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Affymax's Stock Soars on Hope for Anemia Drug Approval


A panel of government advisers voted 15-1 to recommend US approval of a treatment for kidney failure patients. If approved, Affymax would take on market leader Amgen.

Affymax's (AFFY) stock is surging after government advisers recommended the company's treatment for kidney failure patients be approved.

A panel of Food and Drug Administration expert advisers voted 15-1 to approve peginesatide, a treatment for dialysis patients with anemia caused by chronic kidney failure. The FDA, scheduled to make a final decision by March 27, is not bound by the recommendation.

It would be the first drug approved for Affymax, which lost more than $400 million over the past decade. Along with development partner Takeda Pharmaceutical of Japan, Affymax would take on Amgen (AMGN) and its leading anemia drug Epogen. Takeda has sales rights for peginesatide outside of the US.

Shares of Affymax rose 26% to $7.37 in early trading Thursday. The stock rose earlier in the week on hope for a positive panel vote. Amgen rose 1% to $58.92.

Safety concerns with peginesatide have hurt Affymax's stock, which traded above $24 a share in the first half of 2010. Affymax's shares crashed in June of last year when research showed heart risks associated with taking the drug. However, that study involved patients who were not on dialysis. Affymax is seeking approval for treating those on dialysis. In briefing documents released earlier this week before Wednesday's meeting of FDA advisers, the agency's staff reiterated concerns about patient safety but noted the treatment worked.

If approved, Affymax will face a very dominant player in Amgen, which just last month signed supply agreements with the two largest kidney dialysis clinic operators in the US, according to Reuters. Amgen signed a 7-year contract with dialysis company DaVita to provide at least 90% of the clinic owner's medicine needs. Amgen also has a multi-year deal with Fresenius Medical Care, though that deal is not exclusive, according to Reuters.

Robert W. Baird analyst Christopher Raymond estimates Amgen locked up 70% of the market for providing dialysis centers with drugs. He says, however, that the 30% remaining market share still represents a large sales opportunity, and he suspects some clinic operators may opt out of agreements if Affymax prices its drug lower than Epogen. Raymond recommends buying the stock and has a $13 price target on the shares.

On a conference call with investors and analysts Thursday morning, Affymax execs said they haven't finalized a price.

"We know the market is very price sensitive," CEO John Orwin says.

As for the uphill battle against Amgen, Orwin says he believes customers -- the dialysis centers -- would welcome a competitor to Epogen. "We feel comfortable that there's a pent-up demand out there," he says.

Affymax's drug also is designed to be dosed once a month, which is less frequent than Epogen. That allows Affymax to tout the convenience factor of the drug.

Twitter: @brettchase

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