Safety issues cloud Amgen’s outlook
Amgen Inc. on Monday reported an 11% rise in first-quarter profit, driven by increased sales of its anemia and arthritis drugs. But the company said its earnings per share for fiscal 2007 would be at the low end of its previous forecast.
Recent safety questions cut into sales growth of the company’s bestselling product, anemia drug Aranesp, the Thousand Oaks-based company said. But Amgen also reported progress on its most promising new drug, osteoporosis treatment denosumab.
The net effect was seen as positive by investors, who pushed Amgen stock higher in after-hours trading Monday. Analysts and company executives agree that the company needs new winners to fuel its sales and earnings growth.
“Obviously for Aranesp, the expectations have come down,” said Fariba Ghodsian, an analyst with Dafna Capital in Los Angeles. But, she added, the company’s pipeline was more exciting, particularly the osteoporosis drug under development. “That is the next potential blockbuster drug for Amgen,” she said.
Amgen said it would tighten its belt to make up for shrinking sales of the popular Aranesp. That trend was expected to continue amid worries that Aranesp and other anemia-fighting drugs for cancer and kidney patients could be harmful when prescribed too aggressively.
With the future of its biggest seller unclear, Amgen touted two drugs in development. It said denosumab achieved all main and secondary goals in a trial of 332 patients. Analysts were encouraged by that news because the osteoporosis market is huge.
And an as-yet-unnamed drug, AMG531, also fared well in a clinical trial as a treatment against an autoimmune blood disorder called immune thrombocytopenic purpura, said Amgen, which planned to seek U.S. and European regulatory approval for the drug this year.
Based on the uncertainty surrounding its anemia drugs, Amgen declined to offer investors revenue guidance for the year. The company expects to offer an updated financial forecast in its second-quarter report as it gets a better idea of the effect of regulatory changes and new study results on Aranesp and Epogen, an older anemia medication used for patients on kidney dialysis, Chief Executive Kevin Sharer said Monday.
Amid questions about the drugs’ safety in certain patients and in some dosages, U.S. regulators forced the company to beef up warning labels on packages of Aranesp and Epogen last month and instructed physicians to prescribe the lowest dose possible.
Last week, the company released the results of a highly anticipated safety study of Aranesp, which along with similar anemia medications is taken by more than 1 million people in the U.S. each year. The Amgen-sponsored trial found that Aranesp showed no increased risk of death compared with a placebo in a subset of lung cancer patients.
The results were seen as crucial to the future of Amgen’s anemia products. Aranesp and its shorter-acting predecessor, Epogen, account for about half of Amgen’s sales.
CEO Sharer sought to counter safety concerns Monday, saying Amgen had data from several studies on more than 9,000 patients and was confident the drugs were safe for approved uses.
Amgen said its net income increased to $1.11 billion, or 94 cents a share, from $1 billion, or 82 cents, a year earlier. Profit, excluding some items, was $1.08 a share.
Amgen said 2007 earnings would be at the low end of its prior estimate of $4.30 to $4.50 a share.
Aranesp sales grew to $1.02 billion, up 14% from the same period a year earlier but down 7% from the previous quarter’s $1.1 billion.
Sales of Epogen were up 3.5%, to $625 million, in the first quarter compared with the year-earlier period. That was 5% below fourth-quarter sales of $661 million.
“We cannot predict the long-term impact,” George Morrow, executive vice president for global commercial operations, said of the anemia drugs’ future sales.
Sales of the drugs, also sold by Johnson & Johnson under the brand name Procrit, have grown exponentially over the last decade, reaching almost $11 billion last year. Medicare currently spends more on these drugs than any other single type of medication.
Sales of other drugs that play a smaller role in Amgen’s portfolio trended up. Enbrel, a drug for rheumatoid arthritis and other autoimmune diseases, posted an 11% increase in sales to $730 million. Amgen’s new colorectal cancer drug, Vectibix, racked up $51 million in sales in its second full quarter on the market.
But Vectibix growth was limited in late March when the results of a clinical trial showed survival rates declined when patients were put on a combination treatment that included the new drug. As a result, analysts said, the company can’t expand Vectibix sales by marketing it as a front-line therapy.
“It has been somewhat of a rough year for them,” analyst Ghodsian said.
After rising 22 cents to $62.19, Amgen shares climbed to $62.75 in after-hours trading. Earnings were announced after the close of regular trading.
