Genentech Scores Big With Avastin

Updated from 7:23 a.m. EDT

Genentech's (DNA - commentary - Cramer's Take) shares rocketed 45% Monday after the biotech firm said its experimental drug Avastin "markedly" improved the survival of patients with colon cancer when used alongside chemotherapy.

The somewhat stunning positive results from the phase III clinical study of Avastin are a huge win for Genentech. Avastin is the most important -- and, up to this point, fairly controversial -- drug in the company's late-stage pipeline. The drug is the most advanced attempt to create a so-called anti-angiogenesis drug, which works by cutting off the blood supply to tumors. Anti-angiogenesis drugs have had a checkered history, and Avastin was no exception. Most recently, the drug failed a late-stage trial involving breast cancer patients last fall, leading to somewhat lowered expectations for its success.

Doubters appear wrong. "This study provides the first phase III clinical validation of the long-pursued anti-angiogenic hypothesis: that by targeting a tumor's blood supply, you may impact its viability," said Dr. Sue Hellman, Genentech's chief medical officer, in a statement.

ASCO Ahead

Genentech said it plans to discuss the filing of an approval application for Avastin with the Food and Drug Administration. First, however, the actual data will be presented at the annual meeting of the American Society of Clinical Oncology, which starts May 31 in Chicago. The Avastin data will be presented on Sunday, June 1.

The ASCO meeting always brings with it a surprise or two, and clearly Avastin -- which was not expected to make a splash at the closely watched cancer confab -- will now be one of the major highlights.

Investors have been hoping that Genentech's late-stage drug pipeline would fuel its future growth. But fears that the biotech firm was falling short are likely to be shelved now. The company owns 100% of the rights to Avastin, which means, if approved, the drug will contribute mightily to the bottom line. And on Thursday, an FDA advisory panel unanimously recommended approval for its experimental asthma drug, Xolair.

Genentech shares jumped $16.95, or 45%, to $54.85. The huge gains were bolstered by scores of analyst upgrades. If approved, Avastin could easily become the company's next blockbuster (read: billion-dollar selling) drug. It's not known how fast Genentech can file Avastin with the FDA, but most analysts see the drug being filed in the second half of this year, and possibly on the market in early 2004.

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Adam Feuerstein writes regularly for RealMoney.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback.