Amgen anticipates pricing for its anemia therapy Aranesp (darbepoetin) to be stable regardless of the outcome of a lawsuit by Johnson & Johnson challenging its discounting practices.

J&J filed suit Oct. 11 arguing Amgen unfairly increased market share of Aranesp at the expense of J&J's Procrit (epoetin) by linking rebates for its two febrile neutropenia agents, Neupogen and Neulasta , to purchases of Aranesp.

On its third quarter earnings call Oct. 18, J&J CFO Bob Darretta said, "Should we be unsuccessful in getting the injunction...it will re-inject tremendous price pressure."

The firm expects a ruling on its request for a preliminary injunction sometime between February and April 2006.

In response to a question regarding J&J's comments during its earning call the next day, Amgen CEO Kevin Sharer said, "We think J&J will act in their own interest, and we will do the same....The thing that is important here is that we are seeing price stability in the market."

"The [average sales price] system is working, and we would expect J&J to be a rational competitor."

Amgen Exec VP-Global Commercial Operations George Morrow noted that if "you lower your price dramatically, you dig yourself a pretty big ASP hole in subsequent quarters."

The firms have been engaged in a long-running price war that had shown some signs of subsiding (¹ Also see "EPO Ceasefire? Amgen Aranesp Price To Remain Stable Unless J&J Acts First" - Pink Sheet, 3 May, 2004., p. 10).

"We are starting to see a gradual stabilization of ASPs for our products," Morrow said. "Recently, we have taken more frequent price increases, but of a smaller magnitude."

"For example, at the end of September, we increased the price of Aranesp, Neulasta and Neupogen by 2%, 3% and 4%, respectively."

Such pricing stability "ought to let us enjoy all the volume demand growth that exists in those markets...going forward," he said.

J&J's lawsuit alleges that because Neupogen and Neulasta have a 98% market share and are needed by oncology clinics to treat cancer patients, linking their rebates to Aranesp purchases constitutes a violation of the Sherman Antitrust Act.

When "clinics do not agree to purchase significant volumes of Aranesp, instead of Procrit...Amgen does not sufficiently rebate" them for Neulasta and Neupogen, the complaint alleges.

On Oct. 1, Amgen modified the pricing structure again - requiring a higher share of Aranesp purchases to achieve maximum discounting - "to eliminate Procrit from the oncology clinic market," the complaint alleges.

"The adoption of an ASP reimbursement system in hospitals will allow Amgen to introduce into hospitals the same pricing scheme it is now using to foreclose competition in the sale of [anemia] products to oncology clinics," the complaint alleges.

Amgen declined to discuss whether the suit accurately describes the rebating, but Morrow said the discounts have "resulted in increased competition and decreased costs to clinics, patients and the government....Amgen's contracts are lawful, pro-competitive and in the best interest of customers."

For the third quarter, Aranesp's U.S. sales were $542 mil., up 44%. The product "continues to exhibit strength due to share gain and the growing penetration of erythropoietins, where we saw 14% demand growth in Q3 within the oncology channel," Morrow said.

In the EU, erythropoietin use grew 6% in the oncology setting and 7% in nephrology setting. Aranesp share increased to 45% in oncology and 46% in nephrology. "We continue to drive the uptake of extended dosing regimens in both markets, which is important for the entrance of...follow-on biologics in coming years," Morrow stated.

Aranesp also continues to make gains in the U.S. hospital dialysis segment and has "well over two-thirds" of the market, the exec said. "I don't know if we will fully penetrate it, but by the middle of next year, anybody that is going to convert will convert."

Hospital use is between 10% and 20% of the total dialysis market, Amgen estimates.

"Aranesp use in the hospital segment is being driven by pricing and preference to stock a single erythropoietin," Morrow said.

Inroads are coming at the expense of Amgen's epoetin Epogen , which dropped 12% in the quarter for U.S. sales of $599 mil. About two-thirds of the decline was due to "a little swing" in inventory and the other third was cannibalization from Aranesp in the hospital setting.

Amgen dismissed investor concerns surrounding an apparent slowdown of total product sales growth compared to the preceding quarter, saying that it historically happens in the third quarter and that year-over-year comparisons are more meaningful.

"Sequential quarterly growth rates can be influenced by other factors such as extended holiday periods, or buy-ins ahead of price increases. We did see small buy-ins in Q2 related to the Fourth of July holiday weekend, which if we adjust for lead to flat or positive sequential trends," Morrow said.

Amgen's total sales increased 19% to $3.05 bil., compared to the 2004 period. Second quarter 2005 sales were slightly higher at $3.07 bil.

[Editor's note: An article on the impact of DTC ads on Amgen's Enbrel appeared in ² "The Pink Sheet" DAILY Oct. 20. To read the article and sign up for a free trial, visit our website, www.ThePinkSheetDAILY.com.]

Amgen Expects Stable Aranesp Pricing Despite J&J Lawsuit Over Rebates

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