Affymax, as one analyst put it last week, is “not dead yet.”
That may not sound like a ringing endorsement, but given what has happened to the Palo Alto, CA-based biotech company (NASDAQ: AFFY) this summer, it has to count as some kind of progress. Affymax spent years of concentrated effort, and hundreds of millions of dollars, on a quest to create an anemia drug for kidney patients that could compete with Amgen’s multi-billion dollar franchise treatment. On June 21, the dream appeared to fall apart.
That was when Affymax and its partner, Japan-based Takeda Pharmaceutical, released their results from four pivotal clinical trials. The studies showed that patients on the Affymax anemia drug had a higher rate of heart-related adverse events, such as congestive heart failure and unstable angina, if they had chronic kidney disease that hasn’t yet required dialysis. The stock plummeted 69 percent from $23.01 before that data release, to $7.18 after investors had a full day to chew on the results. A company pursuing a multi-billion dollar market opportunity suddenly was given a stock market value of less than $200 million.
While a lot of investors clearly decided to cut bait and move on, Affymax isn’t ready to give up, as analyst Chris Raymond wrote last week. Affymax had said all along that its drug, peginesatide (Hematide) had reached its goal of showing that it is at least equal in effectiveness to the Amgen’s epoetin alfa (Epogen), and that it didn’t see any increased heart risk in kidney patients in the final stage of disease, those who are getting dialysis treatments. Last Thursday, Affymax announced that after combing through the data with Takeda, the companies plan to discuss the results of the studies for dialysis patients with the FDA, and that it plans to submit a new drug application to the agency in the first half of 2011.
That show of confidence sent Affymax stock up 26 percent.
“People were looking for some more hand-holding,” says Affymax CEO Arlene Morris, meaning that investors needed assurance that the company still had a viable way to seek FDA approval. She added that the company’s fundamental business plan is still intact. “All the same conditions still exist for us in the market. We have a great opportunity to move forward.”
Plenty of companies have tried to challenge Amgen’s dominance in the treatment of anemia for patients undergoing kidney dialysis, and nobody has yet landed a glove on biotech’s biggest company. Amgen’s big breakthrough, which dates back to the 1980s, was to create a genetically engineered drug that could stimulate the body to make more oxygen-carrying red blood cells, and help combat the deep fatigue caused by anemia. The worldwide market for anemia drugs for kidney patients is worth about $7 billion in sales each year. That encompasses patients with early forms of kidney disease and patients who have worsened all the way to dialysis.
Affymax’s drug is designed to work to stimulate red blood cells in a different way than Amgen’s, but it is really aiming to compete from a business standpoint on convenience and price. There are currently about 400,000 patients in the U.S. on dialysis therapy, who have failing kidneys, and go in 13 times per month to facilities that perform the procedure to filter out impurities from the blood that the kidneys otherwise do. Each visit, most patients also get an injection of Amgen’s epoetin alfa. The Affymax drug is designed to last longer in the bloodstream, requiring only one injection a month for anemia. This provides one less thing doctors and patients need to do during the dialysis visits, and makes for simpler insurance reimbursement procedures, Morris says. What’s more important, though, is that Affymax and Takeda are considering whether to offer their drug at a lower price than Amgen’s—which could provide a compelling reason for dialysis clinics to switch in an era of tightening Medicare reimbursement for kidney patients.
Affymax and Takeda are still a long way from setting the price for the anemia drug, but Morris says they could decide to offer a lower price. “People have been looking for 18 years for someone else to come into the market,” Morris says. “Because it’s a monopoly, they can charge whatever they want.”
Before any of that can come to fruition, Affymax and Takeda will have to make a compelling case to the FDA that their drug deserves a spot on the market. The agency has spent a lot of time and energy thinking about the risks and benefits of the drugs made by Amgen, after a series of safety warnings came out in 2007 alerted doctors to higher risk of heart attack, stroke and death when those treatments are used in high doses. That whole debacle chopped $29 billion off of Amgen’s market valuation that year. While Amgen suffered through that period, Affymax was crafting its game plan, beginning its series of four pivotal studies that ended up enrolling 2,609 patients with kidney disease at varying degrees of severity.
The first look at the data, as mentioned above, wasn’t encouraging to investors. Affymax and Takeda looked at a composite safety score on cardiovascular health, which combined death, stroke, heart attack, congestive heart failure, unstable angina, and arrhythmia. On that important measurement, 21.6 percent of non-dialysis patients had an adverse event while on the Affymax/Takeda product. That compared with 17.1 percent of patients on the Amgen drug.
While that made the new drug look like a riskier choice, the situation was reversed when Affymax and Takeda looked at patients in the end stage of kidney disease (dialysis). In those patients, 22.8 percent on the Affymax drug had a cardiovascular adverse event, while 24.4 percent had one while taking the Amgen product.
Affymax was “obviously surprised,” Morris says, to see the higher rate of cardiovascular adverse events in the non-dialysis patients. And after weeks of digging into the data, she said the companies still haven’t determined exactly why that happened. Affymax and Takeda aren’t planning to seek FDA approval for the non-dialysis patient population, although Morris wouldn’t quite go so far as to say the product has no future for those patients.
Researchers have floated at least one hypothesis that Morris shared with me. The idea is that many kidney disease patients also coincidentally have heart trouble, and many of them die from it before they ever progress all the way to end-stage renal disease (dialysis). That means the dialysis patient population is naturally self-selected to be people with hardy cardiovascular health, and less likely to be perturbed by an anemia therapy.
Really, though, it’s just an idea, not iron-clad evidence. “We’re still trying to look at what happened in the pre-dialysis population,” Morris says.
Missing out on the pre-dialysis population means that Affymax could miss a significant part of the opportunity with its anemia drug. About three-fourths of the kidney disease market for anemia drugs comes from dialysis patients, while the remaining one-fourth comes from the pre-dialysis patient population, Morris says. Analyst Chris Raymond, in a note to clients on Aug. 5, said that Affymax’s dialysis-only strategy is “plausible.”
“Given our estimation that dialysis alone supports a valuation in the $20 range, we continue to recommend purchase,” Raymond wrote.
If Affymax files its application in the first half of 2011, it will almost surely have to pass the scrutiny of a public advisory panel that will want to look closely at the safety of its product. Since there’s already an effective drug on the market for these patients, it’s likely to get a standard 10-month review. It could be well into 2012 before the company could have this drug on the U.S. market, if it ever gets there. But key research leaders in the treatment of kidney disease and cardiology are “almost universally supportive” of Affymax’s plan to seek FDA approval for treating dialysis patients, Raymond wrote. And the safety questions that were raised by the other pre-dialysis trials may not actually derail the drug like investors thought when the data first appeared on June 21.
“While FDA certainly won’t ignore the pre-dialysis data, the agency has indicated they consider these patient populations to be completely separate,” Raymond wrote.
It will probably take a couple years to really know if this strategy pans out or not. But it’s at least a viable option—and a lot more viable than investors thought at first blush, Morris says.
“I’m happy with where we are,” she says.
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