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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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April 11, 2007

Amgen: The Pythian Oracle Laughs Again

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Posted by Derek

Amgen's not getting a lot of good press these days. They're famously the House that EPO built, but (in a familiar story) they may have pressed their lead franchise too far. An excellent backgrounder can be found here at Nature Biotechnology. In short, the company was coining money in the renal market, and looked for new areas where EPO could be of use (and of profit). Chemotherapy-induced anemia looked like a winner, and Amgen aggressively promoted EPO's use in oncology. (Correction - the real extension was into cancer-associated anemia, not just that induced by chemotherapy. See the comments for more - DBL). But (as the editorial details), this whole strategy is backfiring disastrously.

First off, anemia doesn't appear to be a major cause of chemotherapy side effects. If that weren't bad enough, a series of clinical trials have shown that patients receiving standard therapy plus EPO do worse than usual. As of last month, all forms of EPO now have a new black-box label warning. Not ugly enough yet? OK, the company has admitted that it knew about some of this data but didn't talk about it for months. The SEC is investigating them for that decision, and Medicare is looking at whether the company has been overcharging. Their CFO just announced that he's "pursuing other interests".

A sample of the Nature B. editorial makes its point well:

"Amgen does not come out of this well. Although seeking new indications for existing medicines is clearly a valid strategy, the company appears to have miscalculated the balance between expansion and the risks to its existing business—and potentially opened itself to charges that it has recklessly endangered patients' lives. . .

Furthermore, Amgen has surely miscalculated strategically. Any benefits from the commercial push to extend Aranesp into new oncology markets are likely to bring relatively modest returns—Aranesp's 2006 sales in cancer-associated anemia, for example, were approx. $500 million. But the repercussions of failure will be felt not only in cancer but also potentially across all EPO markets. A proportion of the whole $7.1 billion Epogen and Aranesp franchise—nearly 50% of Amgen's total revenue in 2006—is thus under threat."

Amgen isn't the first drug company to have over-reached. Everyone's going to try to make the most of their existing drugs, especially when there aren't all that many things coming along to replace them. But readers with some classical background may well think of Croesus crossing the Halys every time they hear about this kind of thing. . .

Comments (11) + TrackBacks (0) | Category: Business and Markets | Cancer | Why Everyone Loves Us


COMMENTS

1. CR on April 11, 2007 11:25 AM writes...

Excellent article in The Wall Street Journal yesterday regarding Amgen. The WSJ has an item regarding Amgen "sitting on the data"; which is in regards to a Dutch study. Amgen is quoted in the article as saying they never had the complete data--inquired several times to the Dutch team but to no avail--and that is why they did not tell investors that entire story.

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2. David Young on April 11, 2007 11:50 AM writes...

And all this may put a crimp in the development of Roche's CERA.

As a hematologist/oncologist, let me say that Epoeitin has a salutatory effect on the quality of life of patients with anemia from renal failure and can be of some help in anemia associated with cytotoxic chemotherapy. However, these growth factors are not a panacea for anemia in patients on chemotherapy and are of almost no use for patients with cancer who are not on chemotherapy.. we don't use Epogen in this setting and these studies suggest that the drugs are actually harmful there. On the flip side, perhaps all of our cancer patients should be on low molecular weight heparins... data suggests that these drugs prolong survival, but that is off topic here.

Truth is, I do see a little too much of "let's expand the use of our drug" strategy and too little of "lets see what we can do to make our drug work more effectively" strategy in oncology.

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3. Dave H on April 11, 2007 12:13 PM writes...

Backtracking to the BCRX & Dendreon post.... Cramer blows it again. This is his "best of breed" biotech investment.

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4. Hap on April 11, 2007 12:27 PM writes...

I thought that the cancer-related anemia use for Epo, et al. was one of the clearly envisioned uses of it - Epo was our case study in a drug development undergrad class. Epo was developed by Johnson + Johnson (Ortho Pharm.) and by Amgen, and the market for Epo was supposed to be split by indication between use in dialysis-related anemia and other uses (and Amgen failed to file J+J's application for 17 mos. and was sued and paid $160M?, allowing Amgen to get some of the market for other indications for Epo). I don't know if it was envisioned for non-chemotherapy-related anemia in addition to the chemotherapy-related anemia, though (though I thought it was). This is probably happening now because the original patent (and presumably the division of therapeutic ares between J+J and Amgen) is expired and so any extra money goes to them (as do any extra risks).

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5. Mark M on April 11, 2007 1:01 PM writes...

Question for everyone:

Why is that once trouble hits a pharma or biotech firm, the first high level person to get the ax is CFO?

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6. Chrispy on April 11, 2007 2:33 PM writes...


Mark --

Good question! The sudden departure of the guy who at his level had the least to do with Amgen's strategy is puzzling...

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7. Elio Evangelista on April 11, 2007 4:27 PM writes...

Great post. I just have a quick comment. Having recently studied new indication strategies for a recent report that Cutting Edge Information published, I can understand why Amgen was gung-ho to make its new indication successful. However, even with the strategy seemingly backfiring, my guess is that Amgen has contingencies lined up - perhaps a new formulation or dosing alternative to protect at least some of the market share that will potentially be lost from the fallout of this recent information.
Although this is a huge blow, I'd be surprised if Amgen didn't have some other lifecycle management maneuver up its sleeve.

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8. Jumbo on April 11, 2007 6:56 PM writes...

Just so we have things straight, Epo's are, as mentioned above, quite helpful in chemo-induced anemia. What Amgen was testing was if cancer-associated anemia could also be helped by Epo. It is in that application that they had problems with safety. Epo used for kidney-failure and chemo-induced anemia is still very appropriate. But other uses are the issue.

My observation - if pharmas stopped worrying about stockholders demands of 15% profit growth, they wouldn't be so motivated to test drugs in iffy situations. But then there would be no stockholders, the stock value would tank, investment would vanish, and new drugs would completely stop being developed (See, even the little guys primarily are focussing on re-targeting existing 'failed' drugs, so their source of compounds - big pharma, would also dry up). What a world, what a world.

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9. Pillo on April 13, 2007 2:51 PM writes...

Jumbo- Finally someone got it right! Amgen was not "endangering patients" at any point in time. That comment is obviously from someone whom either doesn't know all the facts or has a problem with reading comprehension. All of the negative press is arising from "Investigational Stidies" where the products were inntiated at higher than approved Hgb levels and targeted higher than normal Hgb levels. This is where the problems arise. If the drugs are used as they are approved and to target Hgb correction at "normal" levels this would not occur in the average patient. However, when you intiate at >12 Hgb and go until Hgb go beyond 13 and 14 you are going to have problems. So let's keep the stories straight. Use it correctly and we won't have any problem!

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10. Amgen Employee on April 17, 2007 4:08 PM writes...

Seems to me, and a lot of other employees at the company ... that CEO Kevin Sharer needs to be the next one at Amgen to go.

His "vision" and "leadership" have now taken Amgen to the brink of financial ruin. Amgen needs a complete "shake-up" of upper senior management to straighten out its current growth problems. The problem with Amgen is that many of its managers don't come from with-in the pharma business, and are trying to sell its Amgen's products almost like they're in the consumer/retail business. Instead they should be focusing their efforts on expanding Amgen's single focus on the EPO family,
to a better rounded out protfolio of bio (or more traditional) pharma products. The company's single focus EPO strategy is now turing out to be its undoing.

Too many of my fellow Amgen employees are considering leaving the company if things really get ugly soon. That means a real "brain drain" from the company due to its senior managements lack of talent to take this company to a higher level.

Amgen is now a large pharma company, and likewise needs a new CEO who doesn't come off a such a "cowboy". The company now needs a new CEO (to work with the new CFO), who comes from a well knowledged pharma background .... someone who knows the industry and can take Amgen from its current financial woes and lack of strategic "vision", and move the company to its next level.

Sorry Kevin ... but its time to go, you're beginning to have too much of a negative effect on the future of Amgen's future survival!

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11. Ogan Gurel on August 23, 2007 8:40 PM writes...

Excellent post Derek and some pretty good comments here as well.

I've written too about all this (see the "Deconstruction of Amgen") at http://blog.aesisgroup.com/2007/08/21/the-deconstruction-of-amgen.aspx

where my two major points have been:

(1) the litigation heavy strategy at Amgen and
(2) their attempt to convert a biotech company into a "blockbuster" pharmaceutical firm through the "indication expansions" well discussed by yourself and others.

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