Amgen Details Plan to Fight Patent Cliff, Lifts 2013 View
02/07/2013| 03:11pm US/Eastern
--Amgen to fight patent cliff with biosimilar, international expansion
--Sees launching six biosimilars, beginning in 2017
--Raises 2013 per-share earnings outlook
(Adds details in ninth paragraph and analyst comments in 13th paragraph.)
By Joseph Walker
Amgen Inc. (>> Amgen, Inc.) said it will aggressively seek revenue over the next few years from international markets and by launching copycat drugs as the company prepares for a new phase in its history when many of its hallmark drugs lose patent protection.
"Through the period of our patent expirations, we'll be able to grow earnings and cash flow," Chief Executive Robert Bradway said at a business review meeting with investors in New York.
Growing revenues may be trickier. The company faces the prospect of new competition from biosimilars--cheaper generic-like versions of complex biological medications--for several blockbuster therapies, beginning later this year. Some analysts have expressed concerns about Amgen's ability to move quickly enough to offset expected sales declines for those drugs.
The company presented a full-throated defense Thursday, giving details on the timing for its new product pipeline, expansion into new geographical markets including China, and its plan to introduce its own biosimilar products in 2017.
Through increased operational efficiencies in areas like manufacturing and research and development, the company says it will save $1 billion in 2015. Despite headwinds, Amgen said it would continue to deliver 60% of adjusted net income to shareholders through dividends, even as it scales back on share repurchases.
Amgen also raised its earnings view for 2013. The company now expects adjusted per-share earnings of $7.05 to $7.35, up from its January view of $6.85 to $7.15. The uptick came as a benefit from a tax adjustment for prior years that will be recorded in the first quarter.
Going forward, Amgen said it will launch six biosimilar drugs beginning in 2017, including a generic version of AbbVie Inc.'s (>> AbbVie Inc) Humira and Johnson and Johnson's (>> Johnson & Johnson) Remicade, two rheumatoid arthritis drugs that Amgen already competes against with its Enbrel medication.
Those drugs, along with four cancer biosimilars, present a $41 billion market from which Amgen can take market share, the company said.
The company said it would rely on its reputation for high-quality manufacturing to both promote its biosimilars as well as defend its own drugs against biosimilar competition. To that end, it will launch a "Made By Amgen" advertising campaign that will emphasize its "track record of expertise and regulatory science," Mr. Bradway said.
Amgen walks a fine line in bringing biosimilars to market in the U.S. while also trying to limit the threat from generics to its own drugs.
"We're not only dealing with the potential competition from biosimilars, but we also think we have a very strong ability to develop biosimilars," said Sean Harper, Amgen executive vice president for research and development.
Amgen shares, which are up 24% from a year ago, slid 1.2% Thursday to $85.52.
Despite the company's efforts to alleviate concerns about its long-term growth, some analysts expressed skepticism.
"We remain concerned about a slew of competitive challengers that will threaten all of Amgen's core franchises in 2013 and later years, and we expect those products to all come under price, share and volume pressure," said Geoff Porges, a Bernstein Research analyst.
Amgen said its international expansion would focus mostly on China and Japan, where it expects to begin selling its products in 2015 and 2016, respectively. The firm is in talks with a potential partner to create a Japanese-based subsidiary by 2020 and expects to create a commercial, manufacturing, and research and development presence in China.
Amgen also highlighted several experimental drugs that it hopes can be its next blockbusters. By 2016, late-stage trial results for eight of its pipeline candidates will be released. Some of those drugs, including ones for high cholesterol and osteoporosis, could be billion-dollar opportunities if approved, analysts have said.
Anthony Hooper, executive vice president for commercial operations, defended the company's core product lineup, including the anemia drug Epogen, which he said would "continue to generate significant revenues even after losing patent protection."
As Amgen's first blockbuster, Epogen has for more than two decades been the only drug of its kind, engendering loyalty among health-care providers and patients. While sales have fell roughly 25% since 2009 amid safety concerns and a change in Medicare reimbursement, Amgen still retains 96% market share. That legacy presents challenges to new competitors, Mr. Hooper said.
"Based on the history we've seen, Epogen will continue to be an important part of dialysis treatment going forward regardless of new competition," Mr. Hooper said.
Amgen also pointed to Enbrel, its biggest-selling drug, which will contribute $800 million in additional operating income next year as payments to Pfizer Inc. (>> Pfizer Inc.) transition from a profit-sharing arrangement to a royalty-based structure. The royalties will expire in 2017 and contribute an additional 10% of Enbrel sales to the company's operating income. The drug had sales of more than $4 billion last year.
--Saabira Chaudhuri contributed to this article.
Write to Joseph Walker at email@example.com
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