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Amgen stock drops as Medicare tightens anaemia reimbursement

The world's largest biotech Amgen has seen its stock come under pressure after the US Centers for Medicare and Medicaid Services said it would be limiting reimbursements for the company's top-selling anaemia drug, Aranesp

The world's largest biotech Amgen has seen its stock come under intense pressure after the decision by the US Centers for Medicare and Medicaid Services that it will be limiting reimbursements for the company's top-selling anaemia drug, Aranesp (darbepoetin alfa).

Aranesp and sister anaemia treatment Epogen (epoetin alfa) accounted for almost 60 per cent of Amgen's FY06 profits. In early 2007, a number of clinical studies questioned the safety of Aranesp and Epogen dosing in cancer patients.

The safety concerns were related to the regulation in the level of haemoglobin in nearly a million cancer and dialysis patients each year. The Medicare agency wants to reduce the level of haemoglobin at which transfusions are required.

In the US, most doctors aim to keep haemoglobin levels between 11 and 12g per decilitre, but Medicare will only reimburse doctors when levels drops to 10. The agency also ruled that patients whose levels rise above 10 should be denied coverage after four weeks of treatment.

William Blair & Company analysts have reduced their 2007 sales estimate for the anaemia drugs in question to USD 3.7bn from a previous estimate of USD 3.9bn. They also cut their 2008 forecast to USD 3bn from USD 3.8bn.

Amgen reported a steep drop in sales of its main anaemia product line in the last few months, which it believes was caused by doctors tightening prescription use independently. Q2 FY07 US sales of Aranesp were 20 per cent down on Q2 FY06 sales of USD 713m at USD 578m.

Also suffering is J&J which manufactures the anaemia drug, Procrit (epoetin alfa). Sales in Q2 dropped six per cent to rest at USD 758m. The company said it would reduce its global workforce by up to four per cent, or nearly 5,000 jobs, to cut costs.

On 1 August 2007, Amgen's shares dropped USD 1.65 to USD 52.09 - a fall of 3.1 per cent.

2nd August 2007

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