Amgen stock ailing amid drug ruling
Thousand Oaks biotech giant Amgen Inc. continued to get battered Wednesday by investors who appear to have growing doubts about the company’s revenue outlook and its plans for growth.
Its stock -- now at its lowest level in more than four years -- has come under renewed pressure this week in light of a decision Monday by the U.S. Centers for Medicare and Medicaid Services that it is sharply limiting reimbursements for Amgen’s top-selling anemia drug Aranesp.
This week was “a big step backwards,” Thomas Weisel Partners biotech analyst M. Ian Somaiya said. The government is limiting “both the dosage and the length of time doctors can prescribe the drugs. . . and that is clearly negative news.”
Aranesp, and a related product, Epogen, accounted for nearly 60% of Amgen’s profit last year. Since then, several recent studies have raised questions about the safety of Aranesp and Epogen in some patients and dosages.
This spring, a Food and Drug Administration advisory panel recommended that the agency change the drugs’ labels and lower recommended dosages for some patients.
In response, the federal Medicare agency Monday adopted new reimbursement rules for the entire class of drugs, which are also sold by Johnson & Johnson under the brand name Procrit.
On Tuesday, Johnson & Johnson said it was reducing its global workforce by 3% to 4%, or 4,820 jobs, in light of regulatory and sales pressure on Procrit and its heart stent products.
The anemia drugs at issue in the Medicare decision regulate the level of hemoglobin, a substance found in red blood cells that carries oxygen, and are used by nearly a million cancer and dialysis patients each year. Most people have levels around 15 grams per deciliter.
The Medicare agency wants to reduce the level of hemoglobin at which transfusions are required. Most physicians have aimed to keep hemoglobin levels between 11 and 12 grams per deciliter. But Medicare said Monday it would reimburse doctors only when the hemoglobin level drops to 10.
Surprisingly, the agency also ruled that patients whose hemoglobin levels rise above 10 should be denied coverage after four weeks of treatment.
On Tuesday, Amgen strongly denounced Medicare’s decision.
“The coverage restrictions placed on the FDA-approved indication have no scientific basis and are incompatible with good clinical practice,” said Roger M. Perlmutter, Amgen’s executive vice president of research and development. “The final changes form a fairly tight band on hemoglobin levels, which we believe are unrealistic.”
Although Amgen will probably appeal, the decision means the federal government may no longer reimburse doctors for as many as a third of the patients currently on the medications, said Somaiya of Thomas Weisel Partners.
John Sonnier, a biotech analyst at William Blair & Company, reduced his 2007 sales estimate for the drugs to $3.65 billion from a previous estimate of $3.85 billion, and cut his 2008 forecast to $2.97 billion from $3.84 billion, in a research note this week.
The FDA is expected to rule on final label changes for the anemia drugs by the end of the year. On Wednesday, the American Society of Clinical Oncology, which represents physicians who treat people with cancer, sent a letter asking Medicare to reconsider the restrictions, calling them “inconsistent with the FDA-approved label and with national guidelines.”
Dr. Harold J. Burstein, an oncologist at Dana-Farber Cancer Institute in Boston, said although the new rules were more restrictive than what some clinical trials have called for, “there is a lot of room here for reasonable debate.”
Burnstein said the cancer center had revised its guidelines in recent months in light of the newer studies.
Even before Medicare’s recent decision, Amgen reported last week a surprisingly steep drop in sales of its main anemia product line in the last few months, believed to be a result of some doctors tightening prescription use on their own.
Domestic sales of Aranesp were $578 million in the most recent quarter, in contrast to $713 million in the second quarter last year, an almost 20% decrease.
Amgen’s shares fell $1.65, or 3.1%, to $52.09 on Wednesday.
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