July 28 (Bloomberg) -- Amgen Inc. and GlaxoSmithKline Plc said they will jointly market denosumab, Amgen’s novel treatment for osteoporosis that may reach annual sales of $2 billion within a decade.

Glaxo will pay $120 million initially for near-term milestones to share profits in Europe and sell the drug in countries where Thousand Oaks, California-based Amgen doesn’t have a presence, including China, Brazil, India and South Korea, the companies said in a statement. Amgen will market the drug in the U.S. and Canada and retain rights to sell it for cancer in Europe once approved.

Amgen is looking to denosumab to generate revenue and replace declining sales of medicines that treat anemia and arthritis. Denosumab, designed to be injected twice a year, will be reviewed Aug. 13 by U.S. Food and Drug Administration advisers as a treatment for osteoporosis in post-menopausal women. It also is being tested for use against a variety of cancers.

“When you talk about the osteoporosis setting you are dealing with a very competitive market against a well-known generic, so a sure-footed marketing and partnering strategy will be critical,” said John Sonnier, an analyst with William Blair & Co. in Chicago, in a telephone interview before the announcement.

Amgen gained $1.65, or 2.7 percent, to $62.42 at 4 p.m. New York time in Nasdaq Stock Market composite trading. Glaxo rose 8.5 pence to 1,171.5 pence in London trading.

$2 Billion

Denosumab may grab $2 billion of the $8.7 billion annual market for osteoporosis by 2018, according to a June report by the sales research firm Decision Resources, based in Waltham, Massachusetts.

Glaxo beat 10 other companies for the partnership, Amgen executives said on a conference call yesterday.

“Not all biopharmaceutical companies are targeted at therapeutic areas like osteoporosis that have such a sizable potential,” Eddie Gray, head of Glaxo’s European pharmaceuticals division, said today in an interview. “We were able to convince Amgen that that our experience was extremely valuable and they’ve taken that view as well. We’ve also identified biopharmaceuticals as an area we haven’t been traditionally involved in.”

The drug may cost patients about $1,200 a year, Yaron Werber, an analyst at Citigroup in New York, said yesterday in a telephone interview. Assuming Amgen receives a 25 percent royalty on sales outside the U.S., denosumab can generate $958 billion worldwide by 2012, Werber said. The companies didn’t disclose the specifics of how profits will be shared.

Partner in Europe

“Our collaboration with GlaxoSmithKline will help Amgen bring the promise of denosumab to patients in Europe and other parts of the world more effectively than if we commercialized the drug globally on our own,” said Amgen Chief Executive Officer Kevin Sharer in the statement.

Jim Daly, an Amgen senior vice president, said at a Nov. 7 investor meeting that a sales force of 800 to 1,500 would be needed to promote the drug in Europe, and 500 to 1,000 representatives would be needed in the U.S.

More than 200 million people worldwide, including 25 million in the U.S., have osteoporosis, a disease that causes bones to deteriorate and break. The condition mostly affects elderly women.

Because the most common treatment, Merck & Co.’s generic Fosamax, is a daily pill, Amgen “will need to change the way doctors think to get them to use an injectable for osteoporosis,” said Chris Raymond, an analyst with Robert W. Baird & Co. in New York, in a telephone interview.

In Line

Amgen will charge about $850 a year for denosumab, in line with other brand-name medicines for osteoporosis, said Eric Schmidt, an analyst with Cowen & Co. in New York, in a note to clients. He estimates the drug will generate more than $1 billion a year by 2015.

Fosamax had $3 billion in sales in 2007 before cheaper generic copycats came on the market and cut into revenue, according to data compiled by Bloomberg.

Amgen is betting doctors and patients want an alternative that adds benefit beyond those offered by Fosamax and other osteoporosis pills known as bisphosphonates. Those include Boniva, sold by Basel, Switzerland-based Roche Holding AG and Glaxo, Novartis AG’s Reclast and Procter & Gamble Co.’s Actonel.

$1 Billion

Boniva generated $434.3 million in sales last year for London-based Glaxo and $1.02 billion for Roche. Actonel generated more than $1 billion last year, Procter & Gamble spokeswoman Tom Millikin said in a May 13 interview. Reclast, also marketed as Aclasta outside the U.S., had $254 million in revenue last year, according to Bloomberg data. The medicine was approved in August 2007 by U.S. regulators and in October that year by European officials.

As many as 70 million patients will be afflicted with osteoporosis in Europe by 2012, meaning denosumab won’t compete with Glaxo’s partnership for Boniva, Gray said.

“Osteoporosis is one of those conditions where the growth in the number of patients is really quite marked,” Gray said. “Physicians are always looking for complementary action.”

Amgen’s drug is faster acting, easier to give to patients, and free of side effects found with bisphosphonates, studies have shown. Fosamax and similar medications can, in some cases, make jaw bones crumble, and are tied to nausea, diarrhea and constipation, doctors say.

To contact the reporters on this story: Tom Randall in New York at trandall6@bloomberg.net; Lisa Rapaport in New York at Lrapaport1@bloomberg.net

Last Updated: July 28, 2009 16:23 EDT