As unpleasant as chemotherapy is, infections can make it even worse. To paraphrase the old saying, reduce cancer patients’ risk of sepsis, and the world will beat a path to your door. Amgen Inc. (AMGN) did precisely that on its way to becoming a $120 billion company, while extending hundreds of thousands of lives in the process.
Founded in 1980, the former Applied Molecular Genetics does one thing, and that exceptionally: human therapeutics. Greatly simplifying things, Amgen is a drug manufacturer. But its pharmaceuticals go well beyond mere headache and joint pain relief. Amgen’s big sellers (Neupogen, Prolia, Vectibix, among others) treat low white blood cell counts, osteoporosis and colorectal cancer, respectively. Serious drugs for the most serious of conditions. (For related reading, see: How Johnson & Johnson Became a Household Name.)
American health care in the 21st century being what it is – an endless series of intermediaries, both private and governmental, inserting themselves as parties to every transaction no matter how minimal – Amgen’s direct customers aren’t patients, but rather consortia. Just three of those, Cardinal Health Inc. (CAH); AmerisourceBergen Corp. (ABC); and McKesson Corp. (MCK), account for three-quarters of Amgen’s worldwide sales.
7 Drugs = The Bulk of Sales
Amgen sells almost exclusively in North America and Europe, 77% of its revenue coming from the former. As for what exactly Amgen makes, the company’s product line is remarkably small. It’s pretty much just seven drugs, as follows in descending order of importance:
Enbrel, used to combat severe arthritis and similar inflammatory diseases. First synthesized in the 1990s, then sold to a company that Amgen later bought, Enbrel is patented through 2028. A syringe containing 50 milligrams of Enbrel can cost around $700. Even the most gallant Third World attempt at a generic reduces that price by only a couple of hundred dollars. Amgen sold $4.6 billion worth of Embrel last year.
$4,600 a Dose
The company sells almost as much Neulasta as it does Embrel, within a percentage point or so. Compared to the former, the latter is a steal. Neulasta, one of Amgen’s two primary white blood cell stimulants, comes in 6-milligram syringes that sell at the retail level for $4,600. That princely sum is a bargain when the alternative is having bone marrow that produces too few leukocytes. Together, Embrel and Neulasta represent half the sales of one of the world’s largest corporations. (For related reading, see: How Merck Found its Way into Millions of Medicine Cabinets.)
Amgen’s second-tier offerings – Epogen, Aranesp and the aforementioned Prolia – each make up about one-tenth of the company’s sales. The first two are the red blood cell counterparts to Neulasta and Neupogen. In fact, Epogen and Aranesp have the same chemical formula. They differ mostly in their accompanying preservatives, the major practical difference being that Aranesp has a longer half-life. And a much higher price. A 1-milliliter vial of Epogen can cost $300, while a 300 microgram syringe of Aranesp goes for around $2,100.
High Prices for a Reason
Keep in mind that as astounding as these prices may seem, a) they’re almost always covered by insurance, b) the political landscape is such that no one’s going to pay that much out of pocket anyway, c) again, most patients will agree that they’re worth every penny, and d) it’s not as if anyone takes most of these drugs daily. Regarding Prolia, for instance: it’s an antibody used to make bones denser and less susceptible to breakage. While it sets the buyer back over $900 for a 1-milligram syringe, that syringe is administered only twice a year. (For related reading, see: Evaluating Pharmaceutical Companies.)
That leaves Neupogen and Sensipar on the list of Amgen’s biggest moneymakers. The former is another white blood cell stimulant, used only on cancer patients who’ve already grown tumors. Neupogen sales made up 8% of Amgen’s total revenue for the most recent fiscal year. The drug is also sold by various Amgen competitors, the patent having expired in December 2013. Amgen’s version costs $320 for a 300-microgram syringe, and the company sold about 4.6 million such doses last year. (A little mathematical note: That means that in 2013 the company synthesized only about three pounds of filgrastim, the systematic name of Neupogen. In other words, we've found a substance far, far more expensive than printer ink.)
Rounding out Amgen’s therapeutic septet is Sensipar, which is used to combat the effects of failing kidneys, and thus modify calcium levels in end-stage patients. Sensipar prolongs quality of life when it’s needed most. And it accounts for 6% of Amgen’s revenue, which means a cool billion. Sensipar is also by far the cheapest of Amgen’s major pharmaceuticals, going for $18 a pill. (For related reading, see: How Gilead Sciences Became a Big Name in Biotech.)
The Bottom Line
There are few endeavors more noble than healing the suffering (the admonition to do so is right there in Matthew 10:8, before the passage starts getting into cleansing lepers and casting out demons). Amgen and its clinic development team have healed more suffering patients than just about any company in existence. By setting its resources to alleviating physical pain, the company has found its market and profited tremendously. It turned a $5 billion profit in 2013, a number that’s just the latest point on a continuously rising line. (For more, see: Who are Amgen's Main Competitors?)