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  • dinepat203 dinepat203 Feb 27, 2013 12:31 PM Flag

    Concerns Amgen's Business Update

    Amgen Inc. (AMGN) is the world's largest biotechnology company, but it is beginning to face Big Pharma-type problems that include looming patent expirations for several best-selling drugs, competition from new rivals and increased regulatory scrutiny. As a result, some observers wonder whether the company can continue to satisfy investors at a time of threats to its core business and uncertainty around its new drug pipeline. "It's been a great ride, but we're stepping aside here," wrote Christopher Raymond, an Robert W. Baird analyst, in a note to investors downgrading the stock last fall. "This story seems to have played out for the time being." Thursday, Amgen gets to answer its critics at the company's business review meeting in New York. There, the company is expected to highlight experimental drugs, an increased focus on international markets, and its nascent effort to develop generic versions of biological drugs, or biosimilars. Amgen has shown itself to be resilient, using aggressive dividend payments and buying back stock to help lift shares to all-time highs over the past year. As demand for some of its drugs stagnated or declined, it has used price increases to stabilize revenues. The company also has relied on its political skills. Since 2009, Amgen has spent about $42 million on lobbying, second only to Pfizer Inc. (PFE) among large drug companies, according to an analysis of data from the Center for Responsive Politics. The contributions may have helped to secure some key legislative victories. In January, the Thousand Oaks, Calif., company secured provisions in the "fiscal cliff" bill that could help stall sales declines for its kidney-dialysis drugs Sensipar and Epogen. Some critics have pointed to Amgen as a symbol of the too-cozy relationship between the drug industry and Washington. "The government seems always to roll over for the drug companies and other health industries, and that's what it's done for Amgen," said Marcia Angell, former editor of the New England Journal of Medicine. That is "one more reason the [Affordable Care Act] probably won't accomplish very much by way of controlling costs." Amgen said the fiscal-cliff provisions are likely to benefit kidney-dialysis patients and its lobbying expenditures are commensurate to the role government plays in its business. "Because Amgen operates in a highly regulated industry influenced by Congress and regulatory agencies, the company has established a presence in Washington, D.C., in an effort to effectively shape health-care policy and ensure patient safety and access to products," the company said in a written statement. The bill mandates that Medicare lower the price it pays for Epogen through a complex funding formula that covers most U.S. patients with fatal kidney disease. The lower price paid by Medicare is meant to reflect the decrease in Epogen use as dosing levels have gone down. In a nod to dialysis centers--which pay for Epogen and noted the drug's costs have risen substantially--Amgen's price increases will be factored into Medicare's reimbursement. Including the increase should help to ease the sales decline in Epogen, which faces pressure from a lower-priced drug launched by Affymax Inc. (AFFY) last year. Amgen said the Epogen price recalculation, to be determined by year-end, should ensure a fair reimbursement rate. "Amgen's engagement on this legislation was in the best interests of dialysis patients," the company said. "This provision of the bill is intended to save Medicare several billions of dollars." Meanwhile, concerns remain about looming patent expirations for four of Amgen's blockbuster drugs--those generating at least $1 billion annually--over the next few years. The anti-infection medication Neupogen will be first later this year. There are reasons to be optimistic about Amgen's future, and they have contributed to the stock's 75% gain over the past 18 months. Its arthritis drug Enbrel generated $4.23 billion last year, up 14% from a year earlier, and won't lose patent protection until 2028. Some of its newer drugs, including the osteoperosis treatment Xgeva, have also boosted revenues, though they haven't grown as quickly as some expected. The company also is well-positioned to tap into the biosimilar market through its development deal with Actavis Inc. (ACT), formerly Watson Pharmaceuticals Inc., said Ian Somaiya, a Piper Jaffray analyst. Amgen has several promising experimental drugs in its pipeline, including an ovarian-cancer medication the company is expected to release late-stage data on this year. Treatments for high cholesterol and osteoporosis are considered potential blockbusters, Mr. Somaiya said, though they are one to two years on the horizon. Nonetheless, more battles are likely in Washington, including a change in Medicare drug policy that could increase the rebates drug manufacturers pay the government for sales to seniors eligible for both Medicare and Medicaid, also known as dual eligibles. The change would result in a 5% blow to Amgen's earnings, compared with an impact of 1% to 2% for its peers

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