December 18 2007: 5:29 AM EST
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Amgen's science doesn't guarantee profits

The biotech has a promising treatment for bone weakness, but Wall Street doesn't believe it will revive Amgen's shaky finances. Here's why.

By John Simons, writer

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Amgen has a promising new drug, but it won't necessarily cure the company's ills.

(Fortune) -- Amgen just can't get a break these days.

Late last week, the Thousand Oaks, Calif.-based biotech announced positive results from a phase III study involving its forthcoming osteoporosis treatment, denosumab. The drug helped increase bone density in breast cancer patients, according to Amgen scientists who presented the data at a session of the annual San Antonio Breast Cancer Symposium. In the study, Amgen's experimental drug was well tolerated by patients and was able to increase bone density by 5.5% more than placebo.

Normally, you'd think investors would be thrilled; after all, osteoporosis is a roughly $5 billion market today. Yet Amgen stock closed down more than 3 percent on Monday, and its shares are now at a five-year low.

What's the problem? It's not doubt that the new drug has potential to help the 10 million Americans who suffer from osteoporosis. "The results of this pivotal study provide a promising glimpse of the potential of denosumab to help manage bone disease in multiple tumor types and stages of disease in the cancer setting," said Roger Perlmutter, Amgen's director of R&D. "This data," Perlmutter continued "should be encouraging to clinicians who witness the devastating effects of cancer and cancer treatment on their patients' bones."

The reason is that few outside the company believe that Amgen can make the new drug pay off. Aside from the problems Fortune outlined here last week, denosumab - even if delivers on the promise of being a efficacious osteoporosis-fighter - will enter a market teeming bone density boosters.

The current market leader is Merck's Fosamax, which generated about $3.1 billion in revenues in 2006. Its patent protection expires next year; when that happens the market's size will likely shrink as cheaper generics undercut sales. By the time Amgen ushers denosumab to market sometime in late 2009, it will face what's likely to be 11 or more competing therapies - a handful of which will be inexpensive generic knock-offs of Merck's (MRK, Fortune 500) Fosamax.

In order to differentiate denosumab from Fosamax and its generic copies, Amgen (AMGN, Fortune 500) has put its drug in a head-to-head study against Merck's. Amgen hopes to show that its drug is safer as well as more effective. The study won't yield results until sometime in early 2008.

And even if denosumab pummels Fosamax (and its clones) in the clinical battle, the war has to be won in the doctor's office. Amgen is at a distinct disadvantage when marketing to primary care physicians, who are likely to prescribe denosumab to their post-menopausal patients (more than 80% of osteoporosis sufferers are women over age 50). That's because Amgen and other biotechs generally focus their sales on niche specialists, not family doctors.

Companies already selling osteoporosis medicines include GlaxoSmithKline (GSK), Novartis (NVS), and Sanofi-Aventis. Amgen will enter the fray with less experience, and in the midst of a market share melee between generic sellers and the biggest of Big Pharmas. "Not only will they have to win market share, but they will have to convince doctors they haven't met before to use denosumab," says Lazard Capital Markets analyst Joel Sendak.

Though many analysts have projected denosumab to garner peak sales of $2 billion, Sendak believes - no matter what the clinical data suggests - Amgen's osteoporosis treatment will likely generate $1 billion at its peak. "To think that denosumab can solve all of Amgen's problems is overly optimistic," says Sendak.  To top of page