West Coast Editor
Genentech Inc.'s lackluster fourth-quarter and year-end earnings turned investor hopes to the year ahead with Avastin in breast cancer, Rituxan against autoimmune diseases and a pipeline that includes the Phase II-ready Hedgehog pathway antagonist partnered with Curis Inc.
Analysts at Leerink Swann, though, predicted in a research report that lessened sales of key products and the lack of a major growth driver "could position [Genentech] shares for flattish performance in 2008."
After the bell Monday, South San Francisco-based Genentech reported adjusted 2007 revenue of $11.7 billion, up 26 percent over 2006, with adjusted earnings of $3.1 billion, or $2.94 per share, up from $2.3 billion, or $2.23 per share. Wall Street consensus called for $3.1 billion, and $2.92 per share.
Fourth-quarter adjusted earnings reached $737 million, or 69 cents per share, with revenue of $2.96 billion, somewhat beating the expected $720 million, or 68 cents per share, on $2.9 billion in revenue.
Genentech's stock (NYSE:DNA) closed Tuesday at $69.62, down $1.02.
Arthur Levinson, chairman and CEO of South San Francisco-based Genentech, during a conference call hailed "another year of significant growth," although sales of Avastin (bevacizumab) for colorectal cancer (CRC) and non-small-cell lung cancer in the U.S. - $603 million for the quarter, a 23 percent rise over the same period in 2006 - disappointed analysts.
A regulatory filing for would-be Avastin competitor Erbitux (cetuximab, ImClone Systems Inc.) in first-line CRC has been delayed pending final results from the trial known as CRYSTAL late this year or early next. Interim CRYSTAL data disclosed during the American Society of Clinical Oncology suggested overall survival might not be great. Avastin, meanwhile, sold well over $2.2 billion for the full year, 32 percent more than 2006.
Another potential challenger in first-line CRC is Thousand Oaks, Calif.-based Amgen Inc.'s Vectibix (panitumumab), cleared in September 2006 for CRC that has spread despite standard chemotherapy. Last spring, though, Amgen stopped a Phase III trial with Vectibix as part of a dual-biologic, first-line regimen due to lack of efficacy and toxicity concerns. (See BioWorld Today, March 26, 2007.)
Data from the Phase III AVADO trial with Avastin in first-line metastatic breast cancer, expected in the first half of this year, could boost off-label use, and hopes remain high that the FDA will approve the drug in that indication, based on data from AVADO and from another study known as ECOG 2100.
It's a toss-up. An FDA advisory panel in December narrowly recommended against approval of Avastin for breast cancer. The drug boosted progression-free survival (PFS, the primary endpoint of ECOG 2100), but that didn't mean a statistically significant improvement in overall survival, the secondary endpoint. By the PDUFA date of Feb. 23, the FDA probably will ask for more data - due this year not only from AVADO but also from another large study called RIBBON-1.
The question is whether the FDA, which likes PFS as a primary endpoint but not so much as a surrogate endpoint of survival, can be persuaded by more PFS (and safety) data. Analyst William Tanner, with Leerink, "continues to believe that outright approval is unlikely, even with additional results from AVADO and RIBBON-1," and he predicted in his report that Genentech will end up with "post-approval commitments" related to Avastin in breast cancer.
Participants in the earnings call wanted to know whether Avastin could grow in the double digits next year without the breast-cancer approval. Overall guidance ranged between 12 percent and 17 percent in earnings-per-share growth for this year over 2007.
David Ebersman, chief financial officer, noted that "the range [of 2008 guidance] we provided does accommodate the possibility that we won't get the approval for Avastin in breast cancer this year," though the upper end allows for the possibility that the FDA might say yes.
Ian Clark, vice president of commercial operations, noted that in the third quarter, "we had a good increase in revenue and yet I couldn't report an increase in [Avastin's] penetration in lung cancer. This time around, I've got almost the reverse." Potential growth remains in NSCLC, he said, as well as renal-cell cancer and glioblastoma.
From Erbitux, Avastin faces a threat in NSCLC as well, but ImClone's disclosure in September that its FLEX study with Erbitux yielded statistically significant improvement in overall survival brought no data, and results will not be offered until this year's ASCO meeting - and Erbitux will have to beat Avastin's formidable median survival rate of 12.3 months.
Susan Desmond-Hellman, president of product development for Genentech, pointed to November's Phase II data showing 36 percent of patients with glioblastoma treated with Avastin alone and 51 percent of patients treated with Avastin combined with irinotecan chemotherapy lived without the disease advancing within six months. Preliminary estimates of tumor response were observed in 21 percent of patients treated with Avastin alone and in 34 percent of patients treated with Avastin in combination with chemo.
"We continue to believe in Avastin for metastatic breast cancer, based on the really strong, literally unprecedented increase in PFS that we saw in ECOG 2100, but it isn't just Genentech," she said. "The field believes Avastin is adding value for breast cancer, or the oncology thought leaders wouldn't put Avastin in the adjuvant setting."
Whatever the FDA decides to do, the AVADO results will impact how the field regards Avastin's worth in first-line breast cancer, she said.
Genentech's Rituxan (rituximab, which targets the CD20 antigen, for non-Hodgkin's lymphoma and rheumatoid arthritis) sold $596 million for the quarter, up from $560 million in 2006, and well over $2.2 billion for the year, up from about $2 billion. Rituxan data, too, are due in the first half of this year. The Phase III EXPLORER trial is testing the drug against lupus.
Herceptin (trastuzumab) continues to perform well, selling $327 million in the fourth quarter, compared to $322 million in the previous year's period, and about $1.2 billion for the year, up 4 percent over 2006.
Although Lucentis (ranibizumab) seems to have shrunken, with $197 million in U.S. sales for the quarter compared to $217 million the previous time around, the full-year numbers tell a different story for the age-related macular degeneration therapy, which sold $815 million in 2007, 114 percent more than the $380 million in 2006.
That could mean - as analyst Bret Holley with Oppenheimer believes - that new patients are starting Lucentis, and those on treatment longer are getting less frequent doses. In Tanner's view, Lucentis sales "continued to be negatively impacted by the use of Avastin" in AMD.
Lucentis has been the subject of controversy. Genentech sent a direct-to-patient letter comparing side effects (as listed on labels) of intravenous Avastin compared to Lucentis, which is injected into the eye.
Consultants queried by Jefferies & Co. found the match-up unfair, since the delivery routes differ, and the letter "caused alarm amongst some patients treated with Avastin."
According to Jefferies, the anxiety could mean more delays in enrollment of a Phase III trial sponsored by the National Institutes of Health that would try Avastin and Lucentis head to head, since patients might fear the Avastin side effects. Patients might boycott Genentech trials outright, allowing for trials with competitive products to gain ground.
Among others in the AMD space are Tarrytown, N.Y.-based Regeneron Pharmaceuticals Inc. with a Phase III trial of its VEGF Trap-Eye, which offers less frequent injections than Lucentis. Opko Health Inc. is in Phase III with the anti-VEGF small interfering RNA drug bevasiranib, which could be used with Lucentis.
With Curis, of Cambridge, Mass., Genentech plans Phase II trials in one or more solid tumor indications with the lead systemic Hedgehog antagonist during the first half of this year. (See BioWorld Today, Dec. 13, 2007.)