Anti-Anemia Drug Finally Gets Close to Circulation
The magic potion is a clear liquid packed in vials and kept refrigerated in a Thousand Oaks warehouse while it sits waiting to be sold. It’s the latest biotechnology drug, called erythropoietin, or EPO, an anti-anemia treatment that, after seven years and $70 million in research and development, will be the first commercial product of a company called Amgen.
“It’s a product for which there is no alternative,” said George Rathmann, Amgen’s chairman.
Amgen is doing all it can to get off to a fast start. “Running out of material is unacceptable,” said Gordon Binder, Amgen’s chief executive. So Amgen’s new manufacturing plant is up and running and has turned out a three-month supply of EPO while Amgen is hiring salespeople and has lined up refrigerated warehouses around the country to keep the drug fresh.
Everything is ready save one thing. Amgen still needs U.S. Food and Drug Administration approval to sell the drug.
No one expects the FDA to reject Amgen’s request to sell EPO, a hormone that triggers production of red blood cells, that in clinical tests successfully treated the chronic anemia suffered by patients with kidney disease. EPO was discovered by scientists in 1906, but the body produces only microscopic amounts of the hormone, and the challenge has been how to get enough of it.
Able to Make Drug
But in biotechnology, scientists are medical detectives who by resplicing genes, which carry the blueprints of life, can trigger production of rare hormones and proteins so they can be used as a therapeutic drug. Amgen has submitted 40,000 pages of supporting documents and conducted extensive EPO tests on patients, winning glowing reviews in the New England Journal of Medicine.
Amgen’s executives had hoped that the FDA would complete its elaborate review and approve EPO for sale by late 1988. Now the company is “very optimistic” that the drug will be approved for sale by March, Binder said.
During the wait, Amgen’s stock has bounced up and down on each scrap of news about the FDA’s approval process. Financial analysts still expect Amgen to be the first company to win approval to sell EPO because it applied to the FDA more than a year ahead of any other company.
And with that approval will come riches. What is unnerving, though, is that no one seems certain how plentiful those riches will be.
In November, Amgen’s stock spurted when an analyst with Shearson Lehman Hutton predicted worldwide sales for EPO of $3.5 billion, with $1.8 billion in the United States by 1993. Binder said that the figure was preposterous. “We just find it hard to accept a plan on any drug selling more than $1 billion, no matter what it cures,” he said.
‘Excited About Amgen’
Last week, Montgomery Securities analyst Denise Gilbert made her own projection that EPO would sell no more than $450 million in the United States by 1993, and the stock dipped. “I’m excited about Amgen and find EPO a compelling story. But I’m trying to deflate expectations,” she said.
The trouble is that the stock market has lost much of its confidence in biotechnology and fears that only a few companies out of the hundreds will actually produce drugs that are big winners.
Amgen has much at risk. The company has five other drugs undergoing tests in humans, but EPO has secured the little company’s reputation and boosted the value of Amgen’s stock to $550 million, even though until now it essentially has been without a product to sell. Last year Amgen earned $1.7 million on sales of $53 million, but those figures are a mirage. The sales are primarily advances from the company’s research and development partners, while the “profits” are from investments.
The stock market is also pessimistic about biotechnology because of the many misadventures of Genentech, the San Francisco biotech company whose reputation took a terrible beating last year. A year ago Genentech’s stock was trading at $47 per share and there was no end to the enthusiasm for its latest drug, TPA, an anti-blood-clotting agent that could save heart attack victims. The drug would sell $400 million in its first year, analysts boasted, and Genentech’s executives did nothing to discourage those expectations.
Genentech ended up selling about $175 million worth of TPA in 1988, still a record for first year sales of a new drug, but the stock collapsed and now languishes at $17.
What went wrong? The drug was expensive--at $2,200 a dose TPA is 10 times the price of older heart attack drugs--and various studies were inconclusive about TPA’s advantages over other drugs. Only last month, Genentech wrote off $25 million worth of TPA inventory because the drug is perishable and sales were far slower than the company’s optimistic projections.
Binder says he learned from Genentech’s troubles. “You don’t want to spend money making something you’re not going to use. In some industries you have a big sale and mark the price down. That’s not possible in pharmaceuticals.”
Lesson No. 2, Binder said is: “We try to have reasonable expectations about Amgen’s results.” Gilbert recently trimmed her 1990 profit estimates for Amgen after the company’s executives told her what they would need to spend to get EPO into the market.
Still, most analysts figure Amgen has a big winner in EPO. The biggest use will be to help treat patients who undergo kidney dialysis to cleanse impurities from their blood. Those patients cannot produce enough red blood cells and many of them need transfusions of up to four quarts of blood a month. But patients injected with EPO didn’t need the transfusions and were able go about their lives more normally.
To encourage companies to come up with drugs to treat relatively rare diseases, Congress awards so-called “orphan drug status,” a seven-year exclusive franchise, to the first manufacturer of such drugs. EPO qualifies as an orphan drug and Amgen has shrewdly kept the rights to sell EPO to kidney dialysis patients. Jim McCamant, editor of the Medical Technology Stock Letter, says that is likely to be a $200-million-a-year market in this country.
Other Possible Uses
EPO may also work in treating other kinds of anemia, including chemotherapy and leukemia patients. EPO is also being tested with AZT, an AIDS treatment drug that produces anemia as a side effect. Sales of EPO to patients other than those with kidney disease would be open to other companies with their own versions of EPO, but analysts can’t agree on how big that market will be. Johnson & Johnson will sell Amgen’s version of EPO for other, disparate uses in this country while paying Amgen a royalty, estimated by analysts at 8% of gross sales.
By Gilbert’s reckoning, Amgen’s profits will grow like a weed, from $15 million for the March, 1990, fiscal year, to $83 million in 1993. By then, she figures Amgen’s second drug, G-CSF, which produces white blood cells, will strike gold as well.
Even if Amgen wins the EPO race from the laboratory to the marketplace, it must still win a battle of wits in the courtroom to ensure its profits.
Amgen is now locked in four patent-infringement lawsuits with its chief rival, Genetics Institute, a biotech company, which with Chugai Pharmaceutical of Tokyo is racing to get its own version of EPO approved for sale in the United States. Most analysts figure that Genetics Institute, with headquarters in Cambridge, Mass., is at least a year behind Amgen.
Both Amgen and Genetics Institute have separate, seemingly conflicting patents relating to EPO, and it could take years for the cases to go all the way through to the U.S. Court of Appeals. Until the cases are resolved, both companies should be free to sell the new drug, but whichever company wins in court figures to take home the biggest share of profits.
Genetics Institute has been willing to discuss an out-of-court settlement with Amgen, presumably for some sort of cross-licensing deal in which both could sell the drug, but Amgen’s executives have refused. “We’re so far apart there’s nothing to discuss,” Binder said.
