Affymax Inc.'s morning Wall Street sell-off reversed itself by the afternoon on Thursday, as shareholders began to understand what the decision by dialysis firm Fresenius Medical Care North America – in contract negotiations with Affymax – really meant.

"This was an incredible gift for folks who wanted to take advantage of the weakness, and a lot of folks did, obviously," said Chris Raymond, analyst with Baird Equity Research, who called the Omontys episode "the biggest instance where the market has misinterpreted news in the 13 years I've been covering biotech."

Fresenius said it was pausing a pilot study with the erythropoiesis-stimulating agent (ESA) Omontys (peginesatide) for anemia in dialysis patients with chronic kidney disease, and mentioned a minor rate of allergic reactions to the once-monthly injectable, partnered with Osaka, Japan-based Takeda Pharmaceuticals Co. Ltd.

At one point, Affymax shares (NASDAQ:AFFY) were down about 30 percent on Valentine's Day, but investors were feeling the love again by the time the market closed. The stock ended at $15.74, down only $1.17.

But the shakeup really started on Wednesday, when someone leaked word of the trial stoppage on the Yahoo finance message board. A retail broker sent the link to Raymond, who passed it along to Affymax and Fresenius, with questions. "Next thing you know, they 8-K'd it," Raymond told BioWorld Today, referring to the form that must be filed with the SEC when certain "material events" take place.

Affymax's 8-K affirmed what Yahoo message board readers had been told: that Fresenius, of Waltham, Mass., was holding up expansion of a pilot study, having chalked up 56,000 doses of Omontys in 18,000 patients. Fresenius also cited mostly mild allergic reactions in about 1 out of 1,000 patients.

"A small number" of the site reactions were serious, according to the letter sent from Fresenius to Affymax, which became part of the 8-K.

Fresenius entered the supply agreement with Palo Alto, Calif.-based Affymax in July 2012, and the agreement was to last through April 2013, by which time the pilot program would be complete.

Robyn Karnauskas, analyst with Deutsche Bank, wrote in a Thursday bulletin that the Omontys "safety signal likely puts [the Fresenius] agreement with Affymax in jeopardy, or at minimum delays agreement."

Or not. Raymond pointed out that the allergic reactions work out to 0. 1 percent with Omontys, well below the 2 percent with Epogen (epoetin alpha, Amgen Inc.), and even below the 3 percent noted on the label of Omontys, cleared by the FDA in March 2012 as the first new ESA to reach the market since 2001 . (See BioWorld Today, March 28, 2012.)

Not only were the allergic reactions lower than anticipated with Epogen and by Omontys' own label, but also the Fresenius pilot study turned out to include many more than the planned 10,000 patients – and still the reactions were low.

"I think this pilot program might have gotten away from [Fresenius] a little bit, where docs put on way too many patients, too quickly," Raymond said. "And honestly, that's a good thing. If the natural demand for your product is out-kicking your coverage, in terms of what you agreed to do with your supplier, that says a little something about how docs are feeling about the drug."

The outcome of the pilot helps to determine next steps between Fresenius, which holds about a third of the dialysis market, and Affymax.

"It's very sensitive, I'm sure, and they're in a very intense negotiation about price, and about what the real volume is, and the speed of uptake," Raymond said. "If I were John Orwin, the CEO of Affymax, I would say as little possible. Given the backdrop, the last thing they wanted to do was 8-K this," and the poster on Yahoo may have forced the company's hand.

What does it all mean for Thousand Oaks, Calif.-based Amgen, with competing Epogen? Karnauskas wrote that "the Street had been concerned that Affymax would get an exclusive agreement with [Fresenius] in April once the pilot was complete. We believe this pause [of the pilot study] could suggest upside to [Amgen's ESA] franchise, which has been under debate due to Affymax risk."

Raymond didn't seem to believe so. "In and of itself, the letter that was sent out [to Affymax by Fresenius] sounds concerning, right? They use the word 'pause,' they highlight 'safety,'" he said. It was probably such language that caused retailers who owned Affymax to panic during the first part of Thursday. "They shot first and asked questions later," Raymond said.

Amgen's stock (NASDAQ:AMGN) closed Thursday at $84.72, down 22 cents.