This is a perfect example of why ADVR will not rocket in the short term.
Amgen's New Drug Faces Risks
Inherent in the Biotech Market
By RHONDA L. RUNDLE
Staff Reporter of THE WALL STREET JOURNAL
THOUSAND OAKS, Calif. -- Amgen Inc. has finally
received approval for its first new drug in six years, a
treatment for chronic hepatitis C. But it still faces the plight
of so many biotech companies: Trying to generate new
products and new growth, while grappling with killer
competition and deep cutbacks in health-care costs.
Amgen announced Tuesday that the Food and Drug
Administration has approved Infergen, a drug aimed at a
hard-to-treat blood-borne virus that causes liver injury
over a period of years. Four times more common than
HIV, hepatitis C kills 8,000 to 10,000 Americans annually.
Amgen hopes Infergen will help patients who haven't
responded well to other hepatitis C drugs, or who have
suffered relapses. But it's a niche drug that analysts say will
be lucky to eventually generate $100 million annually in
U.S. sales.
That's a far cry from Amgen's other two drugs: Epogen, an
anemia drug for kidney-dialysis patients that was
introduced in 1989, and Neupogen, which was introduced
two years later and helps cancer chemotherapy patients
fight infections. Each of these drugs generated more than
$1 billion in sales last year.
But Neupogen faces mounting pressure from health plans
trying to hold down drug costs. And in August, Amgen
abruptly withdrew its endorsement of analysts' 1997
earnings projections, citing an unexpected slowdown in
Epogen sales. Uncertainty about how serious the Epogen
problems may be, and the absence of exciting research
results this year, have pushed Amgen's shares into the
doldrums.
A special Medicare program that pays for most dialysis
treatments accounts for the bulk of Epogen sales. Now the
drug has fallen into the crosshairs of Medicare cost-cutters:
The Health Care Financing Administration, which oversees
Medicare, is currently reviewing a proposal to cut Epogen
payments by 10%.
Amgen stock rose 46.8 cents to $49.6315 Wednesday in
Nasdaq Stock Market trading.
Infergen's debut "will be a great test for Amgen," because
the drug faces competition from established rivals, says
Douglas S. Perry, who as Amgen's marketing director is in
charge of the Infergen launch. With a few possible
exceptions, drugs in Amgen's development pipeline will
also face competition.
By contrast, Epogen and Neupogen were almost instant
blockbusters that broke new medical ground. Infergen,
however, will be up against two similar drugs sold by
pharmaceutical powerhouses. Schering-Plough Corp., the
leading hepatitis C drug maker, filed a lawsuit last
December charging Amgen with infringement of a patent
held by Biogen Inc., which discovered the drug Schering
sells as Intron A. Amgen says it has a different molecule
that doesn't infringe on Biogen's patent.
Infergen is the first of five drugs that Amgen expects to
commercialize over the next five years, says Gordon
Binder, chairman and chief executive officer. Stemgen, a
blood-cell booster for breast-cancer chemotherapy
patients, could receive FDA approval next year, he says.
Analysts estimate modest sales at maturity of up to $50
million a year. When Amgen went searching for a
seasoned pharmaceutical marketing executive 18 months
ago, Mr. Perry fit the bill. During 23 years at what is now
Germany's Hoechst Marion Roussel, "every product I was
involved in came up against major competition," he says.
At Amgen he has assembled a sales team of about 50
people who will promote Infergen directly to hepatologists
and gastroenterologists who treat hepatitis C patients.
Amgen is pricing the drug at $2,116 for a 24-week
treatment, slightly higher than Intron A.
The team's mission won't be easy because Infergen doesn't
have a clear edge over either Intron A or Roche Holding
Ltd.'s Roferon A. Scientists who designed Infergen initially
hoped it would have fewer side effects than rival drugs, but
they were disappointed.
"It's not a pleasant experience to take any of the
interferons," which all cause flu-like symptoms, Mr. Perry
concedes. Picking his words carefully, he says: "Infergen is
just as good as the other compounds" and offers "a second
chance for those who have failed" on the other drugs.
Amgen hopes to attract some of the 70% of hepatitis C
patients who haven't benefited from rival drugs, or who
relapsed after taking them. In addition, Amgen expects
more infected people to seek treatment as they learn that
the disease can lead to cirrhosis, liver cancer or death. Of
the estimated four million infected Americans, only about
10% have been diagnosed.
Schering's Intron A, which is used to treat several other
conditions besides hepatitis C, produced sales of $160
million in the U.S. last year. Just as it was planning
Infergen's rollout, Amgen management has been jolted by
the bumps in the Epogen market. Epogen sales, which
account for half of Amgen's total product sales, spurted
21% to more than $1 billion in 1996. This year, most
analysts agree, the growth will slow to around 10% to
13%.
Medicare reimburses U.S. dialysis centers for practically
all of the Epogen given to the nation's 214,000 dialysis
patients. This summer, Amgen underestimated the impact
of a government policy change that effectively reduced
demand for Epogen at some dialysis centers.
These centers also face the proposed 10% reduction in
reimbursements for Epogen treatments. If the Health Care
Financing Administration approves the cut, Amgen would
be under enormous pressure to lower the drug's price.
Another threat to Epogen comes from the National Kidney
Foundation, which this month issued new
dialysis-treatment guidelines. Some believe the guidelines
will lead physicians to administer Epogen by injection
rather than intravenously. If that happens, it would
decrease demand for the drug because less of it is used in
injections.
Amgen's Mr. Binder notes that the kidney foundation's
recommendations, came out in draft form a year ago, and
their effect "is really behind us."
Not everyone agrees. "I think Epogen revenues will go
down 3%" next year -- even without a price cut, predicts
Albert Rauch, an Everen Securities analyst in Chicago.
For Amgen and Mr. Binder, the search for the next
blockbuster weighs heavily. None of its 12 drugs in human
trials has washed out completely, but expectations for
some of them have been scaled back. One former hot
candidate, brain-derived neurotrophic factor, showed no
statistically significant advantage for people with
amyotrophic lateral sclerosis, better known as Lou
Gehrig's disease. |
