West Coast Editor
Anxiously awaited news regarding Avastin data from a Phase III study in breast cancer broke Tuesday, and - although many analysts had predicted mixed results at best - investors' faith in Genentech Inc.'s drug may have developed a few cracks.
"This was worse than expected," said Martin Auster, analyst with SunTrust Robinson Humphrey in Atlanta, calling South San Francisco-based Genentech "the most prolific and productive biotech industry member" despite a year of product setbacks.
Avastin (bevacizumab), an antibody directed at vascular endothelial growth factor (VEGF) missed its primary efficacy endpoint of progression-free survival in relapsed metastatic breast cancer, but the company said a secondary endpoint - overall response rate - achieved statistical significance in the 462-patient trial. That secondary endpoint, though, still didn't translate into benefit with regard to progression-free survival or 12-month survival.
The company's stock (NYSE:DNA) slid $3.11 Tuesday, or 9.7 percent, to close at $28.89. Hopeful investor eyes turned to the lead Phase III study with Avastin in 900 colorectal cancer patients, results from which are due in mid-2003. Phase II trials in non-small-cell lung and kidney cancers have been completed.
In the Phase III breast cancer study, patients were given Avastin with Xeloda (capecitabine) chemotherapy or Xeloda alone. Adverse events were similar to those in Phase II studies, including venous thrombosis, hypertension and asymptomatic proteinuria. No serious increase in bleeding was recorded in the Avastin arm of the study, however.
Genentech said it was pleased with the overall safety profile, and views VEGF as a potentially important target in cancer therapy. Auster, however, said the market is "starting to write off [drugs]" that meet hurdles.
"If the Avastin news [in colorectal cancer] is screamingly positive, it will be a shock to everybody," he said, noting that Genentech has had "five or six negative events this year."
Among those events: In February, Tracleer (bosentan), partnered with Switzerland-based Actelion Ltd., failed a Phase III trial for congestive heart failure. The biologics license application for Genentech's psoriasis drug, Raptiva (efalizumab), has been delayed. Genentech lost its court dispute with the City of Hope National Medical Center. And the company's cancer drug Tarceva (erlotinib HCl, also known as OSI-774), a small-molecule inhibitor of the epidermal growth factor receptor, which is partnered with Melville, N.Y.-based OSI Pharmaceuticals Inc., suffered fallout from the failure of Iressa, London-based AstraZeneca plc's EGFR inhibitor for cancer. (See BioWorld Today, Feb. 8, 2002; Aug. 5, 2002; and Aug. 21, 2002.)
"A substantial gray cloud hovers over Tarceva and thunder and lightning can be heard and seen in Avastin's vicinity," Auster wrote in a research report.
The Avastin failure, he told BioWorld Today, is "the last straw, and it's going to make people reluctant to get back into Genentech. They just don't have a clean product right now."
But Auster predicted the company would make a comeback, and said the stock is a worthy buy "if you can be patient and hold out until things clear up."
The colorectal cancer trial with Avastin may not be what accomplishes the clearing up, he said, although it's similar to the Phase II study in that indication, which proved encouraging. A similar precedent wasn't available for breast cancer.
"They had never really tested it in people who previously failed chemotherapy in breast cancer," Auster said. "If you want to argue it from that end, there's more reason to believe it will work in colorectal cancer. But the [VEGF] mechanism isn't very well understood."
Auster said Genentech's stock is likely to "exhibit considerable weakness with its core cancer franchise in doubt," but he is optimistic about the company overall and expects biologics license application filings for Raptiva and Xolair (omalizumab), Genentech's asthma treatment partnered with Basel, Switzerland-based Novartis Pharma AG, by the end of the year.
Lowering Genentech's rating from "outperform" to "buy," Auster guessed the stock would fall between 15 percent to 20 percent on the breast cancer Phase III news, although the damage proved not quite as severe.
"There might have been [short-selling] going on ahead" of the data disclosure, he said, adding that Genentech's stock price has integrated some of its woes already.
"We took our target price down to $33, a reasonable place for the stock to get to, without much more happening," Auster said. "At some point, I think, Tarceva will find a niche and the EGF concept will find a niche. It's going to take a bit of luck."