After the closing bell yesterday Genentech popped out a stock-moving press release. The world's most highly-valued biotech announced that its drug Avastin when used in combo with Sanofi-Aventis' chemo drug, Taxotere, helped women with a certain type of aggressive, advanced breast cancer live longer without the disease getting worse.
Genentech didn't say how much longer, only that it was statistically significant. The exact amount of time will likely be revealed at the American Society of Clinical Oncology''s annual conference in the spring. This is the second clinical trial to show what's referred to as "progression-free survival".
But investors aren't waiting to find out. DNA shares spiked in after hours trading and are higher in the early going this morning. Buyers are betting this second big study of Avastin in breast cancer might convince the Food and Drug Administration to approve the drug for use on those patients. The agency is expected to make a decision as early as a week from this Friday. Winning approval is a big deal because analysts believe it could add several hundred million dollars a year to Genentech's Avastin revenue.
But there are any number of scenarios. The FDA could approve Avastin for breast cancer, delay making a decision or reject it outright. You may remember, the stock fell about ten bucks last fall when an FDA Advisory Committee voted 5-4 against recommending approval of Avastin for breast cancer. So, is this new study enough to push the FDA to overrule the advice of its outside experts?
Analyst answers to that question are all over the place. Mike King at Rodman & Renshaw writes in a research note to clients this morning, "the...results only modestly improve the odds of FDA approval by the (decision) date." George Farmer at Wachovia Capital Markets says, "...we believe the agency will delay an...approval decision by as much as 180 days beyond the scheduled (decision) date of February 23."
Bernstein's Geoffrey Porges writes, "Overall our view was that the chance of an approval on Feb 23 was no more than 20-25% prior to this disclosure. We believe this subjective probability now increases to 30-40%." And FBR's Jim Reddoch says, "...we bet the FDA will wait to see the overall survival data (from both studies). If these show a survival benefit...the FDA may approve Avastin in breast (probably '09 at the earliest)."
The parenthetical 2009 forecast is Reddoch's call. Overall survival is now considered the holy grail in cancer drug research and is different from progression-free survival.
FBR and Wachovia would like to bank DNA. Bernstein owns at least one percent of DNA shares and makes a market in the stock.
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