First some context: Affymax is trying to get an anemia drug approved. The drug, peginesatide, has already undergone Phase III trials, an NDA was already filed for it, will be facing an advisory panel on December 7 and has a PDUFA date of March 27 2012.
Now, the news (actually from Friday, after the market close) was that Amgen (AMGN) is signing supply contracts with dialysis centers. These contracts are for supplying Epogen (the drug peginesatide will compete with, if approved) to the dialysis centers, sometimes for a large part of these centers’ needs.
The market for anemia drugs is large, over $5 billion per year in the US, if we add Epogen and Aranesp, but these contracts might lock down some of the market, given that peginesatide, if approved, will be only for dialysis patients.
These news can thus be seen as negative, in that some of the market peginesatide will try to conquer will be locked down, diminishing its sales potential.
However, there’s also a positive angle: the news is a vote of confidence, by Amgen, that peginesatide will be approved, because if Amgen thought the chances were low, they wouldn’t be locking themselves into supply contracts that will include prices less favorable than those they’d get in a non-competitive market.
Disclosure: I am long AFFY. It is a small position for me, because biotech companies seeking approval are always very risky if they fail to get it, so the position must always be seen as a long shot.