Amgen Inc. (AMGN) received a major boost recently with the company gaining US Food and Drug Administration (FDA) approval for Xgeva (denosumab) for the prevention of skeletal-related events (SREs) in patients with bone metastases from solid tumors.
Significant Expansion in Patient Population
With this approval, Amgen should see a significant expansion in the patient population for denosumab. Denosumab is currently available under the trade name Prolia for the treatment of osteoporosis in postmenopausal women at increased risk of fracture or patients who have failed or are intolerant to other osteoporosis treatments.
The company had gained approval for Prolia in both the US and the EU in mid-2010. However, initial sales have been disappointing. Prolia sales for the recently reported third quarter of 2010 were $10 million, well below expectations. Prolia ramp up remained slow under the buy and bill environment.
While we believe that expanded reimbursement coverage will help drive sales, the recent approval for the solid tumor population should provide a major boost to revenues.
Moreover, Amgen is slated to report much-awaited results from a phase III study (147) conducted in patients with prostate cancer later this quarter. Positive results from this study would be a major revenue driver.
With this new approval, we believe Prolia/Xgeva sales have the potential to cross $1 billion. Once available, Xgeva will compete primarily with Novartis’ (NVS) Zometa, which delivered sales of $1.5 billion in 2009.
Xgeva’s approval was based on data from three pivotal phase III head-to-head studies that compared Xgeva to Zometa. Results indicated Xgeva showed superiority over Zometa in reducing the risk of SREs in patients with breast or prostate cancer and bone metastases. Xgeva was also shown to delay the onset of bone complications compared to Zometa.
However, Xgeva was found to be non-inferior to Zometa in reducing the risk of SREs in multiple myeloma patients. We note that Xgeva is not approved for use in multiple myeloma patients.
Neutral on Amgen
We currently have a Neutral recommendation on Amgen, which is supported by a Zacks #3 Rank (short-term “Hold” rating). Amgen is in a challenging growth period given the slowdown in sales of key products like Aranesp due to several reasons like labels restricting usage and other safety related issues. Moreover, products like Enbrel are facing intense competition from new competitors.
With several of Amgen’s key products slated to lose patent protection over the next few years, the company has a lot riding on the successful commercialization of Prolia/Xgeva. The recent approval of Xgeva is a major boost for the company and should help drive revenues going forward. Amgen is currently seeking regulatory approval for Xgeva in the EU, Australia, Canada, Japan and Switzerland.
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