Tarceva Approval Only Half OSI's Battle

Tarceva, on the other hand, was approved on the basis of a study that showed a two-month survival benefit in the same type of patient with advanced lung cancer. When it comes to cancer treatments, drugs that prolong life are best, which is why many people expect Tarceva to outperform Iressa.

The story is more complicated, of course. AstraZeneca is running its own Iressa survival studies, with data expected in early 2005. If Iressa lung cancer patients also live longer, then the marketing battle between the two drugs could boil down to which survival benefit is greater. Wall Street likes a zero-sum game where the drug with the best efficacy is perceived as the winner. But doctors are not always so discriminating and will often view drugs as equivalents if efficacy is within the same range.

Pricing could also become an issue. OSI has indicated that Tarceva's wholesale price will be $2,026 for a 30-day supply -- a premium to Iressa's price tag of $1,800 per month because OSI feels its drug is superior. But will doctors, and more importantly insurance companies, agree to pay more for Tarceva, especially if the two drugs end up with similar efficacy?

Biotech investors got real excited about Tarceva last spring, and rightly so. But Thursday's approval was widely expected, even if it was two months earlier than the FDA's official decision date. OSI may have to put some strong Tarceva sales in the books before investors are willing to take the company back to its previous heights.

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