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Already strong in lung cancer, Tarceva proved its mettle in a Phase III study combined with gemcitabine as a first-line therapy against pancreatic cancer, meeting the primary endpoint of survival improvement.

"The absolute benefit isn't that much, but my sense is that with a dire disease like pancreatic cancer, you're probably going to get off-label use right away," said Christopher Raymond, analyst with Robert W. Baird & Co. in Chicago.

"[Genentech] has recognized this is a modest survival benefit, and kudos to them for that," he added.

Tarceva (erlotinib HCl), for which a new drug application already is pending with the FDA, is being developed in a three-way effort by Melville, N.Y.-based OSI Pharmaceuticals Inc. and Genentech Inc., of South San Francisco, as well as F. Hoffmann-La Roche Ltd., of Basel, Switzerland.

OSI's stock (NASDAQ:OSIP) closed Monday at $68.20, up $5.60, after trading as high as $69.91. Genentech's shares (NYSE:DNA) ended the day at $53.91, up $1.91.

The study tested Tarceva with gemcitabine against gemcitabine plus placebo in the notoriously hard-to-treat indication of pancreatic cancer, 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.

Researchers also found a statistically significant improvement in progression-free survival, but tumor response was no different. First analysis of the safety data found no surprises, with rash and diarrhea the expected side effects.

Tarceva is 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, which was coordinated by the National Cancer Institute of Canada Clinical Trials Group at Queens University in Kingston, Ontario.

Jennifer Chao, analyst with Deutsche Bank Securities Inc. in New York, projected broad use of Tarceva plus gemcitabine in pancreatic cancer, and raised sales estimates for the drug from $160 million to $220 million in 2005, and from $280 million to $360 million in 2006, with approval and launch expected at the end of this year or the beginning of next.

Raising her earnings-per-share estimate to $1.16 from $1.14 in 2005, Chao reiterated a "buy" rating on Genentech, which also has Avastin (bevacizumab) for colorectal cancer and Herceptin (trastuzumab) for breast cancer in its lineup of cancer drugs. Analysts at First Albany reiterated a "buy" rating on OSI.

Raymond was less impressed. He allowed that Genentech has, "without a doubt, the most impressive pipeline in the industry" and noted that the pricing profile for Tarceva looks promising. OSI (which he doesn't cover) has said Tarceva's cost would fall between London-based AstraZeneca plc's Iressa (gefitinib), for non-small-cell lung cancer (NSCLC), and Gleevec (imatinab) for chronic myeloid leukemia from Novartis AG, of Basel, Switzerland. Iressa's annual patient cost is about $24,000, and Gleevec's is about $33,000. Raymond estimated Tarceva's at $27,500.

"My fear is that higher-priced therapies like this may not have the tailwind that people thought they would have," Raymond told BioWorld Today, adding that he's concerned about Avastin.

Genentech's second-quarter earnings topped out way above consensus, "which shocked me," he said. Avastin sold $133 million in its first full quarter of sales. Consensus was $85 million.

"Some were looking for numbers that high, and I give them credit for being right," Raymond said. "But [Genentech's share price] has since gone from the high $50s to the low $40s. It was a fair amount of momentum money that was probably driving the valuation." The stock since has rebounded.

"I've been wrong in the near term on Avastin, but I'm still not as optimistic [as others] on that drug's prospects next year," he said.

OSI and Genentech filed the NDA in July for Tarceva as a monotherapy for patients with advanced NSCLC who have failed at least one standard chemotherapy regimen, and in mid-September the two firms launched a Phase IIIb study called ACT (Access to Care, Tarceva) to make the drug available to more patients until the FDA makes its decision, expected early next year. (See BioWorld Today, Aug. 3, 2004, and Sept. 13, 2004.)

OSI, which licensed Tarceva to Genentech (in which Roche owns a large interest), saw its share price soar 138 percent in the spring on the news of Tarceva's efficacy against NSCLC. Raymond said Tarceva also has potential in head and neck, ovarian and metastatic breast cancer. (See BioWorld Today, April 27, 2004.)

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