Amgen shares fell sharply Friday after several investment banks slashed their ratings on the biotechnology company'sshares after a U.S. Food and Drug Administration advisory panel called for marketing restrictions on popular anemia drugs sold by Amgen and Johnson & Johnson.
At least four investment banks - Citigroup, JPMorgan, Morgan Stanley and Lazard Capital - issued downgrades for Amgen shares, saying the the panel's ruling is likely to have a material impact on its drugs, Aranesp and Epogen. Citigroup cut Amgen to sell from hold, while Morgan Stanley lowered its rate to equal-weight from overweight and J.P Morgan cut Amgen to neutral from overweight.
The impact was relatively mild on J&J, which is not nearly as dependent on Procrit sales for its revenue growth. But Aranesp is by far Amgen's biggest product and, along with Epogen, accounts for roughly half of Amgen's profit.
Amgen shares have fallen about 12% since the FDA panel's vote on Thursday afternoon, reaching a low not seen in nearly three years. J&J shares were up on Friday after dropping about 2% following the panel vote.
"The panel discussing the use of (the anemia drugs) in oncology was much harsher than we expected, recommending further tightening beyond the restrictions the FDA recently invoked," Lazard analyst Joel Sendek wrote in a research note in which he took his rating on Amgen shares all the way down to a "sell" from "buy."
Sendek forecast a 21% decrease in worldwide Aranesp sales this year and significantly lowered his earnings projections through 2010, taking his 2007 EPS forecast down to $4.09 from $4.30 and 2010 to $4.80 from $5.77.
The FDA panel of outside cancer experts urged the agency to make marketing of the medicines contingent upon further restrictions being placed on the drugs' labels and upon an agreement by the companies to conduct more clinical trials. The panel also voted for disease-specific labels on anemia drugs and lower dosages. The FDA usually, but not always, follows the recommendations of its advisers.
Amgen contends that the benefits blood-cell boosting drugs, which allow cancer patients to have significantly fewer blood transfusions, outweigh the risks.
Health regulators have been concerned that the drug has been prescribed too aggressively and could be harming patients. The FDA imposed its strongest warning label on the drugs in March and advised physicians to use the lowest dose possible.
Aranesp had sales of about $4.1 billion last year, and along with its predecessor Epogen accounted for roughly half of Amgen's sales.
In April, Amgen said data from a recent study of Aranesp and lung cancer patients showed no difference in the risk of death compared with a placebo.
The drugs are forms of the natural protein erythropoietin, or EPO, used to treat anemia by stimulating the body's production of hemoglobin, the protein in red blood cells that carries oxygen.