Investor jitters eased somewhat as the Centers for Medicare & Medicaid Services' plans for reimbursement of erythropoietin (EPO) stimulating agents (ESAs) became clearer, and backers of Amgen Inc. found cause for encouragement on two fronts.

CMS declared minimal changes in reimbursement for Amgen's anemia drugs Aranesp (darbepoetin alfa) and Epogen (epoetin alfa), when used in kidney disease, but a decision regarding oncology isn't due until Aug. 12 - and the plan there turned out to be a shocker.

The main policy revision for ESAs in kidney disease drops payments by half when hemoglobin levels reach 13 g/dL for three months in a row. The boundary line now is 13 g/dL for six months.

In May CMS said it wanted to pay at lower rates for ESAs for people with certain cancers and related neoplastic conditions, following advice from an FDA committee to curb their use. A "black box" warning went on the labels for Amgen and Aranesp as well as Procrit (epoetin alfa), the ESA marketed by Johnson & Johnson. (See BioWorld Financial Watch, May 21, 2007.)

Users are cautioned that the drugs boosted the risk of death and cardiovascular events, cut the time to tumor progression in patients with advanced head and neck cancer who got radiation therapy and shortened overall survival while increasing deaths because of disease progression at four months in metastatic breast cancer patients on chemo.

In cancer patients, CMS briefing documents declare, ESA therapy should be triggered at hemoglobin levels of 9 g/dL, the length of treatment should go no longer than 12 weeks and patients with myelodysplastic syndromes should be excluded.

It was like a small earthquake.

"The timing is a surprise, but we see the extent and nature of the coverage cuts as nothing less than stunning," wrote Christopher Raymond, analyst with Robert Baird & Co., in a research report in May. "CMS' proposed restriction cuts two ways: first by explicitly excluding important tumor types (for example, MDS and any tumor treated with Avastin [bevacizumab, Genentech Inc.] or Erbitux/Vectibix) from ESA therapy, and second, by severely restricting ESA use in still-approved settings." Erbitux (cetuximab) is the cancer drug from ImClone Systems Inc. and Bristol-Myers Squibb Co., and Vectibix (panitumumab) is Amgen's.

Amgen's stock took a sizable hit after the Oncologic Drugs Advisory Committee meeting on ESAs, but the word from CMS "changes things dramatically," in Raymond's view. "We have long said that we see reimbursement policy as the key determinant of Aranesp's prospects going forward. And while we believe CMS' move here will come under significant criticism - and could be reversed on many of the points - we think private payer fallout on this issue could take several quarters to play out and ultimately stabilize." Many of the private plans follow CMS' lead, he noted.

Jennifer Chao, analyst with Deutsche Bank, hosted a July 16 conference call with physician John Glaspy, a professor of medicine and director of UCLA's Jonsson Comprehensive Cancer Center, who spoke at ODAC about ESAs.

"I think [CMS officials] know that [9 g/dL] is draconian," he said during the conference call. "My - you know, just my hair-on-the-back-of-the-neck sense of what this first version was about, was to set a point of discussion at a very low level and see what the response was before making a move." But cost is a big, unspoken factor in the discussions, he said, and "no one is willing to admit that's part of what's going on." Debaters "can't look rationally at cost, because we're not supposed to be talking about that." Medicare in 2005 spent more on Epogen than any other drug - $2 billion.

Chao predicted that the trigger for ESA use would be changed from of 9g/dL to 10g/dL, 12 weeks' maximum use would be upped to between 18 weeks and 20 weeks, or as needed, and MDS patients would be included among potential users.

But even if CMS turns around, the black cloud might still hang above ESAs.

"I don't think there is a great Plan B," said Anthony Blau, professor of medicine and co-director of the Institute for Stem Cell and Regenerative Medicine at the University of Washington.

Trouble with EPO for cancer patients "all really comes down to the idea that growth factors are going to cause problems, whenever you're concerned about off-target effects." He said it seems "very likely" that EPO complications are due to such overlaps, though research hasn't established whether this is an off-target effect on tumor cells or mediated through endothelial cells.

"If EPO is bad in patients with cancer, then what are your alternatives? What you're left with are red-blood cell transfusions, and it's my sense that they are being used more and more frequently by oncologists," Blau said. "There's older literature suggesting - and this is, I think, somewhat nebulous - that transfusions may be negative in patients with cancer," but the case is clear that long-term transfusions bring disadvantages.

"Then there's artificial blood, but people have been trying to make artificial blood work for the last three decades," he said.

But there's also Fibrogen Inc.'s FG-2216, an oral, erythropoietic HIF-PH inhibitor in Phase II trials for anemia associated with chronic kidney disease and cancer. Not an oral EPO product, but an oral stimulator of the body's production of EPO, FG-2216 effects iron-transporting enzymes. Fibrogen likes to say that EPO is the horn section, while FG-2216 does the whole symphony.

Making early stage music of its own in the space, based on work done in Blau's laboratory, is newly formed CellNexus LLC, which licensed cell-signaling technology in February from Ariad Pharmaceuticals Inc. Blau is the chief scientific advisor to CellNexus.

The firm's approach, he told BioWorld Financial Watch, is "predicated on being able to target the signal you want in the cell type that you want. It involves taking cells and engineering them to introduce a gene that encodes a modified receptor comprised entirely of human proteins" - in this case, a derivative of the thrombopoetin receptor. Like EPO, it's a growth factor, but thrombopoetin stimulates platelets to go higher.

"We insert a gene that encodes this modified receptor into hematopoetic stem cells, and this gene makes a protein that is present in all lineages of hematopoetic cells, but when we give the drug, the predominant effect is on red cells," Blau said. So far, it has worked in mice, in dogs, and in human cells transplanted into immune-deficient mice.

If injected EPO is bad for cancer patients, Blau speculated, "then maybe your body's own level of [natural] EPO is bad. And maybe the reason that anemia is a poor prognostic factor in cancer is not just due to the anemia, but because anemia induces your kidneys to make more EPO." CellNexus apparently has found a way to use a dimerizer in mice to make red blood cells rise, which suppresses endogenous EPO.

The method, "in principle, is certain to work in humans," Blau said.

"People are always worried about the gene therapy part of it," he acknowledged. "Personally, I think the gene therapy issues are being figured out, and advances in that field have really made this realistic to think about."

The platform could have wide applications in areas such as stem-cell therapy. "We think that it's going to be essential to regulate what happens with these cells after you put them into a person," Blau said.

How soon anything from CellNexus might get clinically into a person will not be known for a while, he added. "Right now we're in discussions with various people about our initial round of funding," he said. "We're really at the very beginning of this."