Amgen Inc. had two tough pills to swallow last week. The company announced that a cancer drug failed a clinical trial and syringes containing its anemia drug were contaminated and had to be recalled.
But investors still believe the company is in good health, largely due to last month’s announcement of strong earnings and cost-cutting at the Thousand Oaks biotech giant.
On Aug. 14, the day after the clinical trial failure and the recall were announced, shares hit an intraday all-time high of $132.52 before settling to a record close of $131.86.
Shares had been gaining strength after last month’s announcement that the company was laying off 15 percent of its global workforce, as many as 2,900 jobs. The restructuring plan was greeted as good news for investors.
John Sonnier, an analyst who follows Amgen at William Blair & Co. in Chicago, had written in a research note that he expects savings from the layoffs will allow the company to invest in new-drug development that will spur growth.
“Our take on the restructuring plan, which includes head-count reduction of over 2,400 employees, is a reallocation of spending away from legacy programs and toward supporting new product launches that hold potential to drive growth,” he wrote.
Last week’s trial results for cancer drug Kyprolis showed the drug does not prolong the life of patients with recurrent or advanced multiple myeloma, a bone marrow cancer, compared with an alternative treatment.
Amgen acquired the drug with its purchase last year of Onyx Pharmaceuticals of South San Francisco for $10.4 billion. The drug was approved by the Food and Drug Administration in 2012 and has been shown in prior trials to help stave off the advances of multiple myeloma in patients treated for recurring cases. The failed trial will limit Kyprolis’ market, but Barrons last week quoted Piper Jaffray analyst Joshua Schimmer as saying that Amgen’s bigger picture remains positive despite the setback.
“Kyprolis is not a key driver of Amgen’s long-term outlook,” he said. “Rather, Amgen’s growing pipeline (for osteoporosis, melanoma, migraine and other conditions) represents cumulatively multiple billions of dollars of upside.”
Meanwhile, the company also had to recall nine lots of prefilled syringes of Aranesp, which is used for the treatment of anemia associated with kidney failure. The drug’s sales totaled $490 million last year. Investors appeared to shrug off the recall as shares climbed the next day.
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