Successful Tarceva Study Sends Shares Skyward

Now, to address the Tarceva sales question: There are approximately 100,000 non-small cell lung cancer patients in the U.S. who would conceivably be eligible for Tarceva therapy, based on this study. Banc of America Securities biotech analyst Mike King puts a $30,000 price tag on the drug and assumes that these patients survive about six months, which puts Tarceva peak sales around $1.5 billion. This, of course, assumes that every patient gets the drug, which never happens. It also assumes that Tarceva is priced at a healthy premium to AstraZeneca's (AZN Quote) lung cancer drug, Iressa, its primary competitor.

Other estimates peg the drug's sales potential for its primary indication in the range of $500 million to $700 million. At this early stage, be careful about such sales projections; they're always a guess, and often more optimistic than realistic.

But King, who gets credit for predicting the positive Tarceva results (which erases his disastrous downgrade of Genentech the morning the Avastin results came out), says Tarceva sales numbers really multiply if the drug one day can be used as chronic, long-term therapy against lung cancer.

"Why not make Tarceva like Celebrex or Lipitor -- a drug that patients take every day for a long time to stave off recurrence of their disease?" he asks. In this scenario, lung cancer patients would have surgery to remove their tumor and chemotherapy to put the disease into remission. Doctors would then have patients take a daily Tarceva pill to stop the cancer from returning. (King has buy ratings on OSI and Genentech; his firm has not done investment banking for either.)