Merrill
CERA 2nd approvable letter/acknowledgement of GI Bleeds
Friday after mkt close, the FDA issued a 2nd approvable letter for Roche’s CERA,
delaying final label determination until an Oct 16 -17 advisory panel discussing
EPO use in nephrology. Roche indicated that they have received a “draft label,”
with final revisions expected after the mtg., although we still believe final approval
is uncertain, especially given the current climate & the acknowledgement that
CERA had 6x the incidence of serious gastrointestinal bleeding compared to other
ESA’s in the pivotal trials. This is the first time, to our knowledge, that this has
been presented, & could place CERA at a competitive disadvantage. While the
delay alleviates the threat of near-term competition, we interpret this stance by the
FDA that a label change for the class is likely. Additionally, Epogen & Aranesp
still face Medicare reimbursement risk, as well as ongoing treatment paradigm
changes by clinicians, which will continue to pressure sales & increase vol.
Previously, we estimated mkt reaction to a minor delay to be ~$2, which is
tempered by the probability of successfully avoiding Amgen’s patent claims,
currently 30% by our estimates. Roche is unlikely to launch CERA prior to the
resolution of the IP case. Using our proprietary risk-adjusted model we estimate
fair value at $56 after this delay w/ further upside resulting from the mkt
acknowledgement of GI bleeding w/CERA. Maintain NEUTRAL
FDA Issued Draft Label until Advisory Panel Meeting
The FDA issued a draft label until after the CV & Renal Drugs Advisory
Committee, scheduled Oct 16-17, which may result in labeling changes for target
levels for the entire EPO class. Current usage results in a monthly average Hb
level of 11.95 g/dL, with 50% of pts over 12 g/dL, & 20% over 13 g/dL- levels that
trials have suggested increase complications. A 1 g/dL lower target could impact
~25% of current EPO usage. CMS is also examining current reimbursement.
Roche Acknowledges 6x higher incidence of serious GI
bleeding with CERA, a significant competitive disadvantage
The press release described a 6x higher incidence of SERIOUS GI hemorrhages
(1.2% vs. 0.2%), which could place CERA at a significant competitive
disadvantage. To our knowledge, this was the first time this was acknowledged
publicly, and it was located in the background section of press release.
Fair value $56, GI Bleeding w/CERA Represents Upside
Based on our previous analysis, we estimate a fair value of $56, as we estimate
the current news is likely to be perceived as a positive event offsetting some of
the threats to Amgen’s EPO franchise. Recognition of the GI bleeding could
represent upside to our estimates. Importantly, our valuation assesses the
likelihood of Roche circumventing AMGN’s IP at 30%, and we believe Roche
unlikely to launch CERA, even with FDA approval, until the case is resolved. |
