Amgen's billion-dollar tightrope walk

NEW YORK (CNNMoney.com) -- It's not looking good for Amgen, which stand to lose billions of dollars in cancer-related drug sales when government regulators meet to decide their future Thursday.

A panel of Food and Drug Administration advisors will focus on the safety of anti-anemia drugs, including Aranesp and Epogen from the biotech and Procrit from Johnson & Johnson. High doses of the treatments have been linked to increased deaths and faster tumor growth.

In documents released ahead of the meeting, The FDA said that "mounting evidence" of the drugs' effects on survival, tumor growth and blood clots requires a "re-assessment of the net benefits of this class of drugs."

Christopher Raymond, an analyst for investment firm Robert W. Baird, said in an investor note that he was "not optimistic" about Amgen's outcome because the "FDA seems inclined to favor further restriction" of the use of these drugs in cancer patients.

Jim Reddoch of FBR Capital said the most likely scenario is further tightening on Aranesp, but in a note to investors, he did not rule out the FDA taking it off the market altogether.

"Certainly I don't think anyone is talking about withdrawing Aranesp from the market," said Dr. Roger Perlmutter, executive vice president of research and development for Amgen, in a teleconference with reporters Wednesday, noting that the drug isn't just used for cancer patients. But Perlmutter also said he didn't want to second-guess the FDA or the panelists.

The FDA has been scrutinizing the treatments over the last year. As a result, Amgen's stock has plunged 27% since March, 2007. J&J, which makes drugs, medical devices and consumer products, seems to be less dependent on the franchise, but its stock has also been volatile.

The drugs, known as erythropoiesis-stimulating agents or ESAs, are FDA-approved to ward off blood-cell reduction, or anemia. Epogen is for anemia associated with kidney failure. Aranesp and Procrit are used, among other treatments, to fight anemia associated with chemotherapy, which drives down blood cell count.

The meeting will also cover Roche's Mircera, also known as CERA, a drug that is barred from entering the U.S. because of an ongoing patent dispute with Amgen.

The panelists will focus on whether chemo usage should be taken off the drugs' labels. They will also consider measures like restricting the use of drugs to only certain types of cancer or certain types of patients, or requiring signed consent from patients acknowledging their awareness of the risks, or eliminating types of advertising.

Cancer-related drugs generate important revenue for Amgen (AMGN, Fortune 500) and J&J (JNJ, Fortune 500). Aranesp sales totaled $3.6 billion in 2007, with more than $2 billion related to cancer, said Amgen. J&J said at least half of Procrit's $1.7 billion in U.S. sales last year was related to cancer treatment. The J&J drug's worldwide total in 2007 was $2.8 billion.

Late last week, the FDA added new warnings to the safety labels for these drugs. The label now says they can increase death and speed up tumor growth in patients with several types of cancer, including breast, cervical, lung, lymphoid and head and neck, unless the drugs are administered within specific dosing guidelines.

The FDA had already toughened the labels in 2007 to reflect the potentially fatal side effects of taking them in high doses. Medicare has also tightened its requirements for coverage of these drugs, based on the dosing issue. This is largely responsible for Aranesp's 25% plunge in sales during the fourth quarter of 2007, to $827 million, according to Amgen.

Amgen and Johnson & Johnson stand by the safety of their drugs. J&J said in a press release that Procrit is "safe and effective when used according to the product label." Amgen said, also in a prepared statement, that the drugs "provide an important clinical option for some patients" and that the meeting with the FDA will help "maximize the benefits of these drugs when used according to the approved labeling while minimizing the risks."

Raymond said that if Amgen loses its cancer-related Aranesp sales, the biotech could lose 44 cents per share in earnings for 2008. He estimates $4.34 earnings per share with the cancer franchise, or $3.90 without it.

But Les Funtleyder, analyst for the trading firm Miller Tabak, said the bulk of the damage has already been done. He did concede that Amgen doesn't have much else going for it, at least for now.

"We believe most of the [Aranesp] sales deterioration is over, but we fail to see what gets Amgen moving upward in the near-term," Funtleyder said in an email.

Correction: An earlier version of this story had an incorrect figure for Procrit sales.