- Baird says they are incremental buyers of AMGN after Friday's weakness which stemmed from a misunderstood result of a halted Aranesp trial in an off-label setting using a much too high dose. This trial has little to do with "real world" use, and they see little commercial impact.
First, this study was not designed to show Aranesp's efficacy in hemoglobin correction but rather looked at its therapeutic effect as a radiosensitizer, targeting a hemoglobin range (14.5 g/dL - 15.5 g/dL), which is far in excess of its labeled range which could be considered safe. The Aranesp dosing required to get hemoglobin levels that high also significantly exceeds recommended dosage.
Second, and more commercially relevant, management indicated Friday on its conference call that physicians simply do not use Aranesp in these patients, nor do they use the excessive Aranesp doses required to get hemoglobin levels that high. It should come as no surprise that using excessive levels of a drug in a patient population it is not indicated for may yield some negative effects.
Reiterates Outperform rating, $90 price target.
- Wachovia notes that while they believe negative clinical outcomes observed in DAHANCA 10 and the AOC trials should not be trivialized, it is unclear whether those attributed to Aranesp were due to underlying disease or ramifications of pushing hemoglobin levels too high. Importantly, adverse event rates in DAHANCA 10 were equivalent in both arms of the study. Although EPO receptor expression analysis from various tumor types may be inconclusive, studies investigating EPO signaling in tumor growth arrive at an array of disparate conclusions, by firm's interpretation.
The latest FDA warning applies to use of all EPO agents, which theoretically includes C.E.R.A. (Roche) whose BLA is currently under review at FDA for treatment of anemia associated with kidney disease. With a distinct pharmacokinetic profile from Aranesp and the unmodified erythropoetins, it is conceivable that FDA will analyze the C.E.R.A. safety data with increased scrutiny, potentially delaying approval, in firm's view. They believe such an outcome could lift a significant overhang also weighing on AMGN stock.
Reiterates Outperform rating. Decreasing '08 Aranesp sales estimates by 5%, AMGN now trades at only 13.6x firm's '08 EPS estimate of $4.92 on an estimated 2006-2010 revenue CAGR of 10%. Believing recent pressure on shares to be a result of a market overreaction and that these overhangs should lift following 1H 2007 quarterly results and anticipated news events, the firm would take advantage of this recent pullback to buy AMGN shares.
- JP Morgan notes that though the complete DAHANCA 10 results are not released, available information suggests that Aranesp may not be appropriate for this niche indication that is not in
our model. Indeed, very few if any oncologists treat non-anemic patients with Aranesp outside of a clinical trial setting. Current commercial treatment regimens utilize much lower Hb targets (11-12g/dl) in anemic patients only.
CERA remains the lever. Despite the noise on Amgen's anemia franchise, which has driven multiple contraction, the firm remains bullish on AMGN's risk/reward going into the May PDUFA for Roche's CERA.
Reiterates OW. Despite a <16 multiple on their 07 EPS est (biotech peers: 30X), AMGN still has a 06-10e EPS CAGR of 12%, in line with biotech peers (14% ex-MEDI, CELG) and actually higher than Genzyme (GENZ) (10%).
Notablecalls: OK, I must admit AMGN's management messed up by not disclosing DAHANCA 10 results soon after they were known. On the other hand, it wasn't a trial handled by the company.
Judging by the way the analyst community is defending the stock this AM, I think investors will be back buying the stock hand over fist over the next couple of days. I just don't see the recent decline as justified. AMGN's dirt cheap here trading only 13x FY08 EPS. Buy it -- the defenses are actionable!
AMGN 1-yr chart: