What's Next for Affymax?

Affymax (NASDAQOTH: AFFY  ) received its first Food and Drug Administration approval last spring with Omontys for anemia in dialysis patients. The drug enters a war against Amgen's (NASDAQ: AMGN  ) Epogen, which has held a near monopoly for over 20 years.

As its lone product enters the market, what's next for Affymax?

Let's make a deal
Why would doctors prescribe Omontys over the better-known Epogen? Omontys' once-monthly injection offers dosage advantage over the older drug, which has a regimen that can exceed a dozen doses per month. Epogen has also drawn safety concerns as of late. And Omontys offers a better price for treatment providers pressed by the new Medicare reimbursement rules.

But victories in this market come from deals with dialysis centers. The companies have to slash prices to obtain the deals but in exchange have their drug easily distributed to the core patient group.

Fresenius Medical Care (NYSE: FMS  ) and DaVita (NYSE: DVA  ) combined form about 60%  of the dialysis center market. Amgen has a "multi-year" deal in place with Fresenius and a seven-year deal with DaVita. Neither blocks Affymax getting its foot in those doors, but that's less likely for the near future.

Affymax secured a short-term deal with Fresenius last year that expires in April. The company hopes to expand that contract for the longer term, but we'll see if that happens and what percentage of customers would end up on Omontys rather than Epogen.

Amgen's DaVita contract stipulates that the center will use Epogen for 90% of its patients. Affymax still plans to evaluate its chances. But Omontys does better with the mid-sized dialysis organizations, or MDOs. The company has deals in place with five of the six MDOs, including the newly struck agreement with DSI Renal.

The road ahead
Affymax will kick off a series of post-market studies this year with data reporting beginning in 2016. These will include a series of pediatric trials and an observational study tracking long-term efficacy and safety.

The European Medicines Agency accepted Omontys' marketing authorization application last year, but Affymax and partner Takeda await a final decision. Takeda bears the responsibility of development abroad,  with Affymax in for half of the royalties.

On the financial front, Affymax will split U.S. profits with Takeda. Affymax will book commercialization expenses and a profit equalization payment from Takeda that come from Takeda booking the top-line sales. The third quarter report -- the drug's first full commercial quarter -- showed $15 million in sales.

Foolish bottom line  
Affymax's up more than 200% in the past 12 months. That kind of growth can't continue long-term, but there's still potential with Omontys. Epogen falls off patent in 2013, and Roche already has a biosimilar in development. The big signs of confidence for Affymax will arrive via long-term contracts with Fresenius and/or DaVita. But those could be years down the line.

While you can certainly make huge gains in biotech companies like Affymax, the best investing approach is to choose great companies and stick with them for the long term. In our free report "3 Stocks That Will Help You Retire Rich," we name stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2208120, ~/Articles/ArticleHandler.aspx, 7/29/2014 9:11:45 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 11 hours ago Sponsored by:
DOW 16,982.59 22.02 0.00%
S&P 500 1,978.91 0.57 0.00%
NASD 4,444.91 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

7/28/2014 3:15 PM
AFFY $0.10 Down +0.00 +0.00%
Affymax, Inc. CAPS Rating: *
AMGN $122.65 Down -0.19 +0.00%
Amgen, Inc. CAPS Rating: ****
DVA $71.75 Up +0.29 +0.00%
DaVita, Inc. CAPS Rating: ****
FMS $33.45 Down -0.16 +0.00%
Fresenius Medical… CAPS Rating: *****

Advertisement