A mandate for change
Robert A. Bradway
CEO (from May 23, 2012)
On May 23, Robert Bradway, Amgen's ($AMGN) president and COO will step into the top role. And once in the top suite he'll have billions of dollars at his disposal to rewrite the script for Amgen, which has been mired down by questions over the fate of its aging anemia drug franchise and Kevin Sharer's rather limited strategy for buying back shares. Analysts want to see some real value creation, and that gives Bradway a mandate for change, a formula that will make the new CEO a person to watch closely in the year ahead.
Sharer was Amgen's president from October 1992 to May 2010 and has been CEO since 2000, a time in which he presided over the acquisition of Immunex and a huge growth in revenues, as Amgen became the world's undisputed biotech world champion after Roche acquired Genentech.
The revenue growth gives Bradway a good-sized war chest to fund some hefty deals--around $17.7 billion in cash and short-term investments, according to Bloomberg. Under Sharer, Amgen has made relatively small acquisitions of under $1 billion, and this cash gives Bradway the option to make some much larger deals.
"Amgen needs to go on an aggressive business development spree to in-license and partner high-impact new drugs in Phase II so they can have Phase III read-outs over the next three to five years," RBC Capital Markets analyst Michael Yee told Bloomberg. An aggressive partnering strategy on Amgen's part could play a big role in driving up values for the biotech companies it likes, helping shape the market at an opportune time.
Bradway does face a challenge this year, one that's shared with many other companies with blockbuster drugs, and the way that he deals with it may be an excellent example for others across the industry. Amgen has depended on Aranesp and Epogen, its anemia therapeutics, for income. However, Epogen, which is used in kidney dialysis patients, will go off patent in 2013, and Aranesp's sales in anemia of cancer have fallen since 2007 because of some adverse clinical trial results. The company therefore needs some new products or indications to fill the gap, and these are arriving from a number of directions. Amgen has a new patent for Enbrel, a biologic for rheumatoid arthritis and psoriasis, giving it protection until 2028, and is seeking a new indication for Xgeva, in cancer bone metastases.
In a move to fill earlier spaces in the company's pipeline, Amgen made some big investments in R&D during 2011, with an increase of 19% in net spending on R&D. This investment is funding the development of Amgen's late-stage products. At the J.P. Morgan Healthcare Conference last month, Bradway said positive results for six mid-to-late stage studies would help boost sales at the big biotech.
Bradway will also oversee the outcome of an agreement with Watson Pharmaceuticals ($WPI) to develop and market biosimilars for oncology. The biosimilars market is going to be one that grows, and while innovators have been skeptical (or even scathing) of these forms of biologics, there will be a drive from payers and governments to use them, and many biotechs may have to bite the bullet and accept their existence, and even embrace it as Amgen has done.