Yesterday, Amgen (AMGN) said that Aranesp failed in a large, randomized, double-blind, placebo-controlled, phase III study that was conducted in patients with chronic kidney disease (not requiring dialysis), anemia and type II diabetes.

The study, referred to as the Trial to Reduce Cardiovascular Endpoints with Aranesp Therapy (TREAT), had two primary endpoints. The first evaluated time to all-cause mortality or cardiovascular morbidity including heart attack, congestive heart failure, hospitalization for angina, or stroke. The second primary endpoint evaluated time to all-cause mortality or chronic dialysis.

Aranesp could not show statistically significant improvement in either. While a higher number of strokes were observed in the Aranesp-treated group compared to the placebo arm, we note that drug’s label already carries a warning regarding the stroke events.

Full efficacy and safety analyses are yet to take place. Amgen will present full results at an upcoming medical meeting later this year.

Aranesp is currently used for the treatment of anemia both in supportive cancer care and in nephrology. The product’s primary competitor is Johnson & Johnson’s (JNJ) Procrit.

Amgen also has another erythropoietin-stimulating agent (ESA), Epogen, in its portfolio. However, sales of the company’s ESA franchise have been under pressure due to safety concerns. Aranesp sales declined 13% to $3.1 billion in 2008.

We believe the environment will remain challenging for both products, especially Aranesp, which is seeing declining sales in both the supportive cancer care and nephrology settings. Moreover, Amgen has submitted a Risk Evaluation and Mitigation Strategy to the FDA. The approval of this plan, expected later this year, could further limit Aranesp sales.

We have a Neutral rating on Amgen. We expect investor focus to remain on the approvability of key pipeline candidate, denosumab, which is the future of Amgen.

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