When the Food and Drug Administration mentions "safety" in conjunction with Johnson & Johnson's (NYSE:JNJ) Eprex and Procrit, or Amgen's (NASDAQ:AMGN) Epogen, investors' ears should perk up. The blockbuster drugs that boost red blood cells have been hit hard by the agency over the last year or so, causing revenue to suffer. But rather than worrying, investors should take the opportunity to learn more about what's going on.
The FDA is concerned about a J&J report that patients in an investigational study taking a high dose of Eprex died at a higher rate than those taking placebo. The private study was hoping to show that using a high dose of Eprex to boost red blood cells, which carry oxygen, improved brain function for stroke victims. Seems like a reasonable hypothesis. Unfortunately, 16% of patients who took Eprex died after three months, compared to just 9% in the control group.
While that's bad news, the worst-case scenario for Johnson & Johnson is that the FDA discontinues any testing in stroke patients and never approves Eprex for that use. It doesn't appear that the companies were really gung-ho about the potential added indication anyway. Amgen isn't testing its drug for increased brain function, and Johnson & Johnson wasn't really involved with the study in question, besides providing the funds and drugs to run the trial.
As an investor in pharma companies, you should pay close attention to what the FDA is saying, especially as it continues to increase the number of warnings it puts out. Some, like Amylin Pharmaceuticals' (NASDAQ:AMLN) Byetta potentially causing pancreatitis, will cause the stock to drop. Others, like a skin-cancer warning for Biogen Idec (NASDAQ:BIIB) and Elan's (NYSE:ELN) Tysabri, are relatively minor.
It's no longer good enough to just read the headlines. You should dig a little deeper to know what's truly going on. Learning more about the companies you invest in will give you a competitive advantage.
