Genentech Halts Avastin Study

Updated from 10:13 a.m. EDT

Shares of Genentech(DNA Quote) sank Friday on news the biotech company halted enrollment in a phase II trial of its much-touted Avastin in ovarian cancer, citing side effects.

Of 44 patients enrolled the trial, five experienced perforation in their gastrointestinal tract. The trial involved ovarian cancer patients in which several types of cancer treatments have failed.

After consulting with the Food and Drug Administration, Genentech stopped enrollment. The company plans to inform currently enrolled patients of the new safety information, and based on doctors' input, possibly discontinue treatment.

Genentech shares sank $2.45, or 2.8% to $85.55.

While gastrointestinal perforation is an expected side effect of the drug, it was seen in a greater-than-expected number of patients in the phase II trial. Since advanced ovarian cancer often spreads to the GI tract, patients are even more at risk for the side effect, according to Genentech. Avastin's most common side effects include hypertension, diarrhea and a lowered white blood cell count. The drug is currently approved to treat colorectal cancer.

Anyone following Avastin is aware of the risk of gastrointestinal perforations caused by the drug, according to Bill Tanner of Leerink Swann, a biotech equity research firm. He said the share price drop was "more of a shoot-first, ask-questions-later response."

The stock has been weak recently, Tanner said in an interview, and people who aren't staunch believers reacted to the news.

In previous trials of Avastin in advanced ovarian cancer, the gastrointestinal perforation rate was about 2% to 3%, according to Genentech. In the halted trial, the perforation rate reached 11% before enrollment was discontinued. Patients in the trial tried and failed more prior treatment regimens than patients in previous ovarian cancer trials for Avastin, Genentech noted.

"The limited overall number of GI perforations seen in this study prevent us from ascertaining definitive risk factors for this adverse event," the company said in a release.

"The only difference we know is how advanced the disease is," says Genentech spokesman Neil Cohen. The phase II trial involved patients who have not responded to at least three prior treatments, and according to Tanner, since this could be their last option, these patients aren't likely to discontinue treatment.

"This is clearly not the cleanest drug," Tanner says, but adds that there are few other alternatives. Leerink Swann does not have an investment banking relationship with Genentech, and neither Tanner nor his firm holds the company's shares.

Genentech still plans to study Avastin in earlier-stage ovarian cancer or other tumor types.

"Ovarian cancer is a small market compared to colorectal, lung, breast, and prostate cancers," Tanner says, "and we've seen good data in those trials." In fact, some analysts don't even have ovarian cancer factored into their Avastin sales models.

Joel Sendek of Lazard Capital Markets didn't include projected ovarian cancer revenue in his Avastin sales estimates and overall earnings estimates. He maintains his buy rating and $103 price target.

Lazard Capital Markets is no longer owned or controlled by Lazard Ltd., or affiliated with the Lazard investment banking business.