Setbacks threaten Amgen

Crucial events in coming weeks could determine future of once-charmed biotech

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April 20, 2007|By New York Times News Service.

Until recently, Amgen Inc. was still considered one of the biggest success stories of the fast-growing biotechnology industry. Now, some analysts are comparing it to a lumbering, stumbling pharmaceutical giant that leans too heavily on an aging product portfolio.

A series of setbacks, some unexpected and some perhaps self-inflicted, pose the greatest challenge in the company's previously charmed 27-year history.

And some crucial events in coming weeks could make clearer whether the company has simply hit a stretch of "choppy water" - as its chief executive contends - or, as some analysts say, the company's best days may be behind it.

"The barrage of bad news that's come out on Amgen in the past 60 days is absolutely unprecedented in the biotech sector," said Mark Schoenebaum, a biotechnology stock analyst at Bear Stearns. Amgen's shares are down about 20 percent since January, knocking nearly $20 billion off its market value.

But the stock has edged up a bit since its recent low of $55.13 on March 29, as some investors have been tempted by management's view that it is too soon for a fire sale. On Monday, the shares rose 62 cents to $59.65, as details of a study were released suggesting that the risks of the company's biggest drug were not as clear-cut as recently thought.

"We are not in a crisis, that's for sure," Kevin W. Sharer, Amgen's chairman and chief executive, said in an interview. In crisis, "people don't know what to do," he said. "People's hair is on fire. Confidence is challenged. We're not there."

At best, though, the company faces plenty of challenges. Several recent studies suggest that its blockbuster anemia drugs, Aranesp and Epogen, might be harming patients, particularly if overused. Those products accounted for $6.6 billion of Amgen's $14.3 billion in revenue last year.

The Food and Drug Administration put new warnings on the drugs last month, citing studies suggesting that Aranesp and Epogen might cause heart problems or hasten the deaths of cancer patients.

Amgen said it would briefly delay reporting its first-quarter results, scheduled this week, to include data from a clinical trial of Aranesp. The financial results are expected Monday.

CFO stepping down

The company also disclosed last week that its chief financial officer, Richard D. Nanula, was resigning to "pursue other opportunities," but would stay three months to aid the transition to his successor, Robert Bradway.

Adding to its woes, Amgen recently reported that patients in a clinical trial combining its new colon cancer drug, Vectibix, with other treatments were more likely to die than patients who got only the other treatments. As a result, Vectibix is likely to remain only a niche drug for now.

Sizing up Amgen's situation in a report titled, "Looking More Like Large Pharma," a Citigroup analyst, Yaron Werber, predicted that Amgen's revenue would grow only 4 percent a year through 2010. That would be well below its 20 percent annual sales growth from 2003 to 2006.

Geoffrey C. Porges of Sanford C. Bernstein & Co. has asked whether Amgen should start paying a dividend to attract shareholders, an inducement common among big drug companies.

And some are even starting to raise questions about Amgen's long-vaunted management. Michael Aberman, an analyst at Credit Suisse, said Sharer's team may have tried to expand the use of its drugs too much, resulting in unsuccessful clinical trials and safety problems that could now endanger sales.

Monday, the company is expected to release the results of a crucial study testing Aranesp's effect on the longevity of patients with small-cell lung cancer. The drug is approved to treat the anemia caused by cancer chemotherapy. If the results indicate that patients taking Aranesp are more likely to die sooner than they might otherwise, "the tide will turn" against the drugs, said John A. Glaspy, a professor of medicine at the University of California, Los Angeles.

An FDA advisory committee plans to meet May 10 to discuss the safety of the anemia drugs. And later that month, another big drug maker, Roche, might win FDA approval for an anemia drug that would compete with Amgen's products.

New products needed

Whatever happens with sales of its anemia drugs, if Amgen is to remain a fast-growing company it must develop new products. But it has yet to show a particular skill in that area, even though it does have many test drugs in its pipeline.

To this day, Amgen still largely lives off Epogen, first approved in 1989, and Neupogen, approved in 1991 to prevent infection in patients receiving chemotherapy.

Its biggest new products since then, Aranesp and Neulasta, were modifications of the original two. And its other big product, the rheumatoid arthritis drug Enbrel, was not homegrown; it came as part of the company's $10 billion acquisition of Immunex in 2002.

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