Down 85%! Why Affymax Is Getting Crushed This Morning

Look out below, Affymax (NASDAQOTH: AFFY  ) investors! The company pulled its only drug off the market, and shares of the company are indicated to fall around 85% this morning, according to Yahoo! Finance.

In collaboration with Japanese pharmaceutical company Takeda, Affymax developed a drug called Omontys for dialysis patients with anemia, or low red blood cell levels. The drug's benefits over existing treatments had some investors optimistic about its commercial potential. But much of that hope was lost on Saturday morning, when the partners announced a voluntary recall of the drug after a small percentage of patients experienced serious initial side effects, leading to a handful of patient deaths.

The market Omontys was looking to penetrate is huge, and dominated by industry giants Amgen (NASDAQ: AMGN  ) and Johnson & Johnson (NYSE: JNJ  ) . Amgen's Epogen and Aranesp combined for more than $2.7 billion in sales in 2012. J&J's Procrit, which is the same underlying drug as Epogen, brought in nearly $1.5 billion. And while the overall market for the branded anemia drugs has been shrinking, Omontys only has to be taken once a month versus multiple times per week for Procrit and and Epogen. That advantage could have seen the drug take plenty of market share over the long term, despite rising generic competition.

I won't mince words -- this is a crushing blow for Affymax. With its sole drug pulled off the market for safety concerns, the long-term viability of the company is in serious question. But if the company can determine the reasons for the reactions and address them in an acceptable way, this may not be the end for Omontys and Affymax. The adverse events appeared to only happen during the initial dose, which suggests that long-term use is safe. However, it's clear from premarket activity that investors are expecting the worst.

Management is providing an update to discuss the news at 8:30 a.m. EST. You can access the webcast at Amgen's investor relations page.

Is bigger really better?
Today's Affymax news highlights a key consideration for investors when investing in small biotech stocks with highly concentrated risks. However, even the strongest, most diversified health care stocks have their detractors.

Involved in everything from baby powder to biotech, Johnson & Johnson's critics are convinced that the company is spread way too thin. If you want to know if J&J is nothing but a bloated corporate whale -- or a well-diversified giant that's perfect for your portfolio -- check out The Fool's new premium report outlining the Johnson & Johnson story in terms that any investor can understand. Claim your copy, and a year of free analyst updates, by clicking here now.


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.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2275021, ~/Articles/ArticleHandler.aspx, 12/20/2014 10:19:15 PM

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...


Advertisement