Analysts Handicap Cancer-Drug Winners Ahead of Annual Showcase

Attention biotech investors: It's time to make money by placing bets on the Super Bowl of cancer research meetings.

The American Society of Clinical Oncology takes over San Francisco's convention center starting May 12 for the most closely watched cancer research meeting of the year. More than 25,000 oncologists will be overflowing meeting rooms and hallways, discussing the latest and most promising cancer treatments.

Wall Street will be there, too. It may sound cold, but let's face facts: There's a ton of money to be made from cancer research. A good showing at ASCO's annual meeting, in the form of positive test results for a new drug or treatment, is all it takes to get a drug company's stock cooking.

For this reason, ASCO tries to keep a tight lid on leaks prior to the meeting's start, releasing information only to the organization's members. Media outlets that publish information on the results, no matter what the source, are banned from the event. Even the companies presenting research data are prohibited from talking about results before the meeting begins. But, of course, that doesn't stop Wall Street analysts from getting their hands on the goods, handicapping ASCO winners in research notes sent to institutional clients well in advance of the meeting.

So, in the interest of leveling the playing field, here's a preview of the big event based on analysts' research notes. More than 3,500 research papers will be presented during four days, an almost impossible number to cover. But in the days leading up to the meeting, buzz is building for Genentech(DNA Quote), Amgen(AMGN Quote), Celgene(CELG Quote), IDEC Pharmaceuticals(IDPH Quote), Imclone Systems(IMCL Quote), AstraZeneca(AZN Quote) and OSI Pharmaceuticals(IMCL Quote), among others.

Some words of caution for investors looking to play the ASCO investing game: Research findings presented at the meeting are just that, research findings. Laura Livingston, an ASCO spokeswoman, says Wall Street analysts are basing their reports on preliminary research data, some of which may change in the time leading up to final presentation at the meeting.

And as with all drug research, further study, as well as Food and Drug Administration approval, is needed before new drugs -- or new uses for old drugs -- hit the market. And as everyone knows, promising drugs often hit roadblocks or outright failure after further testing.

Genentech

Biotech firms are always seeking new uses -- and new selling opportunities -- for their marquee drugs. Genentech is no different. The South San Francisco biotech giant is expected to flood ASCO with data on promising new uses for its two cancer drugs, Herceptin and Rituxan, according to several Wall Street analyst reports.

Genentech will present research findings to expand the use of its breast cancer drug, Herceptin, to treat other cancers, including pancreatic, prostate and nonsmall cell lung cancer, according to a report from CIBC World Markets.

Herceptin was originally developed as a treatment for metastatic breast cancer, or late-stage cancer that spreads to other areas of the body. Genentech is now pushing the drug as first-line defense for breast cancer, and doctors use it this way about 40% of the time. The company will present new data during the ASCO meeting that it hopes will boost the number of doctors turning to Herceptin first, or using the drug in combination with other chemotherapy drugs.

Finally, Genentech will present research data that shows patients who are screened for breast cancer using a new DNA-based test, known colloquially as FISH, respond better to treatment than patients screened using conventional FDA-approved tests, according to Robertson Stephens.

"We believe this year's [ASCO] meeting will be another important and positive one for Genentech," writes Robertson Stephens analyst Jay Silverman in a research note. Silverman rates Genentech a buy and his firm does underwriting for the company.

Imclone Systems

This small New York biotech firm is using ASCO as its major coming-out party. As previously reported by TheStreet.com, Imclone has secured a high-profile spot at the meeting to take the wraps off a novel treatment to stop tumor growth.

The experimental drug is called IMC-C225, a monoclonal antibody that's used to treat patients with colon cancer who are not responding to traditional chemotherapy. Colon cancer is the second-leading cause of cancer death in the U.S. IMC-C225 is not a cure, but in early tests where the drug is added to chemotherapy treatments, it is shrinking tumors and slowing progression of the disease.

In order to move the drug into the slot for FDA approval, Imclone must show that IMC-C225 works in about 15% of test patients. At the ASCO conference, the company's data will boast at least a 17% positive response rate, and possibly higher, according to a report from Morgan Stanley Dean Witter.

"With these data, [IMC-C225] will receive FDA approval, in our view. ... The product will therefore be launched before the end of the year," writes Morgan Stanley analyst Caroline Copithorne, who rates Imclone outperform and whose firm does underwriting for the company.

IMC-C225 is the most advanced member of a new class of cancer-fighting drugs that work by blocking the receptor attached to epidermal growth factor, a common cell protein that somehow goes haywire in cancer cells. By targeting cancer cells that "express" for epidermal growth factor, IMC-C225 seems to stop or shrink tumor growth without the nasty, and potentially fatal, side effects of chemotherapy drugs.

As many as 60% of all cancers, or 3.5 million patients, could be treated with this new class of drugs -- a $6 billion to $10 billion market opportunity, according to Robert Toth, an analyst with Prudential Vector.

In addition to Imclone, OSI Pharmaceuticals, AstraZeneca, Abgenix(ABGX Quote) and Immunex(IMNX Quote) will all be presenting data on promising new drugs that also work by blocking epidermal growth factor receptor, according to Morgan Stanley.

Celgene

The Warren, N.J., biotech firm will present data from trials using thalidomide -- the sedative that caused horrible birth defects in the 1960s -- as a possible treatment in a variety of solid tumor cancers, including renal cell, melanoma, ovarian and colorectal cancers, according to a report from Robertson Stephens biotech analyst Mike King. Most of the data to be presented at the meeting by Celgene for its thalidomide drug, called Thalomid, is still in the early or middle stages of testing, so this could be an opportunity for investors to get in on the ground floor.

"As indicated by the abstracts at ASCO, there is substantial interest among physicians in using Thalomid for a number of solid tumor indications," writes King. "We believe treatment of solid tumors with Thalomid is an area Wall Street has largely ignored." King rates Celgene a buy and his firm has not done underwriting for the company.

IDEC Pharmaceuticals

Along with partner Genentech, IDEC will use the ASCO meeting to present data to expand the use of its franchise cancer drug, Rituxan. The drug is now used to treat non-Hodgkins lymphoma, but the companies hope to gain FDA approval for Rituxan as a treatment for chronic-lymphocytic leukemia, or CLL.

One research paper to be presented at ASCO next week will show that CLL patients are responding well to treatment that combines Rituxan and other chemotherapy drugs, according to a Robertson Stephens report.

"In our view, CLL increases Rituxan's market significantly; there are approximately 60,000 patients with CLL in the United States, writes Robertson Stephens analyst Silverman.

IDEC and Genentech could profit handsomely from expanded Rituxan sales even before getting FDA approval because of "off-label" uses by doctors who prescribe the drug based on the positive research findings they read about at meetings like ASCO.

IDEC will also use the ASCO conference to present additional findings about its latest drug, Zevalin, which is also used to treat non-Hodgkins lymphoma, according to a report from U.S. Bancorp Piper Jaffray. Despite a delay in the FDA approval process, IDEC hopes to get the drug greenlighted and onto the market by the end of the year.

Amgen

Biotech investors are waiting somewhat impatiently for the FDA to approve Amgen's new anemia drug, Aranesp, for use in patients undergoing kidney dialysis. But the Thousand Oaks, Calif., biotech company is not stopping there, using ASCO as the springboard for late-stage research that shows Aranesp can also be used in cancer patients. Amgen will also be pushing earlier-stage research for Abarelix, another potential cancer fighter in its drug development pipeline.

"We believe this year's ASCO is a key meeting for Amgen," writes Robertson Stephens analyst Silverman. "We expect Amgen to emerge as a winner from this meeting, with key marketing data for Aranesp and Abarelix depot prior to their respective launches." Silverman rates Amgen a buy and his firm hasn't done underwriting for the company.