Genentech Shares Fall on Avastin Pricing Fears
Genentech shares traded lower on Thursday after data from a clinical trial indicated that a lower dosage of blockbuster cancer drug Avastin was as effective as the standard dose for lung cancer patients.
The South San Francisco, Calif.-based biotech giant announced this morning that data from a Phase III study showed that both the 15 mg/kg and 7.5 mg/kg dose of Avastin -- combined witih chemotherapy -- significantly improved survival in patients compared with chemotherapy alone.
These results are significant because current monthly costs for lung cancer patients taking Avastin are $8,800, according to Genentech. Analysts say this number could decrease significantly if the lower dose ultimately proves to be as effective as the larger one.
"We believe the success of the low dose arm will drive physicians to use to the lower, less expensive dose, in the majority of their lung cancer patients," said Credit Suisse biotech analyst Michael Aberman, in a report sent to investors Thursday.
"The impact of this change on our Avastin estimates for lung cancer is approximately $230 million per year at peak and a more modest $40 million this year," he said.
Aberman trimmed his price target on the shares to $83 from $84 and maintained a "neutral" rating on the stock.
"While we like Genentech as a company," Aberman said, "we think the stock will stay range-bound for 2007 as its growth is priced in and it faces pressures, including today’s results and competition from new entrants, e.g. GlaxoSmithKline's Tykerb."
The full results of the clincial trial, sponsored by majority shareholder and partner Roche, is expected to be released at the annual meeting of the American Society of Clinical Oncology, or ASCO, this June.
Avastin was approved in the United States for the treatment of non small-cell lung cancer last October.
Separately, health regulators yesterday said that Genentech's asthma drug Xolair should carry the strongest warning possible in order to alert doctors of the risk of a rare but serious reaction known as anaphylaxis.