Amgen's Future Potential

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THOUSAND OAKS, Calif—Last week was a busy one for Amgen (AMGN -0.03%), with good news mixed in with bad.  The largest biotech in the world lost its anemia drug monopoly in the U.S., but also announced good results for experimental drugs that have the potential to tap huge markets.The question now is whether the good news outweighs the bad.

Anemia drugs
Amgen's anemia drug monopoly began 23 years ago when Epogen was approved. Free to set prices and raise them significantly, the company's sales of Epogen have amounted to $37 billion, just for the treatment of American dialysis patients. Amgen also has a licensing agreement with Johnson & Johnson (JNJ -0.59%), which sells the same drug under the name Procrit for other uses. Another form of the drug, Aranesp, sold for $26 billion.

Last week, that monopoly was broken when the Food and Drug Administration (FDA)  approved Affymax's (AFFY +0.25%) therapy Omontys for the treatment of anemia in adult dialysis patients with chronic kidney disease (CKD).

Similar to Epogen, the drug stimulates the bone marrow to produce more red blood cells, allowing patients to avoid blood transfusions. But Affymax's drug may be more attractive as it is to be injected once a month, whereas Amgen's drug is usually given three times a week. And while Amgen recently struck supply agreements with leading dialysis providers, Affymax claims Omontys will be sold at a 20 percent discount to Epogen.

But this was just the latest hit to Amgen's anemia drug franchise in recent years. Sales of Epogen have already been declining because of safety concerns about increased risk of heart attacks, strokes and other cardiovascular problems. Epogen sales dropped 19 percent to $2 billion in 2011 from $2.5 billion in 2010. Aranesp sales dropped 7 percent to $2.3 billion from $2.5 billion in 2010 worldwide, mainly because of a double-digit decline in the U.S. Changes in reimbursements from Medicare put added pressures on sales.

In the pipeline
For years, investors put their hopes in Amgen's osteoporosis drugs Prolia and Xgeva. But sales of the two treatment have yet to gain the expected momentum, and the FDA is unsure about expanding Xgeva's uses.

Meanwhile, Amgen released impressive results a week ago about a new class of cholesterol drug. The study showed the drug, given by monthly injections, dramatically lowered LDL, or the "bad" cholesterol.

Amgen is not the only one attempting to reach this potential $20 billion market first. Regeneron (REGN +2.37%), which in partnership with Sanofi Aventis (SNY -1.17%) is developing a similar drug, also announced results from its study. While Regeneron is a step ahead in its studies, the results of its drug fell short of Amgen's. Merck (MRK +0.09%), Bristol-Myers Squibb (BMY +0.30%) and others are also developing similar drugs.

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