For nearly three decades, Richard Shirley's rheumatoid arthritis caused him so much pain that he could barely make it down a flight of stairs. Last year, he considered joining the waiting list for Enbrel, a highly effective Amgen drug that has been in short supply ever since it hit the market in 1998. Instead, Shirley entered a Boston trial for a new Abbott Laboratories (ABL) drug, Humira. The 62-year-old retired engineer can now walk two miles a day. He dances with his wife and goes bird-watching, virtually without pain. "I'm a nicer guy today because 90% of the pain is gone," he says.
Shirley's story and dozens like it are setting the stage for a messy biotech free-for-all. In one corner is Amgen Inc. (AMGN) of Thousand Oaks, Calif., which spent $11 billion in December, 2001, to acquire the small company that developed Enbrel. But a chronic shortage of manufacturing capacity, which won't be corrected until January at the earliest, has forced some 30,000 patients onto a waiting list. Enbrel sales have been capped at about $200 million per quarter as a result--half the amount that Amgen needs for the acquisition to boost earnings, analysts say.
Across the country, in North Chicago, Ill., is Abbott, which is counting on Humira to be $1 billion dollar drug. Abbott filed for Food & Drug Administration approval in April and is hoping to get the nod in the first quarter of 2003. Both Abbott and Amgen face formidable competition, meanwhile, from a top-selling Johnson & Johnson (JNJ) drug, as well as other rivals with rheumatoid arthritis treatments in the pipeline. All are competing for the same prize: a dominant share of an annual market for rheumatoid arthritis medications estimated to hit $5 billion in 2006.
Amgen drew the unfamiliar role of underdog in this fight. Soon after Enbrel's 1998 launch by its developer, Seattle-based Immunex Corp. (IMNX) , the drug became the gold standard for rheumatoid arthritis treatments. Two injections per week block an inflammation-causing protein called tumor necrosis factor (TNF) that plays a key role in the disease, relieving pain with few side effects. Immunex and now Amgen have had trouble maintaining volume production of the drug, which is grown in finicky cell cultures under exacting conditions. Thus, shortages have left most of the one million patients who might benefit from Enbrel empty-handed. "It has been a huge problem," says Dr. Ernest Brahn, a rheumatology professor at the University of California at Los Angeles. "Some patients are hoarding doses. Others are migrating to different drugs."
Amgen CEO Kevin W. Sharer remains sanguine: "We haven't missed our window of opportunity," he insists. Still, Enbrel has dragged down an otherwise stellar year. Even though two other new drugs have boosted sales in Amgen's core cancer and anemia markets more than 20% this year, Amgen's gross profit margin dropped from 88% prior to the Immunex acquisition to 85% in the most recent quarter. Amgen must share some of the Enbrel proceeds with marketing partner Wyeth, so it has to sell more of the drug to make a decent profit than it does other products. Some analysts fear Amgen won't return to historic profit levels unless it builds Enbrel into a $3 billion-a-year drug. "Amgen might have been better off without Enbrel," says Dr. Martin D. Auster, an analyst at SunTrust Robinson Humphrey. Its stock has dropped 25%, to 45, in the past year. The shares "would have been up this year without Enbrel," Auster says: "Everyone is asking: `Hey, did they really need to do this acquisition?"'
There are no complaints from J&J, which markets a similar drug, Remicade. With $300 million in sales in the third quarter, Remicade knocked Enbrel out of the top spot, even though patients have to take the J&J medication with methotrexate, which causes nausea.
Abbott is even better positioned to capitalize on Enbrel's misfortunes. Its Humira has a compelling selling point: convenience. Patients need to inject the drug only once every two weeks, vs. twice weekly for Enbrel. And unlike Remicade, which is derived in part from mouse cells, Humira is made entirely from human proteins. That means it can circulate in the body longer, with less risk of tripping an immune response. The drug also comes in pre-packaged syringes, making it easier to take. And Abbott has been gearing up for Humira's launch by expanding its manufacturing capacity to ensure that there's a steady supply. Abbott CEO Miles D. White says he will have lots of eager takers among patients who haven't been able to get their hands on Enbrel. "We'll have plenty of room to play here. And this won't be viewed as a me-too drug," he says.
White can't afford to be wrong. His 102-year-old company has turned out only one billion-dollar drug in the past 12 years, the antibiotic Biaxin, and its sales are slipping. Plus, Abbott is still reeling from manufacturing quality problems that resulted in $195 million in FDA fines in the last three years--on top of a $437.5 million fine Abbott paid in 2001 to settle criminal billing-fraud charges brought by the Justice Dept. Analysts expect the company's earnings to grow just 10% this year, far below the industry average of 17%, and Humira is the only drug with blockbuster potential in Abbott's near-term pipeline.
Amgen isn't taking the Abbott onslaught lightly. Dr. Roger M. Perlmutter, executive vice-president for research and development, says Amgen will counter Abbott's attack by emphasizing Enbrel's five-year track record of safety and effectiveness. Some patients in Humira's early trials developed tuberculosis, apparently because the drug can allow latent TB to become active. That raises the risk that the FDA may require Abbott to slap a warning on the drug's label, Perlmutter says. (Abbott claims all such drugs carry this risk.) Amgen also plans to test Enbrel at less frequent dosages, so the drug might one day be able to match Abbott's drug on convenience. For now, though, Amgen has put such research plans on hold. "Unfortunately, we don't have enough drug to do those studies," Perlmutter admits.
Abbott and J&J aren't the only rivals Amgen faces. Pharmacia (PHA) and Genentech (DNA) are also developing rheumatoid arthritis drugs. That's no surprise, as the total U.S. demand for drugs such as Enbrel and Humira could reach $7 billion by 2006, analysts say. Some of that will include treatments for other inflammatory diseases, such as psoriasis. Still, rheumatoid arthritis will account for most of the market, and Amgen will have to dominate this niche to reach sales of $3 billion a year. That's the amount CEO Sharer has admitted Enbrel needs to reach for the acquisition to have been worthwhile, but he never predicted when that would happen.
It's enough to make some investors question Immunex' $11 billion price tag. "That acquisition is starting to look a little expensive," says Sven H. Borho, a partner at mutual-fund company OrbiMed Advisors LLC, which owns shares of Amgen.
Sharer is eager to prove the critics wrong about the acquisition. The FDA is expected to complete its four-month review of a new Rhode Island plant for Enbrel in December. If the plant wins a green light, it could start churning out the drug by January. That won't give Amgen as big a head start on Abbott as it hoped for, but executives remain optimistic. "Here's this wonderful drug that's been completely hamstrung by manufacturing problems," Perlmutter says. "Our goal now is simply to make Enbrel available." That would at least give Amgen a fighting chance in the battle to aid suffering rheumatoid arthritis patients.
Corrections and Clarifications
"An ache at Amgen?" (Science & Technology, Dec. 9) incorrectly stated that the Amgen drug Enbrel is derived in part from hamster proteins. Although Enbrel is grown in hamster cells, it is a fully human protein.
By Arlene Weintraub in Los Angeles and Michael Arndt in Chicago