Amgen's D-mab Debate

Includes: AMGN, NVS
by: Mike Huckman

Analysts are busy jawboning yesterday morning about the side effect Amgen revealed cropped up in a large, late-stage study of its bone drug known as D-mab for breast cancer patients whose disease has spread to the bones. It's known as osteonecrosis of the jaw, or ONJ, for short. The jaw decay is a known side effect with another type of popular drugs for osteoporosis, like Novartis' (NYSE:NVS) Zometa, which was the drug Amgen (NASDAQ:AMGN) used in this head-to-head study with D-mab.

AMGN shares are up huge on the data showing D beat Z. Many analysts think the kind of dual-purpose drug could become a billion-dollar-plus blockbuster. The FDA is scheduled to first decide whether to approve it for osteoporosis in October.

I haven't seen a flurry of biotech analyst commentary like I'm seeing now about D-mab since Genentech was a stand-alone, publicly-traded company. I think analysts must have been hungry for something to once again sink their teeth into. Several of them are raising their price targets on Amgen's stock, but others are being a bit cautious.

Deutsche Bank's Dr. Mark Schoenebaum calls it a "best-case efficacy outcome." But he acknowledges the Street wants to see the actual numbers on ONJ, which will likely be presented at a scientific conference later this year. "For now, we're saying hang on," he told clients in a voicemail blast. Les Funtleyder, the healthcare analyst at Miller Tabak, writes in a research note to clients, "The data looked clean with limited negative side-effects. However, we believe the Street's estimates for D-mab (greater than $3 billion in peak annual sales) will eventually prove optimistic." And even though Amgen says the jaw decay problem was infrequent, Bernstein biotech analyst Geoffrey Porges says, "Efficacy trumps ONJ questions. (But) this does leave open the possibility that there were more cases of ONJ in the D-mab arm, which would be a disappointment, though not sufficient, in cancer patients, to materially affect adoption and share." And Leerink Swann's Steve Yoo writes, "It does imply that ONJ was seen in the D-mab arm which may come as a surprise to investors."

DB has done business with Amgen. Leerink Swann, Bernstein, and DB make a market in AMGN. DB and a part of Bernstein owns at least one percent of AMGN.