Thursday, January 10, 2008

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.”


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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