The last couple of years have been extremely exciting for Amgen (NASDAQ:AMGN) and its shareholders, with its stock essentially tripling in a four-year time span, crushing the overall return of the broader market on a comparable basis.
The catalyst behind Amgen's surging stock price has been its suddenly bountiful late-stage pipeline. Throughout the 2000s, Amgen's product portfolio matured, and there were few difference makers in development. The result was a stagnant stock price and Amgen needing to resort to substantial stock buybacks just to move the needle in the EPS column some years.
Amgen's pipeline kicks into high gear
But things have changed in a big way of late for the original biotech blue-chip stock, with its late-stage pipeline gelling at just the right time. As Amgen's management announced in 2014, the company planned to deliver results on 10 late-stage products between 2014 and 2016. A few of those products have already generated positive results and made their way to pharmacy shelves.
For instance, Blincyto, an immunotherapy designed to treat a rare form of acute lymphoblastic leukemia by engaging the body's T-cells, was approved in December. Studies that led to its approval demonstrated that nearly a third of patients had a complete response for a median of 6.7 months. The therapy was also approved more than five months ahead of its PDUFA decision date from the Food and Drug Administration.
Amgen also received a resounding thumbs-up on Corlanor, a drug designed to reduce the chance of hospitalization for patients with chronic heart failure. The approval of Corlanor marked Amgen's first foray into cardiovascular products -- although cholesterol drug Repatha could soon follow Corlanor in the approval department with the recent backing of the FDA's advisory panel.
The most important FDA decision of 2015 for Amgen
Despite these approvals and upcoming decisions on exciting therapies like Repatha and talimogene laherparepvec, known better as T-Vec, an immunotherapy designed to treat regionally or distant metastatic melanoma, the single most important decision that investors will want to focus on in 2015 is the FDA's upcoming PDUFA decision on Kyprolis.
Kyprolis is Amgen's prized relapsed and refractory multiple myeloma drug that's currently approved as a third-line treatment. In the first quarter, Kyprolis crossed $100 million in total sales for the first time ($108 million), and looks to be on pace to flirt with $500 million in sales in fiscal 2015.
Kyprolis is also the key piece behind the aggressive $10.4 billion buyout of Onyx Pharmaceuticals that Amgen executed in 2013. One of the main tenets behind the acquisition was the idea of expanding Kyprolis' labeling to a second-line indication where there are far more patients. As a third-line drug Kyprolis peak sales potential is probably capped around three-quarters of a billion dollars. As a second- and third-line multiple myeloma drug, we could be talking about $2.5 billion, or perhaps even $3 billion, in peak annual sales.
In late March, Amgen and its shareholders received welcome news from the FDA that it had granted Kyprolis a priority review, thus shortening the standard 10-month review process to a mere six. Based on Amgen's filing date, this set its PDUFA action date as July 26, 2015, which is right around the corner.
This decision isn't cut-and-dried
Normally Wall Street and investors can get a decent sense heading into an FDA decision of whether an approval or rejection might be coming (though nothing is ever a "certainty" when it comes to the FDA). With Kyprolis things just aren't that easy.
In the ASPIRE trial, which Amgen announced last August, Kyprolis in combination with Revlimid and a low-dose dexamethasone delivered a median progression-free survival of 26.3 months. By comparison, the control group with Revlimid and a low-dose dexamethasone sans Kyprolis produced a median progression-free survival of just 17.6 months. This 8.7-month improvement is statistically significant and exactly what the FDA would be looking for in order to give Kyprolis the green light.
However, just days later Amgen reported data on the FOCUS study that didn't even come close to hitting the mark. FOCUS was an open-label study examining Kyprolis against a control combo therapy with the primary endpoint being a statistically significant improvement in median overall survival. Unfortunately, the results showed no meaningful difference in the Kyprolis arm and the control group arm. This is noteworthy because the European Medicines Agency (the EU's version of the FDA) is particularly picky when it comes to approving therapies that don't provide a survival benefit to existing drugs already on the market.
The deciding factor here just might be the ENDEAVOR study, which was released in early March of this year. In ENDEAVOR, Kyprolis was put in a head-to-head study against Takeda Pharmaceuticals' and Millennium Pharmaceuticals' multiple myeloma therapy Velcade. The study unequivocally showed that Kyprolis was superior to Velcade in terms of delaying disease progression, which was the primary endpoint of the study. Median progression-free survival for the Velcade group was 9.4 months, while the median progression-free survival for the Kyprolis arm was 18.7 months -- essentially double.
This is going to be a tough call for the FDA with what appears to be a clear improvement in delaying disease progression (and a presumed improvement in quality of life during that delay) versus a complete miss in improving overall patient survival over existing therapies on the market.
The field could be getting larger in multiple myeloma.
However, even if Kyprolis gets the nod of approval from the FDA on or before July 26, it could face a stiff competitor in the not-so-distant future, at least in later-line indications.
Johnson & Johnson (NYSE: JNJ) in June filed a rolling submission of its biologic license application for daratumumab, a monoclonal antibody seeking to be something of a last-resort therapy for multiple myeloma patients that have tried and progressed on at least three different therapies.
In May, Johnson & Johnson announced its phase 2 results at the American Association for Clinical Oncology's annual meeting. Within the study, daratumumab generated a 29% overall response rate, including 3% with a complete response and 9% with a "very good partial response." Additionally, Johnson & Johnson notes that the median progression-free survival period of its therapy was 3.7 months.
All told the above data may not sound abundantly encouraging. But keep these facts in mind: The median patient in its study was diagnosed 4.8 years prior and had received and progressed on a median of five therapies (with half of the study patients receiving, and progressing on, Kyprolis). Thus, to have 29% of patients respond, even for just shy of four months on average, is incredible.
More interestingly, the study that led Kyprolis to be approved by the FDA as a third-line therapy generated an overall response rate of 23%, and the typical patient in the study had received a median of five different therapies. Daratumumab, under similar conditions, produced a response rate of 29%. It's true that we're not talking about a huge patient pool here, but it could be enough to turn the heads of a few multiple myeloma patients and physicians if daratumumab is approved by the FDA and gains new label indications down the road.
Here's what I think
Now that we have some background, here's my educated guess of what will happen (note my emphasis on the word "guess").
I believe that Kyprolis has a compelling case for approval in the United States where progression-free survival improvements are usually more than enough to get a thumbs-up from the FDA. Overseas I'd peg Kyprolis' approval shot around about 50% since overall survival tends to be where the EMA focuses its efforts when approving new drugs.
But even if Kyprolis is approved, I'd opine that it's already well-reflected in Amgen's stock price. In order for Amgen shares to head higher, Wall Street and investors are going to want to see the company successfully launch its plethora of new products. If Kyprolis marches into blockbuster territory with relative ease (let's say by 2017), then Amgen's valuation may deserve a boost, and its purchase of Onyx will be vilified.
If, however, Kyprolis doesn't gain approval in the U.S. or the EU, it could be difficult for Amgen to ultimately justify the price it paid for Onyx, and for Amgen to maintain its current valuation.
In just a matter of a few weeks we should know which scenario is most likely to play out.