Already getting the colloquial hairy eyeball from some observers because of slowed (though still strong) sales, Avastin stumbled further last week on news that the FDA wants more information about breast cancer trials, pushing approval back about a year.

Wall Street nicked Genentech Inc.'s stock sharply, taking away $3.74, leaving the shares at $78.33. "Given the sell-off, it seems to me that people have been reading more into this than exists," Christopher Raymond, analyst with Robert Baird & Co., told BioWorld Financial Watch.

What investors might have feared was easy to see. Now that Avastin has met trouble broadening its label for breast cancer, what might happen to Genentech's bid with the drug against non-small-cell lung cancer? The FDA's decision on that indication will come in October.

The breast cancer trial, conducted in 685 subjects by a network of researchers led by the Eastern Cooperative Oncology Group, ended early on positive results. Progression-free survival in metastatic breast cancer patients given Avastin plus paclitaxel reached 11 months, compared to six months with paclitaxel alone.

But the FDA wants the data further sorted and sifted just as they would be if the trial had been company sponsored, which means (among other things) an independent review of patient scans.

Listeners to the second-quarter earnings conference call might have heard the bad news coming. "As you know, [PFS] is a softer endpoint than [overall] survival, so it requires more dialogue and documentation," Susan Desmond-Hellman, president of product development for Genentech, told analyst Eric Schmidt, of SG Cowen & Co., adding that negotiations with the agency could go beyond the Nov. 22 PDUFA date.

Her remarks also included cause for optimism regarding Avastin against NSCLC, though the market apparently did not view the matter happily last week. In that pivotal trial, researchers used overall survival as the endpoint, which greatly lessens the chance for difficulty with the FDA - difficulty of the same kind, anyway.

Another plus: The NSCLC data given to regulators are derived from a complete trial, unlike the interim results from the breast cancer study.

Analysts at HSBC Securities Inc. downgraded Genentech's stock from "overweight" to "neutral," and knocked down the target price to $82.50 from $108. But Baird's Raymond, who had a "neutral" rating on the shares before last week's sell-off, upped his rating to "outperform" the day after. Sellers, Raymond wrote in a research note, overreacted, and Genentech's shares became "once again attractive. Accordingly, we are buyers of [the company's stock] into the $90 range," he wrote.

Anti-VEGF Avastin (bevacizumab) sold $1.1 billion last year and $423 million in the U.S. during the second quarter, a 72 percent jump over the same period last year, but forecasters sought $15 million more for the quarter. Times ahead look better, for off-label use and for potential approvals.

Ian Clark, Genentech's vice president of commercial operations, said during the earnings call that "an increasingly large share of the growth is now derived from both lung and breast cancer settings," pointing out that "maybe the new fact" is the increased adoption in breast cancer. Avastin gained a drug compendia listing in breast cancer, which means Medicare and insurance companies will reimburse. A listing for Avastin against lung cancer came in September 2005, but approval in both of those indications will be the key to making investors smile.

Several months ago, a Phase III trial testing Avastin in combination with gemcitabine missed its primary endpoint of overall survival, but no new safety concerns surfaced, and the compound is being tested in more than 100 trials against 25 types of cancer.

Raymond's firm, meanwhile, gets particular encouragement in a recent physician survey by his firm that found use of Avastin in both front- and second-line NSCLC steadily increasing, with almost 20 percent of physicians naming the compound as the most frequently employed front-line agent.

Seventy percent of doctors have used Avastin at least once against the disease. Lazard Capital Markets quoted separate survey data suggesting that physicians will boost their use of Avastin in NSCLC to 36 percent of eligible patients by August 2007.

Genentech reported better news recently, unrelated to the Avastin setback. This month's issue of Arthritis & Rheumatism provided details from the pivotal Phase III study with Rituxan (rituximab), on the basis of which the compound gained a new approval for the cancer drug.

The new regulatory nod clears Rituxan's use in combination with methotrexate to reduce signs and symptoms in moderate to severe adult rheumatoid arthritis patients who have had an inadequate response to one or more tumor necrosis factor (TNF) antagonist therapies.

Rituxan is marketed in the U.S. by Genentech and Biogen Idec Inc. as the first RA therapy that selectively targets CD20-positive B cells, a mechanism of action that could affect multiple pathways by which B cells are believed to contribute to the disease's start and advance.

Rituxan (rituximab), discovered by Biogen Idec, won FDA approval more than eight years ago for relapsed or refractory, low-grade or follicular, CD20-positive, B-cell non-Hodgkin's lymphoma. Sales rose 17 percent in the second quarter over the same period last year to total $526 million.

Genentech did well with its other products, too. Herceptin (trastuzumab) jumped 111 percent to $320 million; Tarceva (erlotinib) increased 47 percent to $103 million; Xolair (omalizumab) increased 31 percent to $105 million; and Raptiva (efalizumab) rose 5 percent to $22 million.

Regarding Tarceva, approved in the U.S. and the European Union for patients with locally advanced or metastatic NSCLC after failure of at least one prior chemotherapy regimen, the Lazard physician poll said use of the compound in second-line and third-line NSCLC will jump by 22 percent and 10 percent respectively.

In pancreatic cancer, Tarceva's share is "robust," Lazard said, with doctors estimating penetration of 24 percent now, rising to 35 percent next year.

The FDA approved Tarceva for that indication in November, and submitted the same data used here to overseas regulators, who viewed it negatively.

Genentech's partner and majority owner, F. Hoffman-La Roche Ltd., asked for reconsideration earlier this month.

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