A rare side effect is cropping up in a small number of European patients taking Johnson & Johnson's ( JNJ) anemia-fighting blockbuster drug Eprex, known in the U.S. as Procrit.

The lead article in the Feb. 14 edition of the New England Journal of Medicine documents 13 patients on Eprex who developed pure red cell aplasia -- a condition in which the body stops producing red blood cells. Simply put, these patients develop an antibody reaction to Eprex, so instead of curing their anemia, the drug actually makes it worse.

An accompanying editorial in the influential medical journal says that at least another 29 Eprex patients in Europe also have developed the same side effect. The patients all were diagnosed between 1998 and 2000.

At this point, the occurrence of the side effect is rare, but Eprex sales -- and J&J's stock -- could be hurt if further evidence linking Eprex to pure red cell aplasia is discovered. Shares of J&J closed Wednesday at $58.09, up 79 cents.

J&J first made public the new side effect in November, when it sent warning letters to European doctors. At the time, the drug giant downplayed the problem because the rate of incidence is so low -- less than 1 patient in 10,000. But the New England Journal of Medicine coverage is bringing the issue back into the spotlight.

Eprex and Procrit, combined, are J&J's bestselling drugs, racking up $3.4 billion in sales last year. More than 3 million patients worldwide have used the drugs.

Carol Goodrich, a J&J spokeswoman, said there is nothing new in the Journal of Medicine article, but because doctors were alerted to the issue, the number of reported European cases of pure red cell aplasia has grown to just under 100.

"No cause and effect between Eprex and pure red cell aplasia has been proven yet, but we're working with regulatory authorities to examine a number of different factors," she says.

Looking for a Cause

These factors could be external -- the way the drug is made, stored or administered -- or it could be something endemic to Eprex's chemical makeup. Goodrich says the company will not speculate on the exact cause until more research is done.

But the NEJM article and editorial are raising concerns that if the side effect is being caused by the drug itself, and not an external factor, then Eprex sales could suffer. This also could hurt Amgen ( AMGN), which sells two forms of the drug -- Epogen in the U.S., which is identical to Eprex; and a newer, longer-acting version called Aranesp, which is sold worldwide.

Epogen and Aranesp sales totaled $2.2 billion in 2001.

"What concerns me is that doctors have only started looking for this problem in patients," says Jon Alsenas, biotech fund manager at ING Furman Selz Asset Management. "The article's author was only focused on Europe, so I wonder if we'll start to see more documented cases in the United States." Alsenas has no positon in Amgen or J&J.

Amgen spokesman Jeff Richardson says only one case of pure red cell aplasia has been reported in an Epogen patient, and that was in 1997.

"This is not an issue with our drug," he says. "This is an issue that involves Eprex in Europe, which is manufactured by Johnson & Johnson."

Richardson's message is clear: If the side effect is caused by an external factor traced back to J&J, then Amgen will jump all over this to expand sales of its drugs in Europe.

One of the theories being considered -- still unproven -- is that patients are developing an antibody response to Eprex because it is produced commercially in animal cells. In other words, after time, a patient's immune system detects Eprex as foreign, and attacks it.

Alsenas says that if this theory proves correct, then Amgen's Epogen sales could be impacted because the drug is exactly the same as J&J's Eprex. But Amgen could be hit doubly hard because the chemical makeup of Aranesp is even "less human," meaning that patients might react even worse to it over time. Much of Amgen's future revenue and earnings growth is tied to robust Aranesp sales, which only began late last year.

Dr. Franklin Bunn of Boston's Brigham and Women's Hospital, author of the editorial in this week's NEJM, calls for Aranesp patients to be monitored for any ill effects.

In response, Amgen's Richardson said the editorial is "simply one doctor's speculation. He has nothing to back up that statement." He added that Aranesp's approval was based on the largest clinical trial conducted for a biologic drug, involving 6,000 patients, and that no cases of pure red cell aplasia have been found.

Amgen shares closed Wednesday at $58.92, down 8 cents.

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