Can Amgen Find a New Engine?

Amgen's string of misfortunes has highlighted the group's need to find an alternative growth engine--one which will, necessarily, look very different from the current anemia franchise. The biotech is leaning too heavily on osteoporosis and cancer candidate denosumab.

Amgen’s string of misfortunes has highlighted the company’s need to find an alternative growth engine—one that will, necessarily, look very different from the current anemia franchise. The biotech is leaning too heavily on osteoporosis and cancer candidate denosumab.

Melanie Senior

The blows to Amgen’s EPO franchise, although remarkable in number, simply intensify the need to shift to a new growth source.

Amgen’s near-term pipeline looks dangerously dependent on osteoporosis and bone cancer candidate denosumab, neither a dead cert.

Notwithstanding its phenomenal success to date, the Big Biotech hasn’t yet proven its R&D prowess—beyond anemia--or its business development mettle.

Now it must; not just to fight off comparisons with its clunkier Big Pharma cousins, but as it’s forced to gear up to making and selling a far wider range of drugs, across more therapeutic and geographic areas.

"This isn’t a crisis," Amgen Inc. ’s CEO Kevin Sharer told the New York Times in mid-April. The statement, in a rare interview, didn’t offer much reassurance to investors in a stock that lost 20% in the first quarter of this year, battered by an extraordinary series of blows to marketed drugs, pipeline, and practices.

Everyone’s familiar with the list of misfortunes: safety concerns over the use of Amgen’s largest drug, long-acting erythropoietin (Aranesp) in cancer; questions over the company’s disclosure of the trial information; disappointing data for Amgen’s newest drug, panitumumab (Vectibix); and ongoing reimbursement, competitive, and generic threats to the EPO franchise that makes up almost half the group’s $14.3 billion revenues.

But this list is remarkable not just because of its length—though analysts say it’s unprecedented for any one firm in a relatively short space of time—but because it applies to a company whose growth and success to date has been equally noteworthy. Amgen is a biotech pioneer, and the sector’s most profitable company. Europe and every other continent outside the US wants its own Amgen. This firm’s market capitalization was above $80 billion at its peak last year—larger than that of Wyeth or Eli Lilly & Co. Between 2003 and 2006 Amgen posted sales growth of 20%, a far cry from the miserable single-digits that Big Pharma has managed.

Whether or not Amgen’s in crisis—the term is, after all, relative—the biotech has certainly come off its pedestal. Revenue growth will be just 4% between 2007 and 2010, according to analysts at Citigroup. That’s not terrible per se—in fact it’s about in line with the global biopharma sector—but it’s terrible compared with what went before.

And that’s the problem. Amgen can no longer rely on the growth drivers that it has lived off to date—drugs that, in their first-generation form, were launched nearly 20 years ago. Anemia drug erythropoeitin alfa (Epogen) was approved in 1989, but 17 years later it still sold $2.5 billion. Follow-on Aranesp sold more than $4 billion in 2006, in large part thanks to line extensions and off-label usage (including in cancer-related anemia). Filgrastin (Neupogen), the white blood-cell booster approved in 1991, and its son pegfilgrastin (Neulasta) added another combined $5 billion in sales in 2006. The figures are extraordinary. But the time lines show why some critics accuse Amgen of resting on its laurels. A single basic innovation just isn’t supposed to last that long or be stretched that wide.

Amgen’s need to prepare itself for the post-EPO era was evident well before Aranesp safety concerns came to light early this year. Other threats were emerging, including the prospect of cheaper, biosimilar forms of EPO, new, perhaps more convenient kinds of erythropoiesis-stimulating agents (ESAs) including small molecules and most prominently Roche ’s mysterious Mircera, a long-acting EPO that Amgen claims infringes its patents and that the company is doing its damnedest to barricade from the US market. But the Aranesp data showing an increased risk of death among cancer patients, plus other studies that have emerged in the last six months showing similar risks associated with high doses of any EPO drug in chronic kidney patients, make this need more urgent. They put the spotlight firmly on Amgen’s ability not to vigorously expand, monetize, and defend the innovation it has created to date---it has shown how skillfully it can do that—but on its ability to generate the innovation necessary to fuel the group for the next 20 years.

It’s a challenge familiar to most Big Pharma—and indeed, Amgen’s now regularly compared with them. With some justification: besides its size and henceforth-modest growth, Amgen has ramped up its R&D spend to $3 billion in 2006, with little visible result, at least to the outside world. It’s cutting costs. CEO Kevin Sharer has been accused of taking home too many millions ($24 million last year) for too little shareholder value creation, and there are questions about the group’s commercial practices.

But on another level Amgen’s challenges are unique—not the same as Big Pharma’s but mirror images. As Big Pharma struggles to come to grips with large-molecule development and commercialization, Amgen must figure out how to master small molecules, which make up a growing portion of its pipeline. And as Big Pharma is forced to embrace more specialist drugs, so Amgen must branch out into primary care areas like metabolic disease and cardiovascular—both of which are development priorities, according to Amgen executives. Meanwhile, as Big Pharma tries to recreate biotech-like creativity by breaking up R&D, Amgen’s challenge is to hang on to its entrepreneurial spirit as R&D budgets and staff levels rise to Big Pharma levels.

As their territories converge, competition between Big Biotech and Big Pharma will intensify further—both in the market and in licensing. They’ll also face more of the same hurdles—in proving cost-effectiveness, gaining reimbursement for expensive treatments, and fighting generics. Amgen’s vigorous efforts in proving the pharmaco-economic value of its products and in lobbying politicians to halt the progress of biosimilars are well-known. But it hasn’t shown the same dealmaking aggression as some Big Pharma; arguably because it hasn’t had to.

Thus Amgen now has a lot to prove: not just that it can do R&D, but also that it can do business development—an activity that’s now integral to R&D at many large drugmakers. And it must do so even if its current difficulties present, as Sharer claims, merely a "stiff headwind."

Times of Trouble

Until about six months ago, the big question around Amgen was whether it could continue to successfully defend its EPO patents against the latest in a string of would-be competitors, Roche. (See "Why EPO Matters," IN VIVO, July 2006 (Also see "Why EPO Matters" - In Vivo, 1 Jul, 2006.) and "Roche’s New EPO: "White Knight" or Wolf in Sheep’s Clothing?" The RPM Report, February 2007 (Also see "Roche's New EPO: "White Knight" or Wolf in Sheep's Clothing?" - Pink Sheet, 1 Feb, 2007.).) That battle rumbles on—Roche is close to launching Mircera, which is thought to be pegylated EPO. But most analysts now expect Amgen will prevail, yet again, in barring Mircera from the US. Hence the most prominent threat to Amgen’s anemia franchise has shifted from competition to safety. A glut of clinical trial results over the last six months (plus others from several years ago) suggest that EPO drugs, particularly when given in high doses, may increase death rates in certain patients groups. One study reported last November in the New England Journal of Medicine showed that chronic kidney disease patients treated with high doses of EPO were more likely to have heart problems or die; a January study of Aranesp in patients with cancer-associated anemia showed those receiving the drug were more likely to die than those on placebo. Results were similarly bad in a Danish study in head and neck cancer patients also on Aranesp.

Amgen had funded many of these studies, which were supposed to support more aggressive use of epoetin drugs, proving the value, not the danger, of raising hemoglobin levels above what current labels recommend, and supporting wider, on-label use of Aranesp in oncology. The unexpected outcome—worsening safety—is a more serious threat to Amgen than competition.

Quite apart from their impact on patients, once safety concerns are out there, they are hard to dispel. They also affect both Amgen’s EPO drugs (plus everyone else’s), not just one, as for example Mircera would.

Thus FDA in March slapped a black box warning on all erythropoiesis stimulating agents (ESAs), and an FDA advisory committee recommended further label restrictions, and called for further trials, as IN VIVO went to press in May. This all provides payors a good reason to limit reimbursement of these drugs, which are among the most expensive on many formularies. Several have already stopped reimbursing Aranesp in the off-label anemia of cancer. Five days after the black box warning, CMS announced it would review reimbursement policy for EPO in all indications. The review timing is uncertain, but further impetus has come from a JAMA study in April 2007 that found that for-profit dialysis chains tend to administer the highest doses of EPO regardless of a patient’s anemia status, likely because there is a financial incentive to do so because suppliers like Amgen offer volume-based discounts linked to usage. Thus Amgen will not only likely lose the $500 million or so in off-label cancer-related sales, but volumes in both nephrology and oncology may reduce by 20 to 30% in some areas, according to Citigroup estimates, potentially affecting 12% of revenues.

The safety saga has done more than dent Amgen’s EPO sales though. It has also hit management’s reputation, most obviously since the SEC launched an investigation into why Amgen management failed to disclose results of the Danish Aranesp trial until several months after it received them. The company’s aggressive promotional tactics around Epogen and Aranesp—its use of DTC, volume-discounting, the October 2006 five-year sole-supplier deal with Fresenius Medical Care AG, which has a 35% share of the US dialysis market, to block Mircera—have also fuelled criticism that Amgen was putting commercial gain ahead of patient safety. "I’m surprised no one has called for Sharer’s head," at least not openly, declares one analyst.

That’s probably an overreaction. Amgen’s management has apologized for the delay in disclosure, which was unlikely to have represented deliberate deception. But the snafu didn’t help Amgen’s image, or investor confidence. "Management’s reputation has been tarnished," says Eric Schmidt, managing director and senior research analyst at Cowen & Co. So when long-standing CFO Richard Nanula decided to resign in the midst of the safety storm (having sold more than 50,000 of his Amgen shares since May 2006, raising about $4 million), it was hard to resist the image of Nanula leaping from a sinking ship.

Whatever the official reason for his departure, Nanula appeared to be leaving just as the numbers, big and sweet for so long, turned sour. Aranesp sales declined 4% in the first two months of 2007, according to IMS, compared with 27% growth in the fourth quarter of last year. Analysts predict at best decelerating growth this year, at worst a decline. Growth in the other half of the big biotech’s revenues looks dull, too: Neupogen and Neulasta generate lots of cash and have great margins, but they likely can’t increase at double-digits any more because they already have three quarters of the market, note Citigroup analysts. Rheumatoid arthritis drug etanercept (Enbrel) faces stiffer competition from new anti-TNF therapies expected on the market, including UCB Group ’s certolizumab (Cimzia) and Johnson & Johnson/Schering-Plough Corp.’s golimumab. [See Deal] (See "UCB: Will Cimzia Be Enough?" IN VIVO, February 2006 (Also see "UCB: Will Cimzia Be Enough?" - In Vivo, 1 Feb, 2006.).) Both are administered less frequently than Enbrel with equivalent or better efficacy. In short, Amgen’s growth is unlikely to go above high single digits for the next three years or more, according to analysts. Nanula "realizes he’s not at the same company he thought he was," sums up Schmidt.

Dependence on Denosumab

Nor, like many analysts and observers, did Nanula see enough waiting in the wings to help replace the declining anemia sales. In Amgen’s late-stage pipeline, denosumab is the lone candidate of significance, say analysts. (See Exhibit 1.)

As lonely candidates go, it’s not a bad one. The compound inhibits osteoclasts, cells that break down bone, through blocking the receptor activator of nuclear factor kappa b (RANK) ligand. "The same pathway that our scientists discovered was critical in governing bone remodeling is also thought to be involved in the spread of tumors through bone," explains Willard Dere, MD, SVP and international CMO at Amgen. "If the pathway is active, tumors are more likely to cause damage, such as fractures." Thus the compound offers a novel approach to treating a variety of diseases, including postmenopausal osteoporosis (PMO), metastatic bone disease, and bone loss from hormone therapy in blood and prostate cancer patients, plus rheumatoid arthritis. Amgen has more than 10 Phase III trials running in these four areas.

Given this potential breadth, Mark Schoenebaum, an analyst at Bear Stearns, reckons "it could be a $5 billion drug," Amgen’s biggest ever product. "One could even argue that it’s the best asset in the entire biopharma industry pipeline," he continues. But, it seems, the bolder its potential, the more disastrous it would be if things went wrong. "God forbid anything should happen to denosumab," sums up another US analyst.

Phase II data are promising, suggesting equivalent efficacy to the current standard of care, biphosphonates, and better convenience (one subcutaneous injection every six months) thus potentially better compliance. It may also be safer. Because denosumab is reversible and does not collect in the bone matrix, it avoids one of the most serious (if rare) side effects of biphosphonates, osteonecrosis of the jaw.

But there have been too many late-stage failures recently for anyone to call this a dead cert. Indeed, Amgen’s own other recent late-stage hopeful, Vectibix, has so far failed to live up to its original, $2 billion-high expectation. Sales of the drug, approved in 2006 for late-stage colon cancer patients who have failed chemotherapy, are just $200 million, and Amgen in March 2007 had to halt a trial that showed a lower survival rate among patients receiving chemotherapy plus bevacizumab (Avastin), Genentech Inc.’s cancer drug, and Vectibix than among those who didn’t also receive Vectibix. "It was only a marketing trial," notes one Amgen executive, dismissing press reports as an overreaction. The trial was designed to give Vectibix an edge over ImClone Systems Inc./Bristol-Myers Squibb Co. ’s cetuximab (Erbitux). [See Deal] But some analysts think the drug will now be approved only for patients who have failed chemo and who don’t respond to Erbitux. Revised peak sales are forecast as $700 million at best—in most company’s books a runaway success, but not enough for Amgen.

The Vectibix disappointment only added to questions over management judgement and trial design, which, according to Cowen’s Schmidt, "don’t always make a lot of sense." Yet even if denosumab does get to market without a hitch—Phase III data in PMO are expected this year—it won’t be another Epogen. That drug started out as an orphan—first drug of its kind, life-saving. Denosumab will face at least six well-established competitors in PMO, including Merck & Co. Inc.’s alendronate (Fosamax) and risedronate (Actonel), marketed by Procter & Gamble Co. In April 2007 the New England Journal of Medicine reported data showing reduced fractures among postmenopausal women in a trial of Novartis AG’s hypercalcemia agent zoledronic acid (Zometa), a biphosphonate given as a once-yearly infusion (though the trial also found increased abnormal heart rhythms). Amgen won’t have a free rein with pricing, either, as it did for Epogen, because cheap generic biphosphonates will be available by 2008, a year before the company hopes to file.

Granted, if denosumab lives up to expectations, it could offer significant improvement over existing drugs—plus, there are signs that denosumab increases bone mineral density more than Fosamax. Until there are long-term data showing the drug’s potential in chronic osteoporosis, though, most analysts are playing it safe. Indeed, the stock’s recent valuation has meant investors get a free call on denosumab, according to Bear Stearns’ Schoenebaum.

R&D: Big, Better, but Bureaucratic?

And, presumably, on the rest of Amgen’s pipeline, too. The company has ramped up R&D spend from $1 billion in 2002 to more than $3 billion last year, during which period the company put 12 new molecules into the clinic. Amgen’s early-stage pipeline indeed looks healthy, with a dozen Phase I compounds, plus, in Phase II, oral multi-kinase inhibitor AMG 706, motasenib, for cancer, and AMG 108, an IL-1 inhibitor for rheumatoid arthritis. AMG 221 and AMG 317 will enter Phase II this year in type II diabetes and asthma, respectively. "Each of these had a good shot at becoming an important therapy," enthuses Dere.

But they’re not going to contribute to growth until 2011 or later. And although Amgen R&D is today "much more productive than it was in the ’90s," notes Bear Stearns’ Schoenebaum, other analysts remain unimpressed, particularly given the level of spend. Amgen spends double what Genentech spends on R&D, yet, according to one analyst, "one can do R&D the other can’t." Genentech’s late-stage pipeline isn’t exactly bursting, but "investors have greater faith that something will come out of Genentech’s research lab, whereas Amgen has not yet created that level of confidence," notes Schoenebaum.

There’s nothing to say it won’t. But when searching for reasons why Amgen’s R&D effort doesn’t appear as productive as the investment might warrant, it’s easy to draw top level parallels with Big Pharma—large spend, little output. Even easier since Amgen’s R&D is headed up by an ex-Big Pharma executive, Roger Perlmutter, MD, PhD. Still, it was Perlmutter, who had been passed over for the top R&D job at Merck, who helped kick-start Amgen’s discovery and development effort when Sharer hired him at the turn of the century. An important element of that was building up Amgen’s small-molecule capabilities. "Roger wanted to make sure we focus on targets we think are important, and that are not limited by modality," Dere told IN VIVO.

In that he seems to have succeeded—a significant and growing portion of the early-stage pipeline is small molecules. Amgen knows that, given its size, it must be able to embrace chemistry as well as biologics to grow, just as Big Pharma is trying to accomplish the reverse. Indeed, senior executives boast that Amgen is "probably the only one right now with world-class technologies in all three modalities—proteins, antibodies, small molecules."

But although Perlmutter attracted many other talented Merck scientists to Amgen, he also brought with him some of Big Pharma’s bureaucracy, according to one senior source. "It suddenly took lots more time to get things done," the source says. The commercial hurdles for development programs got higher, too—many promising assets were abandoned because they looked too small.

Prioritizing is a reality at any company—not just big ones. Yet Amgen’s staff levels did double from 7,500 to 15,000 between 2001 and 2004, and many of the biotech’s original employees left, allegedly because they felt the company had been transformed, in both size and spirit, into a Big Pharma.

Business Development: Not Urgent, So Far

But while most Big Pharma are trying to solve their R&D problems through aggressive deal-making—competing for late-stage in-licensing assets and for entire companies--Amgen has been somewhat less prominent at the negotiating table, at least relative to many of its similarly sized peers. The vast majority of its licensing transactions have been very early-stage; of the 16-odd licensing deals that Amgen has signed since the start of 2003, just two have involved compounds in the clinic. (See Exhibit 2.) As a rough comparison, Wyeth did 30 licensing deals in the same time frame, five at the clinical stage; Genentech did more than 30, and Merck did more than 60.

As for acquisitions, Amgen’s "track record is embarrassing," says one analyst. In December 2005, Amgen paid $2.9 billion for Abgenix, largely to get its hands on full rights to what would become Vectibix. (See "Amgen/Abgenix: All About a Drug," IN VIVO, January 2006 (Also see "Amgen/Abgenix: All About a Drug" - In Vivo, 1 Jan, 2006.).) Given what’s happened to Vectibix, Amgen overpaid. The $1.3 billion Amgen forked out for small-molecule group Tularik in 2004 [See Deal] also looks questionable—few if any of the handful of clinical compounds in Tularik’s pipeline feature in Amgen’s today; one, a Phase II PPAR modulator and partial agonist, was out-licensed in January 2007 to InteKrin Therapeutics Inc., "because it felt a bit too Big Pharma, too much of a flavor variant" says Scott Foraker, VP licensing at Amgen. [See Deal] Even the $17.9 billion Amgen paid for Immunex in 2001 still raises eyebrows—Enbrel still hasn’t quite reached the $3 billion goal Sharer had predicted for it, and the other key asset, apart from discovery research capabilities, was the precursor to Vectibix. [See Deal]

But the company certainly does more than it used to. Foraker claims that Sharer was instrumental in washing out the not-invented-here syndrome, rife within Amgen in the 1990s, in large part by bringing in Perlmutter and George Morrow, EVP global commercial operations. Both men "arrived with the same philosophy" of supporting outreach efforts, says Foraker. According to Sharer, outreach—licensing, M&A, and Amgen Ventures Group, the company’s VC arm--is now responsible for 40% of the portfolio, though the measure encompasses research through to marketed drugs. "Our board completely supports these [outreach] efforts, and they just want more," declares Foraker.

Maybe they’ll soon get more. Meanwhile, even bullish analysts reckon Amgen could have been more active in business development. "You’d think they’d be motivated to get aggressive in licensing," notes one, "but sometimes these companies go into a shell and get defensive." Or maybe NIH hasn’t been fully outgrown after all. Amgen executives deny defensiveness or NIH, but they don’t convey a sense of urgency, instead arguing that the company has won its share of deals---pointing to the September 2006 purchase of private Avidia Inc. , which is developing a new class of proteins that may one day replace monoclonal antibodies. [See Deal] And anyway, "we have an incredible Phase II pipeline and are extremely ambitious in our Phase II programs," Dere told IN VIVO.

While supremely confident in its R&D, Amgen has kept relatively quiet about its midstage pipeline; intentionally so, according to insiders. Given the fallout in the marketed portfolio, that may have been a mistake. They may also be playing down the urgency of their business development goals. But Amgen’s executives are nevertheless looking forward and acknowledging a future in which the company will look very different. "We’re preparing ourselves for the post-EPO era," Foraker says.

Post-EPO Transformation

That may not be apparent from the outside, given the scope and number of Amgen’s moves to defend its franchise. But Amgen is slowly transforming. A glance at the pipeline presages a future Amgen in many more therapeutic areas--including some traditionally labelled primary care--and marketing far more small molecules. It also pushes Amgen beyond its heritage in supportive care oncology and hematology, into therapeutics.

"Vectibix is the beginning of that march" toward actual therapeutics, asserts Foraker, just as hypercalcemia and hyperparathyroidism drug cinecalcet (Sensipar) is the start of Amgen’s shift away from reliance on a handful of specialist biologics within a narrow TA focus, toward a broader, more Big Pharma-style portfolio with oral drugs and larger sales forces.

It won’t be an easy march. Vectibix has already tripped Amgen up; sales of Sensipar in 2006 were just $321 million, accounting for just 2% of revenues. And while some of Amgen’s new therapeutic area priorities are simply a logical expansion of their existing franchises—for instance inflammation, where they’ll build on Enbrel in the US and RA drug anakinra (Kineret), and nephrology, an offshoot of the anemia franchise (which remains a priority, see Sidebar: The Next-Generation Anemia Franchise?)—Amgen’s also expanding into entirely new fields, including metabolic disorders, neuroscience, and cardiovascular. In fact it doesn’t rule out anything much. "We’re driven by unmet need, rather than saying ‘We have certain franchises and what are we doing to continue to maintain them?’" explains Dere.

But primary care fields such as cardiovascular or metabolic disease are proving so tricky that even the biggest Big Pharma are de-emphasizing them; others are moving out of primary care entirely--like Bristol-Myers Squibb Co. (See "BMS Deals Diabetes Drugs, Solidifies Specialist Stance," IN VIVO, February 2007 (Also see "BMS Deals Diabetes Drugs, Solidifies Specialist Stance" - In Vivo, 1 Feb, 2007.).) Safety’s one issue: the post-Vioxx regulatory context, in particular for widely prescribed GP-drugs, demands larger, longer, more expensive trials. Commercialization is another: the flood-it-with-reps approach by Pfizer and others no longer works; docs won’t give reps the time of day, and cost-cutting pharma can’t afford to pay for so many of them. So drug firms are rethinking their marketing; AstraZeneca PLC’s CEO says he’s looking at less manpower-dependent means, and GSK is testing several "new selling models" in a dozen or so markets around the world, according to one insider. (See "CEO Interview: AstraZeneca’s David Brennan," IN VIVO, March 2007 (Also see "CEO Interview: AstraZeneca's David Brennan" - In Vivo, 1 Mar, 2007.).)

These challenges don’t put Amgen off. "We see ourselves someday as having a primary care sales force," Foraker told IN VIVO. Indeed, denosumab—if it works as hoped—will be the first candidate on Amgen’s path into the GP market. But, Foraker continues, Amgen will do PC marketing "in a very different way" than Big Pharma today, "with fewer sales people, and a strong focus on medical sales education." In fact, the biotech claims it can learn from Big Pharma’s mistakes, rather than, as many commentators see it, falling into Big Pharma traps. "We have the benefit of watching history," notes Foraker. "They [Big Pharma] have learnt by doing, and we’ll learn by watching," he continues (and from past experience: Morrow built GP sales forces as CEO of GlaxoSmithKline’s US subsidiary).

Amgen’s success or otherwise in the post-EPO era will in the end boil down to the products, though—whether they’re sufficiently differentiated, and as important, how well the company can demonstrate their cost-effectiveness.

Proving Value--Globally

Amgen’s no stranger to the challenge of proving the value-proposition of its drugs. In theory, the company’s philosophy of treating serious illness places it in relatively strong position. But Amgen’s dependence on a handful of hugely expensive products has forced it to devote significant resources to health economics. So has the slow yet inexorable march of biosimilars—a reality in Europe, and perhaps due soon in the US (see "Timing is Everything: Biotech Pioneers Push Follow-On Biologics Proposal," The RPM Report, April 2007 (Also see "Timing is Everything: Biotech Pioneers Push Follow-On Biologics Proposal" - Pink Sheet, 1 Apr, 2007.))—and the rising innovation bar: neither Italy nor Germany, for instance, recognizes any difference between Neupogen and Neulasta, which are therefore sold at the same price. "I can’t overestimate the extent of our efforts in this area," says Foraker, although the company won’t reveal how many staff work in health economics.

The value game is also particularly relevant in the global context, as Amgen seeks to reduce its dependence on the US. Today, more than 80% of Amgen’s sales come from the US, even though the US market accounts for little more than 40% of global sales. Part of the reason is that Amgen doesn’t sell Epogen or Enbrel in Europe, drugs that together account for 40% of its revenues. (In Europe, Johnson & Johnson sells Epogen as Procrit and Wyeth has Enbrel rights.) So a key component of Amgen’s post-EPO transformation is re-balancing this geographic disconnect; hence the heavy investment since the start of the decade in Europe and other ex-US markets. Amgen now has almost 2,500 employees in Europe, and it does about a third of its clinical development work there, much of it in the Eastern European countries. In March 2007, it opened a European development center in Uxbridge, just outside London, UK, and it has announced plans for a major new production site in Ireland, although recent revenue concerns have delayed this.

Global expansion makes sense to maximize product revenues and access wider patient pools for development. But investments in, and an understanding of, markets abroad--in Europe in particular--also help in the proving-value game. For one thing, dealing with Europe’s various health technology assessment groups provides a good training in what appears more likely to come to the US, too. (See Sidebar: The Health Economic Challenge.) That’s why, as Ken Keller, then general manager for the UK and Ireland, told IN VIVO last year, swapping experience between the US and Europe is important. To get experience of the fourth-hurdle, US managers at Amgen are regularly posted to head European countries. "The zeros are less, but it’s more challenging," said Keller, who has since become VP and general manager in the inflammation business unit.

More importantly, yet more subtly, overseas R&D investments help open dialog with overseas payors—which in Europe means governments. A firm that’s creating local jobs will have a louder voice in the authorities’ ear than others that aren’t. (See "Not-For-Profit Makes Business Sense, Too," IN VIVO, June 2006 (Also see "Not-For-Profit Makes Business Sense, Too" - In Vivo, 1 Jun, 2006.).) So when Dere met UK Prime Minister Tony Blair at the Uxbridge opening, there followed a round-table discussion about the UK commercial environment for biotech—including health technology assessment and the UK’s drug pricing scheme. The challenge to all drug firms is to persuade payors that the overall benefit of their medicines justifies the cost, and to encourage them to consider drug prices not in isolation but in the wider economic and health care context. The strategy of justifying cost based on information about benefits to patients and the system "is not going to work all the time, we’ll have to be realistic," points out Dere. "But it is beneficial for Amgen to talk to the UK government, and I hope those discussions continue to expand."

According to Peter Hertzman, Amgen’s European director, health economics, the message is getting through, thanks to a variety of industry-payor networking initiatives in Europe. Maybe so, though the results are hardly obvious. But demonstrating value will get tougher for everyone as more generics become available; it will also get tougher for Amgen as it’s forced to enter more competitive therapeutic areas.

Amgen: The Sequel

Amgen’s setbacks are amplified by the scale of its past success, just as it attracts criticism in proportion to its profits. Granted, relative to Genentech, Gilead Sciences Inc., and Celgene Corp. it has lost luster, and its prospects for 2007 don’t look great. But even in analysts’ worst-case scenarios, Amgen will grow at the same rate, or faster than, many Big Pharma. Beyond that, "hopefully, the world will accommodate to a new level of expectation" for Epogen and Aranesp, just as they have done with Big Pharma, speculates one US analyst.

It may not get to that. Amgen has already shown somewhat more positive survival data with Aranesp in a lung cancer trial; its shares clawed back over 10% since early April (although much of that gain was reversed on May 10th after the advisory committee meeting). Vectibix may be damaged, but it’s not dead. The bar for Mircera’s approval has been raised, and analysts predict only a 20% chance it will be marketed in the US. Denosumab data due this year could be everything Amgen hopes it will be. And if not, Amgen certainly has the cash to compete fiercely for deals as and when it chooses to.

Amgen needs more than good trial data and more dealmaking, though. It must shed its image—however inaccurate—of a defensive, boring, bureaucratic Big Pharma-like machine that’s frightened of losing its products, to one of a pioneering, creative, R&D-focused biotech that remains at the cutting edge of its trade. It should ensure that its senior R&D folk are noticed at key scientific meetings even more than its lobbyists are on Capitol Hill. It must more loudly convey its excitement over new breakthroughs, not simply its commercial savvy and IP prowess.

Amgen’s unlikely to enjoy the same dominance in the next two decades as it did in the last. But by focusing its energies more visibly on future innovation, and not, to the extent that it appears to be, in stretching and defending past innovation, it will at least give itself the chance.

The Next-Generation Anemia Franchise?

Amgen Inc. executives acknowledge that EPO’s share of revenues will decrease significantly over time, but the company’s not about to give up its lead. "We’ll still be the major player going forward, through second-generation products," argues VP licensing Scott Foraker. "The bar is extremely high in terms of finding a molecule that is more safe and efficacious than Aranesp," he notes, "but it doesn’t mean we don’t continue to look."

Perhaps not always as aggressively as newcomers, though. Last year saw two particularly high-profile, high-priced anemia deals: in April Astellas Pharma Inc. paid $300 million up front for ex-US rights to FibroGen Inc. ’s oral anemia candidate, the most advanced inhibitor of hypoxia-inducible factor (HIF) prolyl hydroxylase [See Deal] (See "FibroGen Wins Big Upfront, Keeps US Rights to Oral Anemia Drug," IN VIVO, June 2006 (Also see "FibroGen Wins Big Upfront, Keeps US Rights to Oral Anemia Drug" - In Vivo, 1 Jun, 2006.)). A few months later, Takeda Pharmaceutical Co. Ltd. licensed worldwide rights to Affymax Inc.’s synthetic pegylated peptide ESA Hematide, which presented promising Phase II results as a once-monthly dose at the National Kidney Foundation’s spring clinical meeting. [See Deal] [See Deal]. Against this backdrop, Amgen’s 2005 deal with University of Oxford spin-off ReOx Ltd., also in HIF biology, looks small. It wasn’t even announced, although the deal is thought to have been worth about £5 million ($10 million). Several analysts speculated that Amgen/ReOx would be at an IP disadvantage relative to FibroGen.

Still, Foraker says the ReOx deal is just "part of a larger internal effort" in anemia, though there’s little visible in the pipeline. He and colleagues hint at several projects Amgen is looking at "within the broader anemia market; I hope we can say more in a year’s time." Perhaps it’s all about to happen.

The Health Economic Challenge

The rise of health technology assessment groups is one of the biggest changes to hit the drug industry in the last 10 years. Companies need to learn how to satisfy these agencies’ demands for proof of cost-effectiveness to access the market. Trouble is, there’s no standard approach for either the nature or format of data that’s required. The UK’s National Institute for Clinical Excellence, for instance, may accept data based on biomarkers and modeling techniques used to extrapolate from pivotal trials, but Germany’s equivalent, IQWiQ, may demand a placebo-controlled trial over three or four years to prove an effect on mortality, for instance. Yet, "we have to deal with all of the agencies," notes Peter Hertzman, Amgen Inc.’s European director of health economics.

Sometimes, companies may only be able to prove mortality benefit in a subset of a product’s indication. In the case of Mimpara (the European trade name for Sensipar) in the UK, NICE originally declined to recommend reimbursement for the drug because they saw no link to morbi-mortality. "So we looked at subgroup data," recalls Hertzman, and saw a different disease progression rate in those subgroups. Amgen got reimbursement on a narrower set of patients than it had hoped, but "for us it was important that the drug got out there and was used," he notes.

Companies will have to try more radical solutions for proving value—including the "no-cure, no pay" approach that’s been tried for limited periods in small European markets by Pfizer and others. Amgen says it’s considering this and other means of sharing risk to better understand value. HTAs are also demanding comparative trials, which, although expensive and risky, offer the clearest means of proving added value compared with what’s on the market.