- Morgan Stanley comments on Amgen (NASDAQ:AMGN) saying CMS may change reimbursement for "bundled" drugs as soon as November 1st in an effort to target Amgen's practice of tying price on Neulasta to Aranesp volume. Amgen's ability to offer discounts on Neulasta while maintaining Aranesp reimbursement (average sales price or ASP has been constant) has been key to the company's rapid share gains from J&J's Procrit (a superior dosing profile is also important). Firm suspects that CMS is most likely to issue guidance to unbundle these drugs, but that this guidance will be open for public comments before implementation, meaning there will be no impact until 2008 (but creating an additional overhang on Amgen's highly profitable erythropoietin business).
Currently, this issue is likely not on most investor radar screens, but Amgen faces risk both in the courts (J&J is suing for violating anti-trust laws) and at CMS. However, as the CERA trial nears and the focus on competitive threats to the anemia franchise intensifies, bundling and ASP have the potential to become another overhang on the business. Furthermore, loss of bundling leverage could slow the Vectibix launch versus ImClone's Erbitux.
Firm maintaint their Equal-weight rating and $72 tgt.
Notablecalls: That's certainly not good news. Neulasta and Aranesp are both important high margin drugs for AMGN and negative changes there will hurt the bottom line. The chart however looks like the stock in on the road to recovery (AMGN has fought several overhangs over the past 18 months) so I would not overstay my welcome on the short side. Sometimes charts top fundamentals. This may be an example of that.
Currently, this issue is likely not on most investor radar screens, but Amgen faces risk both in the courts (J&J is suing for violating anti-trust laws) and at CMS. However, as the CERA trial nears and the focus on competitive threats to the anemia franchise intensifies, bundling and ASP have the potential to become another overhang on the business. Furthermore, loss of bundling leverage could slow the Vectibix launch versus ImClone's Erbitux.
Firm maintaint their Equal-weight rating and $72 tgt.
Notablecalls: That's certainly not good news. Neulasta and Aranesp are both important high margin drugs for AMGN and negative changes there will hurt the bottom line. The chart however looks like the stock in on the road to recovery (AMGN has fought several overhangs over the past 18 months) so I would not overstay my welcome on the short side. Sometimes charts top fundamentals. This may be an example of that.
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