Editor

Amgen Inc.'s second infusion of bad news last week for its briskly selling erythropoietin products sent analysts to their drawing boards and crystal balls, trying to gauge the impact for the biotech giant. But just as worthy of speculation is the upside of reimbursement changes and FDA rulings for smaller firms.

Earlier this month, the agency's Oncologic Drug Advisory Committee seemed satisfied with recent label changes to Amgen Inc.'s EPO products, while proposing more studies and stricter guidelines on prescribing the red blood cell boosters. Amgen makes the red-blood cell boosters Aranesp (darbepoetin alfa), Epogen (epoetin alfa) and Procrit (epoetin alfa). Last year, Aranesp alone brought in $4.1 billion in sales. Procrit is marketed by Johnson & Johnson.

ESAs - synthetic growth hormones that spur progenitor stem cells to pump out more red blood cells, which then carry hemoglobin to tissues and organs - are used as supportive care for anemia in patients on chemotherapy and those with chronic kidney failure, but studies lately have highlighted potential trouble including thrombosis, cardiovascular events, tumor progression and reduced survival. Data presented in mid-April at the American Association for Cancer Research showed Aranesp failed a Phase III trial by not reducing the need for blood transfusions in anemic cancer patients. Disturbingly, the drug increased deaths by almost 45 percent, compared to placebo.

FDA panel members voted 15-2 for more ESA label changes, and decided unanimously in favor of recommending safety studies. They also decided 12-5 to call for labeling to restrict the use of erythropoiesis-stimulating agents in certain cancers such as breast, non-small-cell lung and head and neck, and declared by a 15-2 ballot that labels ought to specify a hemoglobin level at which to begin ESA use in asymptomatic patients. For discontinuing ESAs after chemotherapy, the panel voted 16-1.

The Centers for Medicare & Medicaid Services (CMS) wasted no time in laying down its edict on ESAs. After first saying the guidelines on coverage for such drugs would be delivered in the fourth quarter, CMS last week made known its intention to sharply limit payouts for the drugs in cancers and neoplastic conditions, including myelodysplastic syndromes, a major target of Aranesp. Christopher Raymond, analyst with Robert Baird & Co., called the cuts "Draconian" and "no less than stunning." He predicted the new plan will not "pass scrutiny in terms of its potential damage to public health," although he foresaw private- payer reaction and other fallout that will take "significant time to stabilize."

CMS' proposed national coverage decision would restrict use in any tumor treated with anti-angiogenic agents such as the colorectal cancer drugs Avastin (bevacizumab) from Genentech Inc., or EGFr-targeting monoclonal antibodies such as Erbitux (cetuximab) from ImClone Systems Inc. and Bristol-Myers Squibb Co., and Amgen's own Vectibix (panitumumab). The move would take out not only a huge number of colorectal patients but many with non-small cell lung cancer who are getting Avastin.

The centers also want to limit ESAs to patients with much lower levels of hemoglobin than previously allowed - starting at Hb <9 g/dL - and to allow no more than 12 weeks of treatment per year, discontinuing therapy for sluggish, i.e., those who do not show a rise of at least 1 g/dL in four weeks of treatment. Most patients, Raymond wrote in a research report, start therapy well above the new proposed Hb level.

Leaving aside the inevitable dent in Amgen revenues, which will be painful for investors, Raymond characterized the CMS move as "the opening of a direct offensive on the part of CMS, not just on the manufacturers, but on community oncology practices as well." Cancer doctors and CMS have been getting along fairly well lately, with "a shift among practices to cope with thinner fees and reduced drug margins with more emphasis on evidence-based treatment protocols, larger clinics and less physician choice among key drugs." But the peace is over.

The situation recalls 2004's onset of the Medicare Modernization Act, which so reduced physicians' profits that they put together the Community Oncology Alliance to fight CMS - and they won, sort of, by establishing the data-collecting Quality of Life Demonstration Project, which has gradually petered out. Now, many cancer clinics rely on rebates from the use of Amgen's and J&J's ESAs. If the clinics shut down, where will Medicare-only patients go, when hospitals already are overloaded?

CMS' proposals could take hold as early as August. Public comment is open until June 13. Others in the new rules' line of fire include would-be Amgen competitor Affymax Inc., which has Hematide due to enter Phase III trials for anemia in pre-dialysis patients. In April, the firm disclosed Phase II data to date in dialysis and non-dialysis patients with chronic kidney disease. The compound is a pegylated peptide that binds to and activates the EPO receptor. FibroGen Inc. has FG-2216, an erythropoietic HIF-PH inhibitor in anemia associated with chronic kidney disease and cancer. A Phase I/II trial is expected to start in chemo-induced anemia in the second half of this year. And the mighty F. Hoffmann-La Roche Ltd. is positioning CERA (continuous erythropoietin receptor activator) to enter the market.

One firm enjoying a small spike in its stock price lately is Biopure Corp., which only trades in the 50-cent range but could have a winner in the blood-oxygen therapeutic Hemopure (hemoglobin glutamer-250 [bovine]), with a much shorter - and potentially safer - half-life. Yet to be determined is whether it's the properties of growth stimulating hormone in ESAs that causes tumors to grow, or the hemoglobin that results from their use. If the former, then Hemopure would have an added leg up. The product is approved for anemic patients undergoing surgery in South Africa and for compassionate use in the U.S. to treat life-threatening anemia.

Hemopure could have an uphill road. In January, Biopure got a provisional opinion letter from the United Kingdom Commission on Human Medicines, with questions regarding the treatment in acutely anemic adult orthopedic surgery patients younger than 80 years of age. Issues tagged as "major" relate to toxicology, quality, clinical efficacy and safety, including the product's benefit-risk balance in the proposed indication when blood is readily available.

Other trials are ongoing in the European Union. The 60-patient Phase II study in coronary artery bypass graft surgery has signed about 26 patients in Greece and the UK, while the 100-patient Phase II trial in vascular disease lower limb amputation has enrolled 11 patients in South Africa. After hospital approval, a proposed Phase II trial in the Netherlands in percutaneous coronary intervention will start, and the principal investigator expects results to become clear after fewer than 10 patients are tested.

In the U.S., though, the FDA's Blood Products Advisory Committee voted in December against a proposed 1,100-patient Phase IIb/III study with Hemopure, and Biopure said the Naval Medical Research Center (which is sponsoring the trial) was working with regulators on plans for a smaller Phase II trial.

But that same month, Biopure's competitor Northfield Laboratories Inc. unveiled disappointing results with its Polyheme red-blood cell substitute, which proved no better than saline/blood, as 10.8 percent of trauma patients died within 30 days versus 9.1 percent for the saline/blood group. Polyheme requires refrigeration, unlike Hemopure, and heat exposure might have skewed the results.

Widespread mullings over next events for Amgen, J&J, and ESAs in general included a conference call hosted last week by CIBC World Markets with John Glaspy, director of the Women's Cancers Program Area at the Jonsson Comprehensive Cancer Center at the University of California Los Angeles.

Glaspy called CMS' view of minimum hemoglobin levels to let ESA treatment start "irresponsible," and CIBC predicted the Hgb of 9g/dL threshold would be changed before the policy is finalized. One plus for Amgen that Glaspy found: the "hyper-vigilant regulatory environment" could put the screws to new ESAs trying to get marketing clearance.

"This supports our view that Roche's CERA could face some delays, which would be positive for Amgen," according to CIBC, in a report on the Glaspy call.