands.”

If the Cardio-Renal meeting “goes to that level I think that would be very disappointing, but I think we have to be prepared to deal with that. The best response will come from someone in the audience that says that is preposterous.”

In other words, expect plenty of patient and provider representation ready to speak up on Amgen’s behalf.

But will that be enough to ensure no unpleasant replay of the May ODAC meeting? Citigroup Yaron Werber doesn’t think so. The headline to Citigroup’s Aug. 30 note says it all: “Beware of CRDAC—the Bite May be Worse than Expected.”

Why is Werber concerned? Because “we have learned that Rich Pazdur, head of FDA’s oncology division, will be present in an oversight role. Given his aggressive stance, his presence in CRDAC is a clear concern.”

That seems like a lot to read into one FDA official’s participation in the meeting, but it does underscore a larger point about the regulatory response to the EPO safety issues. As Werber puts it, there is a “theme that FDA/CMS view EPO to have modest benefit w/growing evidence of harm. Thus, panel might be more contentious than expected even on dialysis.”

Werber isn’t alone in worrying. After all, several analysts note, Amgen assured them it was on top of the situation before the May ODAC meeting.

One other thing: Citigroup expects CMS to follow close on the heels of the advisory committee with a national coverage decision about use of EPO in nephrology. And, Werber warns, it is possible that the combined impact could be to make Citigroup’s forecast of a 10%-15% decline in the nephrology market in 2008 overly optimistic.

If Werber is right, Amgen investors have another tough three months to look forward to. Should make for an interesting week next week.

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Generic EPO Should be a Big Deal. But Is It?

Novartis’ Sandoz division was on Friday granted European Commission approval for its biosimilar version of Johnson & Johnson’s epoietin alfa (Eprex). It’s not a huge surprise, given the positive recommendation earlier this summer, and given that Sandoz has done this before: growth hormone Omnitrope became the first biosimilar drug to gain European approval last year (and, after a long legal kerfuffle, got onto the US market, too).

But this should nevertheless be a big deal. We’re talking, after all, about a cheaper copy of EPO, the blockbuster anemia drug that made Amgen. A drug with sales that top $7 billion globally. Of all the biologics in generic firms’ sights, this has to be by far the most valuable--the "killer biologic," as one of you readers put it in a comment on a previous post. EPO is one of the most expensive drugs on many hospital formularies, and accounts for a huge chunk of payor expenditure.

At last!, we should be saying, the long-threatened generic biologics revolution has come to pass. Injectables will get cheaper, patient access will improve, originators will be forced to innovate and move on.

The reality isn’t quite so revolutionary. Sandoz is one of the few companies with the resources to persevere with biosimilars; many smaller firms dropped out as it became clear how onerous clinical trial and regulatory requirements would be.

Commercialization ain’t a slam dunk, either. Sure, a 20% discount counts given the prices of these drugs. But it’s up to individual countries to decide on whether docs may substitute the originator drug with a biosimilar. Innovators have done a good job lobbying against interchangeability. Questions and concerns over safety standards mean that biosimilar firms have an uphill struggle on the marketing and educational front, ensuring that these products are perceived as equivalent, not potentially dangerous cheapies.

Still, Sandoz will be helped considerably by the fact that its biosimilar has been granted the same international non-proprietary name (INN) as the reference drug, epoietin alfa (to the delight of the European Generic Medicines Association, since this goes some way at least to proving their case for scientific equivalence). Sandoz’s EPO will be available under three different brand names, though, likely in order to leverage locally-recognized and trusted generic brands across the various European markets.

Stada, another surviving biosimilars stalwart, had to settle for a slightly different INN for its generic EPO--epoietin zeta, filed in June 2006. That probably helped drive their decision to hand over commercialization to US-based specialist hospital marketer Hospira last November. The move was about “curbing financial risks” associated with the project, whose approval, as the press release optimistically states, “is still possible in late 2007”. Also last year, Mayne Pharma pulled out of a marketing deal with Pliva (now part of Barr Pharmaceuticals) on generic EPO. The product was approved in Croatia in 2005 but hasn’t got past the EU regulators.

In sum, Sandoz's approval in itself isn’t much of a threat to J&J, even less to Amgen, which sells epoietin alfa as Epogen in the US. But it is symbolic, at least in its timing, of an end to the monopolies that innovators have enjoyed on hard-to-make biologics like EPO, a topic we discussed in more detail in this IN VIVO feature.

Sandoz’s head of Biopharmaceuticals Ajaz Hussain knows that biosimilars’ take off will be slow; he told IN VIVO Blog about it earlier this summer. But take off they will, eventually—and when they do, this approval may well be looked upon, if only retrospectively, as one of the most important steps along the way.

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The One-Two Punch in Venture Capital

Domain Associates’ Eckard Weber is now the master of the one-two punch in venture capital.

He finds a drug candidate no one cares about; creates a low-infrastructure company around it; finds a second drug to exploit the infrastructure and spread the risk; sells off the lead drug through an acquisition; keeps the second drug and same management, forms a new company around it; develops it some more; then sells it off again. The first deal at a minimum pays back the investors; the second deal juices the returns. (For more on the story, see the September issue of START-UP).

So far, Weber’s done the 'one-two' three times. He started with Peninsula and follow-on Cerexa (the former to J&J for $245 million in April 2005, the latter to Forest Labs for $494 million plus a potential earn-out in December 2006); meanwhile there was Conforma Therapeutics and follow-on Cabrellis (the first sold to Biogen in May '06 for $150 million plus earn-outs, the second to Pharmion only six months later for $59 million plus earn-outs); and most recently with NovaCardia (stage one completed with the Merck $350 million acquisition last month; stage two just getting started on NovaCardia’s second product).

It’s a good model – and now it looks like others are taking up the idea, too. In June, Amgen won an auction to buy the polymer drug specialist Ilypsa, which had created a platform for drugs that soak up various chemicals, like phosphate and potassium. The most advanced drug, the Phase II ILY101, was an improved phosphate binder that sops up excess phosphates in chronic kidney disease patients on dialysis. But there were other compounds behind it, including a nearly-clinical stage potassium binder also for use in CKD.

When Ilypsa went to partner ILY101 (they’d already sold Japanese rights, to Astellas), they got plenty of interest. And as the deal price rose, a few of the potential licensees broached the possibility of acquisition. Some of them wanted the whole company; others just the lead product. Amgen – with its erythropoietin-driven renal franchise under reimbursement assault -- was among the latter. It needed another product and was willing to pay what looked like an above-the-odds price to get it. $420 million later, Amgen had ILY101 and was ready to dispense with its other research programs (it’s watching its expenses pretty closely—a fact well known to the 2500 or so Amgenites who will be getting their pink slips), the 80 or so Ilypsa employees, and its headquarters.

Instead, some of Ilypsa’s investors – including original VC backers 5am Ventures and others -- apparently broached the topic of buying back the pieces of Ilypsa Amgen was about to chuck anyway. Amgen, which has done little out-licensing and fewer spinouts, seemed to like the idea since the parties have a preliminary deal on a newco. Amgen will get an equity stake and what looks like an inside track, if not exactly an option, on the next program, the potassium binder.

If so, Amgen’s doing the smart thing. It started by getting itself a Phase III product without hurting its P&L (it capitalized the vast majority of the purchase price). Now the VCs will spend their money on the next program while Amgen watches from a ringside seat.

If the drug passes its proof-of-concept test (Phase II trials should be fairly predictive on a non-absorbing drug that doesn’t fundamentally do anything to the body’s biology), Amgen will be able to pad its renal portfolio once again (and again without much affecting the P&L). It will, in effect, have backed into doing the kind of off-P&L R&D bankers and VCs have been urging pharma to do for years. And should it all work out, the VCs will go home pleasantly punch drunk.

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Good News for Amgen and J&J on EPO—but not for the Rest of Pharma

CMS: The Other Drug Safety Agency

Amgen and Johnson & Johnson got some good news when the Centers for Medicare & Medicaid Services finalized its proposed policy on coverage of erythropoietin stimulating agents (ESAs) in cancer patients. The final policy is about as good as it could be for the companies under the circumstances—much better than the agency originally proposed.

CMS agreed to continue to cover EPO in a number of important chemotherapy settings and also dropped some of the toughest dosing restrictions in the proposed policy. So the worst may be over for darbepoetin (Aranesp) and epoetin (Procrit) in the cancer market. Both Amgen and J&J reported sharp revenue declines for their respective brands during the quarter in response to safety concerns—and especially payment changes—but both expect growth to resume from the new, lower baseline.

CMS may have backed off from the most draconian aspects of its proposed limits on EPO coverage, but the agency is not backing off from the position that it does not have to defer to the Food & Drug Administration when it comes to responding to emerging drug safety issues.

In that sense, the final coverage policy is not a change from the agency’s initial proposal—and that is a message that the rest of the biopharmaceutical industry cannot afford to miss.

The RPM Report has written extensively about the activist role taken by CMS in the EPO safety debate. Simply put, there are now two agencies—FDA and CMS—that manufacturers have to consider when thinking about regulatory responses to drug safety issues.

CMS made it abundantly clear in the proposed EPO policy that it does not intend to wait for FDA to finalize its review of the safety issues before acting. And in the final policy, CMS is sticking to that position.

“CMS and FDA are separate agencies with different statutory missions, and operate under distinct legal authorities,” the final policy notes. “We are encouraged that the separate and independent analyses of the FDA and CMS have raised similar serious concerns about the use of ESA treatment in patients with cancer and related neoplastic conditions.”

“FDA deliberations are not public and their timeline for making changes (if any are made) in the labeling for ESAs is unknown. We believe the safety concerns that we have identified in this document required CMS to act quickly to protect beneficiaries.”

There are still plenty of regulatory hurdles ahead for ESAs. FDA hasn’t finalized labeling changes for EPO in response to the safety issues—and both FDA and CMS are just getting started on reviewing use of the agents in the renal failure market.

But one thing is clear: CMS is not going to take a back seat to FDA when safety issues arise.

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It must be two-for-one week on private biotechs

It was always a question of when, not if. Amgen needed to do something to provide for its post-EPO future; now the action has started. Today's acquisition of private Alantos, for $300 million in cash, takes this week's shopping bill for Amgen up to $720 million. Just a couple of days ago it snapped up Ilypsa for $420 million.

Ilypsa fits nicely with Amgen’s existing nephrology franchise: the company’s focused on renal disorders and has a Phase II candidate to treat high blood phosphate in dialysis patients. But Alantos takes Amgen into new, uncharted territory: diabetes.

Now granted, diabetes is a huge and expanding market—that’s why, as Amgen’s executives made clear to IN VIVO last month, it’s a development priority (along with cardiovascular disease). It’s the only primary care area where sales forces are increasing, not shrinking; the number of US reps has doubled to 10,000 in the last five years.

But it’s also gotten highly competitive, with Big Pharma including Merck & Co., Novartis and Roche all piling in. Amgen may have taken faith from the spectacular performance of Merck’s DPP-IV inhibitor Januvia, in the same class as Alantos lead Phase IIa program. But will there be room for many more in the same class?

Not according to Novo Nordisk, who pulled out of the oral anti-diabetics space earlier this year. They might just have sour grapes, since their own DPP-IVs failed several years ago, and the variety of DPP-IVs out there all bind the target differently, with differing degrees of safety and efficacy. But there’s another shadow over the class: GLP-1 analogs (glucagon-like peptide-1 analogs).

For a variety of reasons that you can read about in the forthcoming issue of IN VIVO, many experts believe that GLP-1s, not DPP-IVs, are the place to be in diabetes. Sure, DPP-IVs are oral, GLP-1s are injected. But, getting back to Amgen, it’s not as if they don’t know about proteins.

All that said: good for Amgen. At least they’re doing something, and who knows, maybe Alantos’ DPP-IV will trump Merck's in efficacy or safety (although if so, Amgen will want to take back ex-US rights, which were licensed last October to Servier). Meanwhile Alantos’ investors have done okay—the company has raised a little under $60 million since its foundation (as Therascope AG) in Germany in 1999. --Melanie Senior & Chris Morrison

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Amgen buys Ilypsa for $420mm cash

Amgen is acquiring polymer drug specialist Ilypsa for $420 million in cash.

That price is a nice return for Ilypsa's investors (including 5AM Ventures, Delphi Ventures, Johnson & Johnson Development Corporation, NLV Partners, and US Venture Partners), who invested a combined $46 million in the company's May 2003 Series A and July 2005 Series B.

Ilypsa, which spun out of the materials science company Symyx Technologies concurrent with its Series A, brings to Amgen the Phase II ILY101, a phosphate binder being studied to treat hyperphosphatemia in chronic kidney disease patients on hemodialysis.

ILY101 could help the company move beyond EPO while leveraging its existing infrastructure. Astellas nabbed Japanese rights to the then-Phase I drug in April 2006, in a deal valued at up to $92 million. If US rights were on the table now they would have fetched a pretty penny; given the therapeutic fit, and in particular Amgen's acute need for an alternative growth engine, it's not a surprise the Big Biotech chose to buy rather than ally.

START-UP neatly profiled Ilypsa in late 2005, chronicling the company's genesis (it is Scripps' Peter Schultz's seven thousandth start-up) and screening technology (which identifies non-absorbable polymer drugs) and initial focus on CKD (a massive market with significant unmet need).

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Is it Time to Buy Amgen?

Maybe it’s time to buy Amgen. Yeah, you heard right.

Many of Amgen’s shareholders—including the CFO—have scuttled over the past few months, frightened away by the seemingly endless series of blows to hit the US biotech. That’s why the stock’s at a year-low and down 30% since the start of 2007.

Over the last week, a dozen or so further percentage points were knocked off by May 10th's FDA advisory committee meeting and by the CMS’s proposal on Monday to curb Medicare payments for Aranesp in certain cancer patients.

Can it get any worse? Apparently some of Wall Street’s analysts think so. Several cut their ratings on the stock last week, according to the Wall Street Journal’s Health Blog, including long-time bulls Lazard Capital Markets.

Now, we’re not analysts. (Nor are we shareholders, nor are we share-tipping.) But, let’s face it, analysts have been known to be wrong. Dare we suggest there are whiffs of panic? Perhaps hints of lemming behavior—the slope on this once-loved stock has reversed now for, what, six months, so game’s up?

Now granted, there may be just one or two more potential hitches—the most significant being FDA’s planned fall meeting to discuss the use of EPO drugs in kidney failure. Nephrology makes up a far larger chunk of Amgen’s $6.6 billion EPO sales than oncology, and any ruling here could hit both Epogen and Aranesp.

But Amgen’s already trading at an almost 15% discount to its biopharma peers based on estimated 2007 EPS. And, as they say, in every cloud is a silver lining.

For one thing, any bad for EPO drugs is bad for Amgen’s competitors, too—including Roche's Mircera. Look out on May 20th , the Mircera PDUFA date: a bumpy ride for Roche may help Amgen.

And on a more positive note, Phase III pipeline drug denosumab may be the best in the entire biopharma sector pipeline, if you believe Mark Schoenebaum at Bear Stearns. “It could be a $5 billion drug, Amgen’s biggest ever,” he told IN VIVO last month. The first data is due by year-end. And if you believe Amgen, there’s also a wicked Phase II pipeline tucked away somewhere—if you haven’t heard about it yet, you will soon.

If investors don't start buying Amgen again soon, maybe, just maybe, the stock will hit a low that an acquisition-mad Big Pharma can't resist. The idea is around, if improbable.

But then, Merck & Co. came back, didn’t it?

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Denosumab: Outclast by Reclast?

Just when things couldn't look any gloomier for Amgen. After a series of setbacks the Big Biotech is relying heavily on the future success of its late-stage denosumab osteoporosis therapy. One of the main attractions of the antibody therapy is its convenient route of administration: the drug will only have to be infused twice a year--a big improvement over weekly pill-taking that can lead to poor patient compliance.

Too little too late?

In a three-year study of nearly four thousand patients, Novartis' once-a-year infusion Reclast (a.k.a. Aclasta, a.k.a. Zometa) was shown to decrease bone turnover and improve bone density at 12 months in postmenopausal women with osteoporosis. Results were published yesterday, in this week's New England Journal of Medicine.

Analysts have predicted the drug could be approved in that indication later this year. Although side effects included a higher rate of atrial fibrillation in the treatment group, the drug is on the market for other conditions, such as Paget's disease and the A-fib wasn't seen by observers as a deal breaker in osteoporosis either.

Amgen shares were down nearly two percent yesterday. Denosumab--currently being tested in a handful of late-stage trials, comprising a variety of oncology and bone-related indications--won't hit the market for postmenopausal osteoporosis until at least 2009. We'll take a look at Amgen's post-EPO R&D prospects in the May IN VIVO.

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The More The Money-er

The more Epogen, that is.

Just when you thought it wouldn't get any worse for Amgen, a new study published in the Journal of the American Medical Association suggests that for-profit dialysis chains are routinely administering higher doses of Epogen than necessary, thanks to the incentivizing nature of Medicare reimbursement.

Larger doses mean more cash for the dialysis centers, but may boost red blood cells beyond what FDA considers safe. New guidelines suggest going beyond the recommended maximum 12g/dL may cause "an increased number of deaths and of non-fatal heart attacks, strokes, heart failure, and blood clots." All four of the largest for-profit chains administered siginificantly more epoetin than the largest non-profit chains, according to the study.

The more epoetin used in dialysis-related anemia (where the market is all Amgen's), the more profit. And epoetin use is certainly on the rise. According to the study:

"... between 1991 and 2005, the mean dose of epoetin increased about 4-fold in dialysis patients. Today, epoetin therapy is the largest single Medicare drug expenditure totaling $1.8 billion in 2004 (an increase of 17% from 2003) and epoetin comprised 11% of all Medicare ESRD costs."

As we noted last week upon the escape of Amgen CFO Richard Nanula, and as the usual suspects in the pharma blogosphere point out, things are far from rosy at Amgen these days, where the stock is at a 2-year low. FDA warnings, safety concerns across the board, lawsuits, even potential biogeneric competition: Amgen's EPO franchise is under siege. We'll take a look at where the Big Biotech will turn next in the May IN VIVO.

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Amgen's CFO: Escaping a Sinking Ship?

It may have been a coincidence. But Amgen CFO Richard Nanula's timing in announcing his departure this week to "pursue other opportunities" raised some eyebrows. The Amgen ship is under attack as it has never been before, and the list of invaders is long: clinical setbacks (think Vectibix), safety concerns over key drugs (think black box warnings on Aranesp and Epogen), SEC scrutiny (into whether the firm divulged Aranesp data on time), competition (generic and otherwise) to its multi-billion dollar anemia franchise, and lawsuits (Johnson & Johnson on marketing contracts, Roche on Micera).

No wonder Nanula is fleeing. The numbers have turned bad: annual profits fell 20% last year. More than $20 billion has been wiped off the group's market capitalization in the last six months. Investors are abandoning a once-favorite stock, prompting some analysts to speculate on whether Amgen is a takeoever target.

It's not all doom and gloom (certainly not for Nanula, anyway, who after six years as CFO doubtless would like more time to spend whatever's left of his $8 million 2006 compensation package). Amgen is still, valued at $60 billion or so, larger than many Big Pharma firms. Vectibix, although wounded, isn't dead. The Aranesp scare--a higher risk of death among cancer patients no longer on chemo--applies mostly to a small segment of patients, for which the drug is not officially approved anyway (and now won't be).


Still, the invadors are real, and Amgen is starting to look mightily dependent on one particular asset in its late-stage pipeline: denosumab, a potential blockbuster drug to treat osteoporosis (and, Amgen hopes, a tonne of other diseases, including cancer). As one analyst puts it: "God forbid anything should happen to denosumab".


Indeed. But God didn't help Vectibix much: this was the star drug, touted as a potential $2 billion product, that drove Amgen's $2.2 billion acquisition of Abgenix in December 2005. Vectibix is approved for third-line colorectal cancer, but 2007 sales were less than $200 million, and aren't forecast to get much higher.


For now, Amgen is busy defending its marketed portfolio. But senior management should consider taking Nanula's departure as a cue to start more visibly putting energy into Amgen's post-EPO future rather than its shaky present. Perhaps Nanula's successor, former investment banker Robert Bradway, will have less trouble dealing with a period of less than stellar growth. He's only been with Amgen a year.

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