(Bloomberg) -- A new cancer drug from Amgen Inc. has grabbed the market's attention as the bellwether biotech company looks to replace aging blockbuster medicines.
Amgen is scheduled to announce a fresh update this weekend for AMG 510, which targets a specific gene mutation that signals tumor cells to grow. The new data, which come less than a month after early results in lung cancer missed some expectations, will focus on colon cancer. Investors want to see at least 30% of patients respond to the drug to spark a rally in the shares, Baird analyst Brian Skorney said.
“There's a positive setup into the data,” Jefferies analyst Michael Yee told clients in a note. He has a buy rating on Amgen shares.
The stock has dropped about 5% since hitting a record last September. As sales from mainstays like Enbrel and Neulasta decline, investors have pinned hopes for Amgen's next big break on two treatments: the asthma medicine tezepelumab and AMG 510. With no data expected for tezepelumab in the near term, AMG 510 has been under the microscope. Options set to expire Oct. 4 suggest traders anticipate a stock move of 3% over the next two weeks.
Amgen will present Saturday at the European Society for Medical Oncology meeting in Barcelona. An early look at the data in June at the American Society for Clinical Oncology conference showed 13 of 18 colon cancer patients had signs of disease stabilization but no one's tumors shrank. Amgen management said later in the summer that the drug was exhibiting its first responses in colorectal and appendix cancers.
Read more: Amgen Slips as Gene-Targeting Drug Misses Some ‘Lofty Hopes'
Durability of benefit will be key after earlier results showed some lung cancer tumors started growing again after patients initially responded to treatment, according to Baird. Terence Flynn of Goldman Sachs, who holds the highest price target for the stock on Wall Street, said more patients now on higher dosing should result in more tumor shrinkage.
Amgen's success could backfire as it may spur more competition with other drugs that target the so-called KRAS gene. Skorney, who has the lowest price target on Amgen shares, said there's nothing to stop competitors from jumping in with their own medicines once there is proof of concept.
Indeed, Amgen's results to date have already driven a rally in shares of mid-cap competitor Mirati Therapeutics Inc. Just two years ago Mirati had a market value below $300 million, compared to $3.5 billion today. Much of those gains have been driven by Amgen's results as investors haven't seen any data yet from Mirati. That will change in the fourth quarter when the company discloses the first look at its KRAS-inhibitor, MRTX849. Johnson & Johnson has also started its own KRAS study.
Mirati shares rallied as much as 7% on Tuesday after Guggenheim analyst Michael Schmidt said shares could more than double, reaching $197 in a bull case if the San Diego-based company could best Amgen's drug. Amgen was little changed.
Wells Fargo analyst Jim Birchenough, who rates Amgen market perform, has taken a more cautious outlook at the burgeoning space and expects combination therapies will be needed to drive lasting responses and control disease. AMG 510 is also being tested in combination with Merck & Co.'s top-selling cancer treatment, Keytruda.
--With assistance from Gregory Calderone.
To contact the reporter on this story: Cristin Flanagan in New York at cflanagan1@bloomberg.net
To contact the editor responsible for this story: Catherine Larkin at clarkin4@bloomberg.net
©2019 Bloomberg L.P.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
