Robert Steyer
Despite its initial failure, Iressa was approved by the FDA on May 5 as a treatment for patients with advanced non-small cell lung cancer for whom standard chemotherapy had been ineffective.
Some analysts believe Tarceva could proceed along a similar path -- with a chance for better results. "The more important data will be from an ongoing pivotal Phase III study of Tarceva monotherapy as a second- or third-line treatment for advanced lung cancer, which is expected in early 2004," said Elise Wang, who follows OSI's partner, Genentech, for Citigroup Smith Barney. "If successful, Tarceva will have a key advantage over Iressa from a regulatory and marketing perspective," Wang said Wednesday in a research report to clients. Wang rates Genentech a buy. She doesn't own shares; her firm has had an investment banking relationship with Genentech. Although a big company like Genentech ($2.72 billion in sales last year) can absorb a research setback, it's a different story for a company like OSI, which had $21.8 million in sales for the fiscal year ended Sept. 30, 2002. OSI "faces heightened uncertainty over the next six months," said Jim Birchenough, a biotechnology analyst who follows OSI for Lehman Brothers. He told clients Wednesday that he was cautious about the upcoming results of the Phase III test using Tarceva as a single therapy for advanced lung cancer on patients who hadn't responded to one or two chemotherapy treatments. "While we do believe that ultimately Tarceva will find its way to the market, we believe that it may be through a less certain route that hinges on the FDA's acceptance of (patients') response rate data that may be comparable or slightly less than that achieved by Iressa," he said. Birchenough has an equal weight rating on the stock, saying it is more attractive to long-term investors than those with a shorter -- six months to 12 months -- investment attention span. He doesn't own shares; his firm is a market maker in OSI stock.
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