Tarceva, the eye-opening cancer drug with a new drug application pending, typically is regarded as another feather in the cap of Genentech Inc., whose headgear already is festooned with plumage.

Sure enough, the compound - which last week made headlines again for its efficacy in pancreatic cancer - represents one of many reasons to own stock in the pioneering firm.

Overshadowed in the hoopla is OSI Pharmaceuticals Inc., which licensed Tarceva (erlotinib) to Genentech. (The drug is being developed in a three-way effort by OSI, Genentech and F. Hoffmann-La Roche Ltd., the overseas partner.) OSI undoubtedly feels the pleasant impact of favorable Tarceva news - the company's shares soared 138 percent on word this spring that the compound worked against non-small-cell lung cancer (NSCLC), and rose to a lesser degree on last week's disclosure about pancreatic cancer. But OSI doesn't get the spotlight as often as Genentech.

Partly that's a function of Genentech's leading position, and the company would be closely watched with or without Tarceva, a small-molecule pill designed to block tumor growth by inhibiting the tyrosine kinase activity of the HER1/epidermal growth factor receptor signaling pathway inside the cell. OSI sponsored the study reported last week, which was coordinated by the National Cancer Institute of Canada Clinical Trials Group at Queens University in Kingston, Ontario.

Genentech has, among other products, Avastin (bevacizumab) for colorectal cancer and Herceptin (trastuzumab) for breast cancer in its oncology lineup. Jennifer Chao, analyst with Deutsche Bank Securities Inc., is projecting Genentech's earnings per share to hit $1.16 next year. She rates the stock "buy," and expects approval and launch of Tarceva late this year or early next.

Christopher Raymond, analyst with Robert W. Baird & Co., called the pancreatic cancer results satisfying and estimated off-label use for the drug after it's approved for NSCLC would reach $341 million by 2007. Still, he's not jumping up and down about Genentech overall, on which he has a "neutral" rating.

"I can't look somebody in the eye and say, You've got to buy this stock' [at the current price]," he told BioWorld Financial Watch. "There are certainly things that can change, but what has been driving my thesis on this name for some time is general nervousness about having expectations that are too much too soon for Avastin."

Avastin did, though, beat by a vast margin consensus estimates in sales for the second quarter (the product's first full quarter of sales), topping out at $133 million, with $1 billion projected next year. Even Raymond pointed out in a research note that Genentech is a "great commercial success story" with revenues in 2003 more than $3.3 billion, driven largely by the oncology products - just more than $1.9 billion - and helped by the "diversity of [the company's] revenue sources."

But that's Genentech. OSI had been developing Tarceva with Pfizer Inc., but the Federal Trade Commission forced the giant pharmaceutical company to drop the partnership in order to complete its acquisition of Warner-Lambert Co. Separately, OSI has Novantrone (mitoxantrone concentrate for injection) for oncology indications, as well as multiple sclerosis (marketed in that indication by Serono SA) and Gelclair for the relief of pain associated with oral mucositis. In the pipeline are gene-targeted therapies focused on signal transduction and apoptosis, along with next-generation cytotoxic chemotherapy agents.

The pancreatic cancer study tested Tarceva with gemcitabine against gemcitabine plus placebo in that quickly fatal indication, which only about 20 percent of patients survive one year after diagnosis. Results showed a 23.5 percent improvement in overall survival for patients with locally advanced or metastatic disease, compared to patients given gemcitabine plus placebo.

A total of 569 patients were randomized, with 521 getting 100 mg/day Tarceva or placebo and 48 patients given 150 mg/day Tarceva or placebo. Median and one-year survival in the Tarceva plus gemcitabine arm totaled 6.4 months and 25.6 percent, respectively, compared to 5.9 months and 19.7 percent in the gemcitabine plus placebo arm. Though the benefit was "modest," as Raymond said, reaching statistical significance always is meaningful.

For OSI, missing that significance hasn't always meant punishment, either. The company in June said its drug Aptosyn in combination with Taxotere missed its primary and secondary endpoints in a Phase III study in NSCLC patients - and OSI's stock rose slightly that day.

Aptosyn (exisulind) inhibits cGMP phosphodiesterases, thus activating the intracellular signaling protein, protein kinase G, and stimulating apoptosis through the c-Jun kinase pathway. OSI is developing the drug as part of the Selective Apoptotic Anti-Neoplastic Drug platform it acquired via its $32 million stock buyout of Cell Pathways Inc. in the summer of 2003. Taxotere (docetaxel) is Aventis SA's chemotherapeutic agent.

The approach wasn't expected to work. Even OSI had said inadequate Phase II data with the inherited compound suggested that prospects for Phase III success were low. But it went ahead with the fully enrolled, randomized, double-blind Phase III study designed to test overall survival in patients with advanced NSCLC (the primary endpoint) and to demonstrate improvement in one-year survival, progression-free survival and response rate (the secondary endpoints).

Even some initial bad news with Tarceva didn't hurt OSI (or its partners) much. In October 2003, the companies disclosed failing data from two front-line combination studies of the drug in NSCLC, with limited consequences on Wall Street. AstraZeneca plc had run into similar difficulties earlier with Iressa (gefitinib), an EGFR inhibitor approved in the U.S. for NSCLC. OSI was hurt by the Iressa news, losing more than 57 percent of its stock value in August 2002, when AstraZeneca disclosed that Iressa failed to improve survival in NSCLC when added to first-line standards of care.

The picture has changed, as OSI's CEO Colin Goddard noted when he spoke at the Bear Stearns Healthcare Conference earlier this month in New York. Ending fiscal year Sept. 30 with about $245 million in cash and outstanding debt of about $150 million, OSI with 500 employees knows where its energy must go, at least for now.

"Clearly for the last several years, we've been investing quite heavily in a very expansive Phase III program for Tarceva," he said, adding that Tarceva "will remain the focus and has to do so," as the firm plans to pursue an "aggressive post-approval development strategy" and "move [Tarceva] forward into healthier and healthier patients."

The past year, Goddard noted, "has been a very dramatic one, and we're just now entering what will prove to be a critical juncture in the history of the company."

No Comments