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Genentech's Avastin: Will FDA Give It An "Oscar"?

Who needs Oscar ballots? Biotech investing wonks/nerds (and I'm not suggesting I am one) might wanna start an office pool about when and what the FDA's decision will be on Genentech's drug Avastin for breast cancer.

With the possible exception of the Dendreon Provenge decision last year, I can't recall--in my approximately five or six years on this beat--a more hotly debated FDA call than this one. The agency is expected to announce its ruling sometime tomorrow. Usually the word comes down late in the day--after regular trading hours.

But it's not unheard-of for a decision to be announced midday. Sometimes the FDA puts out a simultaneous press release, but typically the news comes out of the company. The actual "action date" is Saturday, so the conventional wisdom is that it's unveiled sometime tomorrow.

Over the past week or so we've interviewed three biotech analysts and have asked them to handicap the odds of DNA winning approval. Two of them--Rodman & Renshaw's Mike King and Cowen & Co.'s Eric Schmidt--give the company a 30 percent chance. The other one--Bear Stearns' Mark Schoenebaum--places it as high as 55 percent. R & R makes a market in DNA. Schoenebaum or a member of his household owns the stock. The general consensus is if the FDA says "no" or delays making a decision, the stock could fall two or three bucks, but if it pulls off a win the shares could get about a five dollar pop.

In his regular research note to clients about oncology drug use, King points out that Avastin's "off-label" or unapproved use in metastatic breast cancer fell a whopping 65 percent from December to January. Doctors are apparently concerned insurance might not pay for the expensive drug and/or they'll be held liable if something goes wrong.

The drop in Avastin usage occurred in the wake of the FDA Advisory Committee's 5-4 vote against recommending approval of Avastin as the drug of first choice for aggressive, advanced breast cancer that has spread. Recently there've been reports--not my reporting--that two of the panel members who voted "no" have asked the FDA to change their votes. But analysts say the formal meeting vote is what's on the record. Nonetheless, because it was so close many are betting the FDA overrules the advice of its outside experts on this one.

The decision is the topic of the top editorial in today's "Wall Street Journal." The paper says, "Patients with limited options shouldn't be denied drugs that may improve what life they have left...." And the WSJ claims if the agency rejects the drug that it would "be the latest moral indictment of everything that's wrong with the FDA." You can read the whole thing here.

The ruling will not only have an impact to the tens of thousands of women with breast cancer and their loved ones, but also to Genentech and its investors. Analysts estimate FDA approval of Avastin in breast cancer could ultimately add several hundred million to as much as two billion dollars in annual revenue.

Questions? Comments? Pharma@cnbc.com

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