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Amgen facing ill winds

Safety concerns, patent expirations and new rivals are putting the heat on the biotech firm.

December 06, 2006|Daniel Costello | Times Staff Writer

Amgen Inc., the Thousand Oaks-based biotech behemoth, has been a shining star in the drug industry for more than two decades. Recently, it isn't burning so brightly.

This morning, Congress begins hearings about cost and safety concerns around two of the company's top-selling drugs, Epogen and Aranesp, which are used to treat nearly 2 1/2 million dialysis and cancer patients with anemia in the U.S. each year.

Last month, two research studies in the New England Journal of Medicine found those who received higher doses of anemia drugs die or suffer heart attacks and strokes more often than patients who received lower doses.

Should lawmakers signal that they want to curtail the amount of anemia drugs doctors prescribe -- which the federal government could do by lowering reimbursement rates through Medicare -- it would clearly pose a significant threat to Amgen's bottom line. The company's anemia lineup makes up almost half of its sales and 60% of its profit.

Such a move would be the latest in a string of negative events for the company. Some of Amgen's most important international anemia patents have recently expired, and its domestic one will probably follow in just a few years. And the newly Democratic-controlled Congress has signaled it may soon introduce legislation to allow generic competition in the biotech industry, something the federal government hasn't done before.

Meanwhile, the company is under attack from a host of competitors that threaten to do more than just nip at its heels. At the top of the list is Swiss drug maker Roche Holding, which has developed its own anemia drug, Cera, which could get federal approval as early as next year. Amgen has filed a patent infringement suit and a court case is expected in a few months; it's anyone's guess who will prevail.

Perhaps most worrisome is the strength of Amgen's once-storied research pipeline. Some analysts say Amgen is having more difficulty than its competitors in finding new blockbusters to ensure the robust sales growth it has long been known for, especially in the oncology sector, the biotech industry's most lucrative field.

That may be why the company's stock has languished. Although the Amex index of 20 major biotech stocks is up 14% this year, Amgen's stock has declined 12%.

"I don't see much reason to think they're going to get the kind of momentum they had a few years ago anytime soon," said James Reddoch, a biotech analyst with Friedman Billings Ramsey.

It's possible the company could surprise its skeptics and the industry. After all, since the company was founded in 1980, it has grown into the world's largest biotechnology company and boasts one of the biggest stock market values of any drug company. Last year, Amgen earned $3.7 billion on revenue of $12.4 billion.

With the company having cash to spare, executives have the means to find and acquire heaps of new drugs. Several of the company's products are in late-stage clinical trials, and its recent acquisition of Fremont, Calif.-based Abgenix, which has several promising monoclonal antibodies to treat cancer and other diseases, could eventually pay off handsomely.

Willard Dere, Amgen's senior vice president of global development and chief medical officer, said the company was investing $3 billion in research this year and was confident about the number and quality of drugs it has on the market or in clinical trials. Among them: a new colon cancer drug, Vectibix, that came on the market this fall. Several possible breakthrough therapies for osteoporosis, cancer and other diseases could be on pharmacy shelves as early as 2009.

"Our portfolio is filled with novel targets, not me-too drugs," Dere said, referring to the trend among pharmaceutical companies to make copycat versions of available drugs that don't provide significant clinical gains.

But confidence is one thing; results are another. And the company must deal with current challenges. The two New England Journal of Medicine trials have created a firestorm of controversy around the firm and its chief anemia products, Epogen and Aranesp. Aranesp is a longer-acting version of the drug.

Anemia is a condition in which people don't produce enough red blood cells, or hemoglobin, increasing their risk of infections, stroke and death. Amgen's erythropoietin, the basis for its anemia products, stimulates bone marrow to produce red blood cells. Johnson & Johnson markets the same drug under the name Procrit, although it is produced by Amgen.

A healthy adult has a hemoglobin level around 15 grams per deciliter. The . Food and Drug Administration recommends doctors prescribe dosage to anemic patients so that they have a hemoglobin level of 10 to 12 grams per deciliter.

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