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Amgen, Novartis Team Up; Bone Drug Positive in Phase III

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Amgen Inc. (AMGN - Free Report) came up with two important corporate announcements – the company inked a neuroscience-focused collaboration with Novartis AG (NVS - Free Report) targeting areas of Alzheimer's disease and migraine and reported positive phase III data on its osteoporosis candidate romosozumab.

Deal with Novartis for Alzheimer's and Migraine

The Novartis tie-up is a worldwide co-commercialization and co-development pact that focuses on both companies’ BACE (beta-site APP-cleaving enzyme-1) programs targeting Alzheimer's disease. While Novartis' BACE inhibitor CNP520 (phase I/IIa) will be the lead molecule under the collaboration, the pre-clinical BACE inhibitor programs at each company will be treated as potential follow-ons.

Amgen will make upfront and milestone payments as well as disproportional research and development (R&D) costs for an agreed-upon period following which cost and profit will be split equally. On the other hand, Novartis will get global co-development and commercial rights to Amgen’s portfolio of experimental migraine candidates – AMG 334 (phase III) and AMG 301 (phase I) – outside the U.S., Canada and Japan. Moreover, Novartis receives an option to commercialize an additional early-stage Amgen molecule in these territories. Novartis will fund disproportional amounts of global R&D and pay double-digit royalties on sales in return for these territorial rights.

We are positive on this deal. The Alzheimer's disease market offers huge commercial potential and a successfully developed product could bring in billions of dollars in sales. Several companies are working to bring their drugs to market. However, we note that the successful development of therapies for the treatment of Alzheimer's is challenging and several companies including Eli Lilly and Co. (LLY - Free Report) have faced significant setbacks in earlier efforts.

Romosozumab Meets Phase III Primary Endpoint

Amgen and its partner UCB S.A. announced encouraging top-line data from a phase III study (STRUCTURE – STudy evaluating effect of RomosozUmab Compared with Teriparatide in postmenopaUsal women with osteoporosis at high risk for fracture pReviously treated with bisphosphonatE therapy) on romosozumab.

The multi-center, international, randomized, open-label, teriparatide (Forteo)-controlled study (n=436) was conducted to evaluate the safety, tolerability and efficacy of romosozumab in women suffering from postmenopausal osteoporosis.

Results showed that patients who transitioned from a bisphosphonate therapy witnessed a statistically significant difference in the percent change of total hip bone mineral density through month 12. On the safety front, adverse events were found to be similar to those previously reported and no new safety issues were reported.

Meanwhile, romosozumab is in an extensive global phase III program comprising two large studies (≥10,000 patients) to evaluate its potential in reducing the risk of fractures in patients suffering from osteoporosis. Data from the first phase III study (FRAME) should be out in the first half of 2016.

Amgen is a Zacks Rank #2 (Buy) stock. Eli Lilly is another favorably ranked stock in the health care sector, also carrying a Zacks Rank #2.

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