Pipeline Setback at Amgen

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Amgen (AMGN) recently suffered a pipeline setback with the company deciding to halt the development of its oncology candidate, ganitumab (AMG 479).The decision was based on the recommendation of an independent Data Monitoring Committee (:DMC).

The randomized, multicenter, double-blind, phase III study (:GAMMA) evaluated whether the combination of AMG479 and Eli Lilly’s (LLY) Gemzar improved overall survival in patients suffering from metastatic adenocarcinoma of the pancreas versus placebo and Gemzar, as a first-line therapy.

However, after conducting a pre-planned interim analysis of the data, the DMC concluded that the combination of AMG479 and Gemzar would not be likely to improve the survival in patients compared to Gemzar plus placebo. However, the DMC’s analysis of the data from the phase III study did not raise any safety concern(s).

In addition to the GAMMA study, Amgen also decided to halt a phase II study which was evaluating AMG479 in patients suffering from locally advanced pancreatic cancer.

Though disappointed with the discontinuation of the phase III study of AMG479 in the pancreatic cancer indication, we are encouraged by the deep pipeline at Amgen, which represents significant commercial potential. Moreover, Amgen’s efforts to expand the label(s) of its marketed products such as Prolia/Xgeva, Sensipar, Vectibix and Aranesp also encourage us.

Our Recommendation

We are pleased with the strong performance of Amgen in the first half of 2012.  We believe that drugs such as Enbrel (arthritis and psoriasis) should continue performing well in the coming quarters. Management too raised its guidance for 2012, while releasing the second quarter 2012 earnings results.

The company now expects earnings in the range of $6.20 - $6.35 per share on revenues of $16.9 - $17.2 billion. Earlier, Amgen had guided toward earnings of $5.90 - $6.15 per share on revenues of $16.1 - $16.5 billion. Earnings guidance reflects the up-front and milestone payments received from Takeda, AstraZeneca (AZN) and Astellas Pharma in the first half of 2012.

We currently have a Neutral recommendation on Amgen. The stock carries a Zacks #2 Rank (Buy rating) in the short run.

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