Amgen dodges bullet, but Aranesp sales seen falling

LOS ANGELES (Reuters) - Amgen Inc (AMGN.O) dodged a bullet on Thursday when a U.S. advisory panel recommended tighter use of anemia drugs, but said the medicines should remain on the market for most cancer patients, sending the biotechnology company's shares up nearly 5 percent.

Wall Street analysts said oncology sales of Amgen's top-selling Aranesp could fall by as much as half if the proposals are finalized, which could make it hard for the company to meet the low end of its 2008 earnings target.

"There appears to be a modest relief rally in the stock, as the worst case scenario is off the table," said Morgan Stanley analyst Steven Harr said in a research note.

He added that Wall Street analysts will now need to lower their sales and earnings estimate for Amgen. "We think there is more downside than upside over the next several months and we are not yet comfortable stepping in to buy the stock," Harr said.

Before Thursday, Amgen's shares had fallen about 20 percent since early December when the U.S. Food and Drug Administration panel review was announced.

The panel of outside advisors voted that the FDA should sharply restrict the use of Amgen's Aranesp and Johnson & Johnson's (JNJ.N) Procrit in cancer patients after studies showed that they raised the risk of death for some patients.

The drugs, known as erythropoiesis-stimulating agents (ESAs), are genetically engineered forms of a protein that boosts production of red blood cells. The injectable medicines also are sold for patients with kidney disease.

The panel recommended against giving the medicines to patients undergoing chemotherapy or other treatment that could cure their disease, or to patients with advanced breast cancer or head and neck cancer.

Such patients currently account for about 40 percent of Aranesp sales in oncology, which are now running at an annual rate of about $1.2 billion, said Bear Stearns analyst Mark Schoenebaum.

Aranesp cancer sales totaled $2.1 billion in 2006, but fell to $1.55 billion last year amid a steady drumbeat of negative safety data and restrictions on Medicare reimbursement.

Amgen said in January that it expected to earn $4.00 to $4.30 per share this year. Analysts, on average, have projected 2008 earnings of $4.21 per share.

"Probably they can hold $4.00 and maybe earn up to $4.14 this year, Schoenebaum said on a conference call.

The company issued a statement saying it is committed to working with the FDA, but declined to comment on the potential sales impact of the panel recommendations.

"We'll have to see if Amgen can quantify the curative treatment for us or not. My guess is we've clipped a substantial amount, possibly up to 50 percent if doctors follow these recommendations," said Eric Schmidt of Cowen and Co.

Harr at Morgan Stanley said "back of the envelope calculations" suggest that analysts will need to trim annual Aranesp sales estimates by $400 million to $500 million, and earnings by 15 cents to 20 cents a share, which would put "the sacred" $4.00 per share earnings target at risk.

Meanwhile Amgen is awaiting a final resolution of another assault on its anemia drug franchise -- a bid by Roche Holding AG (ROG.VX) to sell its drug Mircera in the United States.

Amgen prevailed in patent litigation against Roche, but the U.S. District Court judge overseeing the case has yet to rule out imposing a settlement that would let Roche launch its anemia medicine in return for paying a royalty to Amgen. A final ruling is expected in the next few weeks.

Amgen's shares rose $2.19, or 4.9 percent, to close on Thursday at $47.18 on Nasdaq. Shares of J&J, for which Procrit is only a small percentage of sales, rose 26 cents to close at $62.81 on the New York Stock Exchange.

(Additional reporting by Bill Berkrot in New York; Editing by Tim Dobbyn)