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Tough Decisions on Osteoporosis Drugs

Amgen (AMGN) and Eli Lilly (LLY) have endured some tough news in recent days on their experimental osteoporosis drugs. The companies' reactions provide investors with a clear picture of how pharmaceutical firms are adjusting their approaches to research and development in the face of a tougher, more safety-conscious Food & Drug Administration.

On Aug. 13, an advisory panel to the FDA stopped short of recommending the agency green-light the widespread use of Amgen's denosumab (brand name Prolia). The agency will probably approve the drug in October, but the panel recommended that it be used only to treat women with osteoporosis and men with bone loss related to certain cancer treatments. The panel voted against approving the drug to prevent osteoporosis or to treat bone loss related to breast cancer. If denosumab were approved for all four indications, it could reach peak sales of $3 billion a year, some analysts believe.

But FDA panel members were concerned about reports of infections and cancer in some trial patients. Amgen proposed a massive post-marketing surveillance program, which would include keeping a database of 380,000 women with osteoporosis for up to five years. The FDA panel wanted even more: It recommended the company develop a "risk evaluation and mitigation strategy," which would entail establishing a plan for doctors to report side effects.

Muted Expectations Some doctors might decide not to bother with denosumab, especially since there are so many more established treatments on the market, such as Merck's (MRK) Fosamax, now available as an affordable generic. It's no wonder some analysts toned down their expectations for denosumab, causing Amgen's stock to drop to 60 from nearly 63 in the past week.

Eli Lilly executives decided side effects caused by its experimental osteoporosis drug, arzoxifene, made applying for FDA approval too risky. On Aug. 18, Lilly announced it was abandoning the drug in the wake of disappointing study results. The drug reduced the risk of vertebral fractures and invasive breast cancer in women with osteoporosis, but it did not seem to reduce the rate of other types of fractures. And it caused blood clots and hot flushes in some women. CEO John Lechleiter said arzoxifene would not be a meaningful advancement over current osteoporosis drugs, including Lilly's own Evista. The results "serve as a reminder of the high risks associated with pharmaceutical innovation," he said in a statement.

Indeed, there comes a point when companies have to make tough decisions about whether the risks of a new drug will outweigh the benefits. That's especially true these days, when the FDA seems particularly vigilant about side effects. In Amgen's case, denosumab is probably a good bet: It significantly reduces fracture rates across the board, and it only has to be injected twice a year, making it more convenient than daily or weekly pills.

Lilly, on the other hand, was smart to cut its losses. The company warned investors it would take a third-quarter charge of 3¢ to 4¢ a share, and the stock dropped slightly. But Lechleiter has vowed to focus Lilly's resources on developing innovative drugs to fill unmet medical needs. To do that, he had to let go of this osteoporosis drug, which was simply facing too much competition from more worthy competitors.

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