Seeking Alpha
Long only
Profile| Send Message| ()  

Amgen (AMGN) grew into a giant company thanks to a lucrative monopoly.

The monopoly, which lasted 23 years in the US, was on a drug to increase red blood cell levels in patients receiving kidney dialysis.

Today, most people undergoing kidney dialysis receive Epo, which helps relieve severe anemia, a condition that can sap their energy. Many cancer patients are also given the drug to combat anemia caused by chemotherapy.

In the old days, before Epo came on the market, the only remedy for anemia was frequent blood transfusions, which carried considerable risks.

The marketed brands are Epogen, Procrit and Aranesp and the business also benefits Johnson & Johnson (JNJ) and Roche (OTCQX:RHHBY).

Now the monopoly appears to be over. Earlier in 2012 the FDA approved Affymax (AFFY)'s drug Omontys, a synthetic pegylated peptidic compound that has the same effect but entails a different approach.

Starting in 2014, Roche will be allowed to sell their drug Mircera in the US.

But the real threat to Amgen's position is the biosimilars.

Biosimilars are the generic versions of biological medicines. Unlike the U.S., the European Medicines Agency (EMEA) years ago introduced regulations to approve biosimilars. In the U.S., biologic drugs in equivalent forms are unavailable because they were not part of the landmark 1984 Hatch-Waxman law, which cleared a regulatory path for cheaper generic copies of prescriptions derived from chemicals.

Neupogen and Neulasta

US patents on Amgen's Neupogen expire in December 2013.

The patents for Neulasta (a longer lasting version of Neupogen) will expire in 2015 in both Europe (August) and the US (October).

Amgen's Neupogen is a granulocyte colony-stimulating factor ((G-CSF)) used to treat neutropenia, a condition in which the body makes too few infection-fighting white blood cells.

Amgen worldwide sales of Neulasta/Neupogen for the year ended December 31, 2011 were $5.2 billion.

International Neupogen sales dropped 15% from sales in 2010, which were in themselves a slide from sales in 2009. In contrast, patent-protected US sales have been on the rise for the past three years.

Amgen's Neulasta still remains the best-selling G-CSF worldwide. But biosimilars are racing to catch up.

In Europe Sandoz, the generic subsidiary of Novartis (NVS), makes Zarzio, while Hospira (HSP) makes Nivestim.

Sandoz's Zarzio is already the #1 filgrastim biosimilar worldwide, accepted in 30 countries as the first choice for primary prevention of febrile neutropenia (low white blood cell counts) and is rapidly expanding its global patient base.

Sandoz's goal is to create the #1 overall G-CSF franchise worldwide.

Zarzio was approved in the EU in 2009 for the same indications as Neupogen.

Sandoz started two phase 3 clinical trials in January 2012, one for biosimilar filgrastim for the US market and the other for its global pegfilgrastim program.

The filgrastim study will evaluate Sandoz's biosimilar filgrastim versus Amgen's Neupogen in breast cancer patients eligible for myelosuppressive chemotherapy treatment.

Hospira launched Nivestim, a biosimilar version of Amgen's Neupogen, in Europe in 2010 and in Australia in 2011.

In addition, several companies including Merck (MRK), Teva (TEVA), and Celgene (CELG) have short-acting filgrastim product candidates in phase 3 trials.

A quote from Amgen's 10-K report for 2011:

Other companies with short-acting filgrastims in phase 3 clinical development for Europe are:

• Merck & Company, Inc. ("Merck") (MK-4214).

• Intas/Apotex Inc. (Neukine).

• Reliance Life Sciences (Religrast).

• Biocon Ltd./Celgene Corporation ("Celgene") (Nufil).

In addition, Teva Pharmaceutical has two long-acting filgrastims in phase 3 clinical development for Europe (XM-22 and Neugranin).

In August 2012 the FDA has approved Teva's biosimilar of Neupogen, called tbo-filgrastim.

But Teva cannot start selling in the US until November 2013 due to a 2010 settlement between Amgen and Teva, following Teva's patent challenge.

Epogen

Amgen's principal European patent relating to Epoetin alfa expired in December 2004.

Amgen does not market Epogen in Europe but it does market a longer lasting version, Aranesp, which has to compete with biosimilars produced by other companies.

Aranesp and Epogen are Amgen's brandnames for darbepoetin alfa and Epoetin alfa, both of which are ESAs (erythropoiesis stimulating agents), proteins that stimulate red blood cell production.

Red blood cells transport oxygen to all cells of the body. A deficient red blood cell count can result in anemia, a condition in which insufficient oxygen is delivered to the body's organs and tissues.

Anemia can be associated with chronic renal failure (CRF) in patients whether they are on dialysis or not.

Amgen divided its invention into several patents, the first of which expired in 2004. But some of the patents were not granted until years later, giving Amgen longer protection than the 20 years envisioned in patent law.

Amgen's patents for epoetin alfa are as follows:

In the U.S.: Process of making erythropoietin 8/15/2012, Product claims to erythropoietin 8/20/2013, Pharmaceutical compositions of erythropoietin 8/20/2013.

Amgen's patents for darbepoetin alfa are:

U.S.: Glycosylation analogs of erythropoietin proteins 5/15/2024.

Europe: Glycosylation analogs of erythropoietin proteins 8/16/2014, which may be extended in some countries in Europe.

There are two main competitors in Europe: Retacrit from Hospira and Binocrit from Sandoz. Reliance Life Sciences Pvt. Ltd. has filed an application in Europe for an epoetin biosimiliar (Epostim).

Retacrit is selling well worldwide, outside the US.

Retacrit's unit sales were up 32 percent in the first quarter of 2012 compared to the first quarter of 2011. The company would not disclose a specific sales figure but reported that net sales of its European line of specialty injectable drugs that includes biosimilars were up 16 percent to $76.2 million.

Hospira is the first and only North American-headquartered company with biosimilars on the European market and in Australia. Retacrit was introduced in early 2008.

Hospira is conducting phase 3 trials in preparation for the US market. The trials are being conducted in collaboration with DaVita (DVA), the largest US dialysis chain, and Fresenius Medical Care (FMS), another chain, as well as with many dialysis clinics and hospitals across the USA.

Hospira expects to launch its U.S. product in mid-2015. It will not be considered interchangeable with Epogen, said chief scientific officer Sumant Ramachandra.

Hospira won't reveal how it plans to price the biosimilar EPO in the U.S., where the brand costs more than $10,000 a year. Hospira said U.S. biosimilars are likely to sell at discounts of 20 to 40 percent from the branded competitors, but some consultants put the discount closer to 10 to 20 percent.

The other side of the story:

Amgen itself is getting into the biosimilars business.

Amgen has a deal with US. generic drugmaker Watson Pharmaceuticals Inc. and Dutch generic drugmaker Synthon to eventually market Synthon's biosimilar version of the blockbuster breast cancer and gastric cancer drug Herceptin made by Roche.

Investor notes:

"In the long-run, the U.S. will be the cornerstone of the global biosimilars market, powering a sector worth between $11 billion and $25 billion in 2020," a December 2011 report by market research firm IMS Health said.

A typical biosimilar takes seven to eight years to develop, at a cost of between $100 and $250 million, which includes additional clinical trials.

But the potential savings for the health care systems are also huge. By 2020, eight countries in the European Union could save a cumulative total of between EUR 11.8 billion ($14.5 billion) and EUR 33.4 billion ($41.0 billion) through the use of biosimilar medicines, according to a German market research firm in a report commissioned by Sandoz.

Amgen's 30 percent stock gain so far in 2012 bests the Standard & Poor's 500 Health Care Index's 10.8 percent increase, and the shares are trading at their highest level since 2005.

Source: Amgen And Its Biosimilar Competitors