FDA panel on anemia drugs has investors wary

By Deena Beasley - Analysis

LOS ANGELES (Reuters) - A U.S. Food and Drug Administration advisory panel may call on Thursday for further restrictions on the use of anemia drugs in cancer patients, leading some investors to expect lower sales for Amgen Inc's (AMGN.O) top-selling Aranesp.

Amgen shares have fallen about 20 percent since early December, largely over the risk of usage limits, and analysts say there is a chance the panel could take more drastic action and recommend anemia drugs not be used at all by many cancer patients.

"Most investors are not expecting this to go well," said Eric Snyder, an analyst at Mehta Partners.

At a minimum, the panel of outside experts is expected to ask for a large-scale study to definitively measure safety.

The FDA a year ago put its strongest "black box" warning on the labels of Aranesp, as well as Amgen's Epogen and Johnson & Johnson's (JNJ.N) Procrit, after studies showed a higher risk of death for some patients.

The agency last week updated the warning to include information about studies showing that the drugs shortened survival for some cancer patients.

Over the past year, there has been a steady drumbeat of negative news about the drugs, which are genetically engineered versions of a protein that boosts production of oxygen-carrying red blood cells.

Concerns that the anemia drugs might be feeding tumor growth began to outweigh the perceived benefits of fewer blood transfusions and better quality of life for cancer patients.

Sales of Aranesp, Amgen's top-selling product, fell 12 percent last year to $3.6 billion, while sales of Procrit, which is less important to J&J's bottom line, fell 9.4 percent to $2.9 billion.

The so-called erythropoiesis-stimulating agents (ESAs) are FDA approved to treat anemia in patients with chronic kidney failure, and in cancer patients undergoing chemotherapy.

TREATED PATIENTS MORE LIKELY TO DIE

The FDA has reviewed studies showing that patients with breast or cervical cancer who were treated with ESAs died sooner, or had more rapid tumor growth, than similar patients who were not given the drugs.

The agency said a trial of Aranesp in women who received chemotherapy before breast-cancer surgery found that after three years, 14 percent of patients treated with Aranesp had died, compared with 9.8 percent who did not get the drug.

Those findings could compel the FDA panel to seek a suspension of ESA use in breast cancer patients or even all cancer patients with solid tumor cancers, according to Wall Street analysts.

Rodman and Renshaw analyst Michael King put the chances of the panel calling for an end to ESA use in breast cancer patients at 30 percent and said there is a 10 percent probability that it would vote to cut off oncology use altogether.

He said in a research note that Amgen's 2007 U.S. oncology sales of Aranesp were $1.55 billion, with breast cancer patients accounting for about 20 percent of the total.

King said the loss of the U.S. oncology market would shave about $9.6 billion, or $8.80 per share, from Amgen's value.

Snyder at Mehta Partners said the FDA panel will most likely suggest significant limits on use, along the lines of Medicare's recently tightened reimbursement guidelines.

Amgen says about half of Aranesp oncology sales in the United States are reimbursed by Medicare, with private payers covering the other half.

The U.S. health insurance program for the elderly and disabled will no longer cover anti-anemia drugs for certain cancer patients and will only pay for the drugs if a patient's hemoglobin level falls to at least 10 grams per deciliter of blood. The drugs' FDA-approved label currently calls for treatment at a hemoglobin level of 12 grams or less.

But without a new safety-focused trial, it is not clear whether that change makes sense for patients, said Dr. John Glaspy, a Los Angeles oncologist at University of California's Jonsson Comprehensive Cancer Center.

ESAs were first approved because they reduced the need for blood transfusions. "Let's find out whether early initiation decreases transfusions and whether later initiation increases survival," Glaspy said.

Goldman Sachs analyst May-Kin Ho said in a research note that the FDA panel is "unlikely" to eliminate anemia treatment for breast cancer and "highly unlikely" to withdraw the drugs from all cancer patients.

She said a "reasonable scenario" would be for the panel to call for further restrictions to the label, resulting in a drop in 2008 Aranesp sales of $150 million to $250 million, cutting Amgen's earnings per share by 9 cents to 16 cents.

Even if Amgen were to lose all Aranesp oncology revenue, the company would likely to be able to meet the low end of its 2008 earnings target of $4.00 to $4.30 per share, Snyder said.

Under that scenario, the company's stock, which closed at $44.18 on Friday on Nasdaq, would likely drop $4, according to Sanford Bernstein analyst Geoffrey Porges.

(Reporting by Deena Beasley; Editing by Tim Dobbyn)