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A Look at Amgen (AMGN) and Its $10 Billion Flop Onyx (AMGN)

11/2/2016 6:43:51 AM

A Look at Amgen and Its $10 Billion Flop Onyx November 2, 2016 (Last Updated: 4:30 p.m. PT)
By Alex Keown, Breaking News Staff

THOUSAND OAKS, Calif. – Despite strong returns for investors, regulatory approval of a new biosimilar and strong revenue streams from drugs in its pipeline, and one analyst isn’t so keen on California-based Amgen (AMGN).

Writing in the Motley Fool this morning, analyst Cheryl Swanson suggested investors “push the pause button” before moving forward with purchasing shares of Amgen.

“The biotech has a concentrated revenue position in only a few products, and its growing revenue and earnings by increasing prices on these drugs in the face of dwindling sales. Worse still, the company recently had a major pipeline failure to the tune of $10 billion,” Swanson said.

The $10 billion flop that Swanson referred to was Amgen’s 2013 acquisition of Onyx Pharmaceuticals (AMGN) and its blood cancer drug, Kyprolis. Amgen was hoping the drug would be a first-line defense for multiple myeloma patients. Phase III data showed that Kyprolis demonstrated superior results for progression-free survival over Velcade, a popular treatment produced by Takeda Pharmaceuticals (TKPYY) and Johnson & Johnson (JNJ). That data was strong enough for the drug to be approved by the U.S. Food and Drug Administration (FDA) for patients with multiple myeloma who have received at least two prior therapies including bortezomib and an immunomodulatory agent and have demonstrated disease progression on or within 60 days of completion of the last therapy. In July 2015 the FDA approved Kyprolis as part of a combination treatment with Revlimid and dexamethasone for multiple myeloma patients who have received one to three prior lines of therapy.
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However, Swanson noted a recent Phase III Clarion trial of Kyprolis in patients with newly diagnosed multiple myeloma who were ineligible for hematopoietic stem-cell transplant showed the survival rates were actually more on par with Velcade. Velcade will be facing generic competition within the next year, which means doctors will likely prescribe the less expensive treatment, making that bad news for Amgen and Kyprolis. In addition to Velcade, Swanson said other multiple myeloma drugs, including Celgene (CELG)’s Pomalyst, may also be preferable, particularly since Celgene’s drug is an oral as opposed to an intravenous drug.

Another piece of the Amgen pipeline that Swanson expressed concern with is its PCSK9 inhibitor Repatha. Repatha was approved by the FDA last year to treat two rare genetic diseases known for high LDL-C, as well as patients who have atherosclerotic CV disease. Last month the anti-cholesterol drug met its endpoints in a Phase III coronary artery disease (CAD) trial. All good news, but Swanson said Repatha has to contend for a share of the market with Praluent, a PCSK9 inhibitor co-developed by Regeneron (REGN) and Sanofi (SNY). Pfizer (PFE) is also developing its own PCSK9 inhibitor which is in late stage trials. Swanson said revenue predictions for Repatha to hit $2 to $4 billion in annual sales may not come to pass. “The drug, which is priced at an eye-popping $14,100 annually, is having the least inspiring launch of a major drug I can remember. Last quarter, it brought in a meager $27 million,” Swanson said.

In addition to those two points, Swanson said Amgen’s reliance on increasing the prices of older drugs as a method of driving revenue, which has been a proven formula in previous years, may be a setback due to political and public concerns over the costs of drugs. As an example, Swanson pointed to Amgen’s blockbuster rheumatoid arthritis drug, Enbrel. When the drug was approved in 1998, Swanson said it cost $10,000 per year. Today, the price is $4,000 per month, which hinders it being covered by many insurance programs, Swanson said. Although the drug still brings in revenue, she said the number of written prescriptions are actually shrinking, making it a long-term problem for Amgen.

This afternoon Kristin Davis, a spokesperson for Amgen told BioSpace that Amgen continues to look at different applications for Enbrel, including one for children suffering from chronic moderate to severe plaque psoriasis.

“We're also investing in novel delivery systems to help patients with chronic inflammatory diseases to more efficiently and efficiently inject themselves and ensure optimal therapy over the treatment period. We will continue to compete on a payer-contracting basis to maximize patient access to Enbrel,” Davis said in her email.

Davis also pointed to recent points about Enbrel the company highlighted in its third quarter call. She said changes in selling price “comprise several components, including changes in list price, as well as the impact from rebates we provide to payers, including those related to their formulary decisions.”

“In highly competitive markets, pharmacy benefit managers (PBMs) can require incremental rebates from us in order for us to maintain our formulary positioning. Maintaining our formulary position is essential to ensure patients have access to a drug like Enbrel, which has the longest in-market history of efficacy and safety,” Davis said. “On the earnings call, it was noted that given this dynamic and present complex negotiations, we expect relatively little benefit from Enbrel net selling price changes in 2017.”

Davis also disputed Swanson’s point that Enbrel isn’t covered by most insurers, including Medicare.

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