At the end of last year, I proclaimed Omontys — an erythropoiesis-stimulating agent, or ESA, that aids in the formation of red blood cells — as one of my 10 drugs approved by the Food and Drug Administration in 2012 to be thankful for. The drug, developed by Affymax, Inc.(NASDAQ:AFFY) and Takeda Pharmaceutical Company Limited, was designed to be a once-a-month injectable treatment for patients on dialysis with chronic kidney disease. Today, it’s the straw that broke Affymax shareholders’ back.
On Saturday, Affymax and Takeda, in cooperation with the FDA, announced the voluntary recall of all lots of injectable Omontys. According to the release, more than 25,000 patients have received the anemia drug since it launched, with 0.2% of them responding with a hypersensitivity reaction that — in a third of those patients — led to anaphylaxis. Fatal reactions were reported in 0.02% of all cases where Omontys was administered.
Houston, we have a problem.
For Takeda, the blow isn’t as severe, as it’s a large pharmaceutical company with dozens of partnerships. For Affymax, this is a completely different story.
In its third-quarter results, released in November, Affymax noted Omontys sales of just $15 million — it wasn’t exactly selling like hotcakes to begin with — and noted at the time that the company wouldn’t be receiving any further milestone or profit equalization payments from Takeda for 2012. Moving forward, it’s not going to be receiving anything as Omontys is Affymax’s only approved drug. Keep in mind that operating expenses including stock-based compensation were guided to a whopping $130 million to $135 million last quarter, and it boasts just $100 million in cash and investments.
OK… breathe… Affymax had to have thought this through and clearly has other compounds in its pipeline, right? That’d be wishful thinking because it only has two other compounds in clinical trials: a late-stage conversion study on — you guessed it — Omontys for use as a once-a-week ESA as opposed to three times a week, and a mid-stage study outside of the U.S. utilizing Omontys to treat dialysis and non-dialysis related anemia for patients with pure red cell aplasia.
(Bangs head on table)
It gets even worse. Let’s assume for a moment that Affymax and Takeda are able to work out these not-so-minor kinks with Omontys to the FDA’s satisfaction — it’ll still be giving Amgen, Inc. (NASDAQ:AMGN) even more time to further its market share lead. Amgen, which makes Epogen — the leading anemia treatment for the past two decades — fortified its market-leading spot a while ago by signing multi-year dialysis center agreements with DaVita HealthCare Partners Inc (NYSE:DVA) and Fresenius Medical Care AG & Co. (ADR) (NYSE:FMS). They’re arguably the two biggest names in dialysis, as my Foolish colleague Brandy Betz noted last month. While this doesn’t negate Affymax from dealing with DaVita and Fresenius, it makes orchestrating an agreement far less likely.