Cancer-Drug Research Leaks Sink Genentech but Buoy ImClone

Updated from 2:04 p.m. EDT

Genentech(DNA) shares were hammered Thursday after research abstracts prepared for the upcoming annual meeting of the American Society of Clinical Oncology were leaked.

ImClone Systems (IMCL) shares were up strongly after positive indications for its cancer drug, Erbitux, were noted in another leaked abstract.

The initial buzz: Some are reading safety issues into Genentech's experimental cancer drug, Avastin, after seeing the abstracts, according to sources. Some patients given Genentech's Avastin as part of a phase II trial are apparently having problems with bleeding and blood clots. Wall Street traders have proved quick to react negatively to the preliminary leaked results, but it is not yet clear how significant these safety issues are, according to a hedge fund manager with access to the abstracts.

Genentech shares fell $5.37, or more than 12%, to $37.75 in Thursday trading.

But the Avastin abstract, obtained by TheStreet.com, also contains some positive information. Of the 28 cancer patients detailed in the abstract, 2 had complete responses to Avastin treatment, while 12 others had partial responses. JP Morgan analyst Frank Berger held a conference call this afternoon with an investigator in the Avastin clinical trials. The doctor's opinion: The efficacy results were impressive, especially given that these patients suffered from advanced stages of their cancer. And the occurrences of blood clots and bleeding are not uncommon in these types of patients, and may not be caused by Avastin, she added.

On his call, Berger noted that much of the safety information contained in the ASCO abstract was known previously, and that the final verdict on the drug will not come until results are released from two phase III studies. One of these studies will be ready later this year, but not at ASCO. (Berger rates Genentech a strong buy and his firm doesn't have a banking relationship with the company.)

Moving to ImClone, data regarding its cancer drug, Erbitux, looked positive. The data are from a phase 2 observational trial in refractory head and neck cancer patients who were given a combination of Erbitux and cisplatin.

ImClone shares closed Thursday up 82 cents, or 3.5%, to $23.81. The stock traded up as much as 7% earlier in the day.

ASCO's annual meeting is the most closely watched cancer meeting of the year. Research abstracts for the meeting were supposed to be released April 15, but ASCO faculty members were apparently granted early access. These abstracts are now making their way quickly across Wall Street trading floors.

A Genentech spokeswoman wouldn't comment, because ASCO rules prohibit companies from discussing research abstracts before they are released at the meeting. But she also was not aware that the ASCO abstracts were released early. ASCO has not yet returned a phone call seeking comment. ASCO said last month that it was changing its policy on releasing abstracts in order to prevent the selective disclosure of market-moving information to traders.

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