The Amgen ceo has, despite initial denials, been grappling with a crisis - a bunch of studies indicate its Aranesp flagship med can increase the risk of cardiovascular disease, tumor growth and death. Layoffs were begun. The stock price has plunged. On Thursday, an FDA panel will review safety issues. Jim Reddoch of Friedman Billings Ramsey issued an investor note this morning predicting the agency will issue still more restrictions on Aranesp usage, even after last week’s label warning. And so The Wall Street Journal chats with Amgen’s Kevin Sharer about his predicament. This is an excerpt…

WSJ: You have had some rough times. What’s your outlook for the company?
Sharer: The last year was the most difficult in our history. We had an unexpected $800 million to $1 billion hit to operating income due to safety concerns about one of our medicines. By restructuring the company to manage expenses, we delivered earnings per share within a penny of the original guidance. The affected medicine, Aranesp in oncology, is half the level that it was in the US a year ago. But it’s stable. I regret deeply the shareholder-value consequences. But this is the most challenging time in my 16 years. All things considered, we’re ready for 2008.

WSJ: There were rumors last year that big pharma companies were looking at Amgen, and that you might be vulnerable to a takeover. How important are these next drugs to your survival as an independent company?
Sharer: Denosumab is important to Amgen, but it’s not vital to our corporate survival. If [it] were a failure, Amgen would grow, not at an industry leading rate, but we would still grow. It’s nothing like some other large companies I have sympathy for, for example, Pfizer (having) to replace Lipitor. It’s nothing like that. We’re not trying to replace some certain revenue loss. It’s all about how much will we grow. As to vulnerability, Amgen has all the money we need to pursue our pipeline. We have the technological capability. We don’t face any near-term patent expirations. We’re self-sufficient. We don’t need a partnership. If somebody (is) going to do something hostile, we can’t control that. I’m not worried about that. What I’m worried about is managing Amgen to the best of our ability.

WSJ: Would you get some advantages from a size and scale that you don’t have?
Sharer: I actually think the reverse. When you think about gigantism in our business, the idea of “big” and “innovation” aren’t two words you usually put together. As you look at the examples where this has been tried, I think there’s a general belief that gigantism is antithetical to biopharmaceutical innovation.

WSJ: As society moves in the direction of universal health care, there’s been a crescendo on keeping costs down. At what point does that impair your ability to produce?
Sharer: I think that in America we will always reward and pay for innovation. If we develop a drug for some disease that doesn’t have a treatment, say Alzheimer’s, I think we’ll get full value for that investment. I think on the margins is where the questions might come out. If it’s a third-in-class [drug] with a very minor difference, that’s where pressure might get applied. And, you know, that might not be bad. I don’t think anybody wants to kill innovation.

WSJ: How is it that you get through the anemia-drug clinical trials and the FDA process, and then later in post-marketing surveillance other safety concerns come up? How do we consumers weigh risks and benefits?
Sharer: The broadest concern you expressed, which I share, is how as a society we achieve multiple goals that are in conflict. Society wants my industry to go after the toughest diseases we know, to take big risks, to make breakthroughs, to invest money to bring efficacious drugs to market. We want to do it, too.

But then as a consumer, you rightly expect to be informed of the full risk/benefit dynamic of a medicine. So how do we do enough testing to make sure that the risk is fully understood - which as an aspiration is important, (but) practically it’s hard to do. How do we judge after a 10,000-patient clinical trial - which is statistically proper and well run and designed - how that medicine is going to perform in a population of 10 million over the next 10 years? We’ve got to be alert because all the biologies in this room are different. We’re not all identical.