Amgen Looks for Relief

Beleaguered holders await anemia drug data.
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The next chapter in the saga of


(AMGN) - Get Report

anemia drug Aranesp unfolds next Monday, when the beleaguered biotech giant unveils results of a closely watched clinical study in lung cancer patients.

Years ago, when "Study 145" was designed, Amgen hoped it would dramatically boost the use of Aranesp by showing that the drug helped cancer patients live longer.

Not so today. Amgen shares have been

battered this year by fears that Aranesp might actually be harmful to cancer patients. Aranesp sales totaled $4.1 billion in 2006, accounting for 30% of Amgen's total product revenue.

So expectations for Study 145 have come way down. Amgen and investors will now be pleased if Aranesp emerges from the study with a negligible survival benefit, or even none at all, as long as the drug isn't shown to be prematurely killing patients.

Amgen shares closed Tuesday up 45 cents to $60.10. The stock has moved off its recent closing low of $55.55 on April 2, spurred by a smattering of

analyst upgrades and Amgen's cheap

valuation -- it trades at around 12 to 13 times forward earnings. Some investors are hoping that good news from Study 145 and decent first-quarter results will relieve the

pressure that's been holding down the stock.

I recently spoke with one

money-manager who is buying Amgen shares for just those reasons. He can't speak on the record because the bylaws of his fund don't allow it, but he's done some interesting legwork on Aranesp and Study 145 that deserves to be shared.

Recall that Study 145 enrolled 600 newly diagnosed patients with small-cell lung cancer. The study was designed to investigate whether Aranesp -- by boosting a patient's hemoglobin level above currently recommended target levels and "oxygenating" tumors -- can sensitize those tumors to chemotherapy, thereby increasing survival.

This fund manager believes Aranesp can, and likely will, show a small a survival benefit, based on results from previous similar studies that investigated the use of anemia drugs, including Aranesp and

Johnson & Johnson's

(JNJ) - Get Report

Procrit, in lung cancer patients. While not designed specifically to measure survival, these studies suggested a small survival benefit in favor of lung cancer patients taking anemia drugs compared with those who did not.

Like Study 145, these historical studies treated patients to levels of hemoglobin higher than what's currently mandated in the Aranesp label. But importantly, these prior studies enrolled patients who either were anemic (had low hemoglobin levels) when they entered the study or became anemic during the study due to the deleterious effects of chemotherapy.

This same favorable scenario is also likely to occur in Study 145, which bodes well for Aranesp, according to this fund manager.

There are other past studies that show Aranesp shortening the lives of cancer patients, but one possible explanation is that those studies enrolled patients who weren't anemic at enrollment and didn't become anemic while treated. This set up a situation in which Aranesp's benefits couldn't be adequately measured, he adds.

Bear Stearns biotech analyst Mark Schoenebaum says his best guess on Study 145's outcome is that Aranesp emerges with a slightly negative survival trend that is not statistically significant and, therefore, is inconclusive.

Investor focus would then shift to May 10, when an advisory panel convened by the Food and Drug Administration is set to discuss the use of anemia drugs in cancer patients. Without conclusive proof of harm, the panel isn't likely to recommend any drastic changes to current practice, which will boost Wall Street's confidence in Amgen's ability to maneuver out of its current predicament, says Schoenebaum. He has an outperform rating on Amgen and owns shares of the company, and his firm has done banking for the company.

"One thing I do think the panel will ask Amgen to do is conduct an Aranesp study that treats cancer patients to

a hemoglobin level of 10-12 and then measure survival. That's the right trial to do and will provide clarity," says Schoenebaum.

Current Aranesp label and cancer-treatment guidelines call for patients to be treated with Aranesp or other anemia drugs when their hemoglobin levels fall to 10. The optimal, recommended target hemoglobin level is 12. All of the controversy over Aranesp began because of efforts to use more of the drug to boost patients' hemoglobin levels above recommended targets, theorizing that more would be better.

Perhaps lost in Amgen's announcement next week of Aranesp trial results will be the company's reporting of first-quarter earnings. Current Street expectations call for the company to earn $1.08 per share on $3.7 billion in total revenue.

Amgen faces other challenges, too: If Aranesp survives, it may face new competitive threats from other anemia drugs in the coming years. There also have been recent questions raised about the prospects for the company's colon cancer drug Vectibix, and much of its future growth rests on the shoulders of an experimental osteoporosis drug, denosumab, which is still in late-stage clinical trials.

But there's plenty of time for traders to worry about those obstacles. For now, investors will be fixated on next Monday and the results of Study 145.

Adam Feuerstein writes regularly for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;

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