Biotechs to Watch as ASCO Glow Fades

The cancer meeting previewed a number of stories that will develop in the coming months.
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Editor's note: This is the last article in a series based on the American Society of Clinical Oncology's 2005 annual meeting. To read Part 1 of the series, please click here. For Part 2 of the series, click here.

Targeted drug therapies for cancer have dominated recent American Society of Clinical Oncology annual meetings, but because drug development is a long process, each passing year represents only a step or two in the direction of a completed treatment.

What remains unclear is whether these therapies, used with chemotherapy, after surgery or even as single agents, are actually better. What is known is that targeted drugs aim for proteins responsible for tumor cell growth, even though doctors still aren't sure exactly how the therapies work.

Chemotherapy, which indiscriminately goes after fast-multiplying cells, including healthy cells, has been used successfully for decades. Current targeted therapies are less toxic than chemo, but in order to develop effective targeted drugs with even fewer side effects, doctors say, more research is needed, and that's going to take time.

While researchers sometimes set goals for the fairly distant future, investors and analysts often aren't as patient. So for anyone with a shorter horizon, here are a few bigger stories to watch as they develop in the coming months.

Multiple Uses

Avastin, already a part of one of the best treatment regimens for colorectal cancer, was ASCO's star drug this year. The

Genentech

(DNA)

drug showed positive data in

breast cancer and

lung cancer trials, and not surprisingly it will remain in the spotlight for some time.

On the basis of these results and positive trial data on the company's Herceptin, analyst Christopher Raymond of Baird Research increased his 12-month price target to $87 from $80. Raymond also increased his full-year Avastin revenue estimates to $1.08 billion from $1.05 billion for the year and boosted Genentech's earnings estimate by a penny to $1.15 a share. He increased his 2006 earnings estimates for the company by 3 cents, to $1.65 a share.

Beyond Avastin, Raymond sees a considerable opportunity for Herceptin, which reduced the risk of breast cancer recurrence by 46% in women with early-stage HER2-positive breast cancer in international phase III trials. Interim results of North American trials showed that Herceptin reduced breast cancer recurrence by 52% when added to chemotherapy after initial treatment by surgery, chemotherapy or radiotherapy, or any combination of the three, and showed a 33% reduction in risk of death. Baird says it does or seeks to do business with the companies it covers.

Varied Views

As for

Onyx Pharmaceuticals

(ONXX)

, the company may continue to feel the effects of "cash burn, financing overhang and post-ASCO biotech trends," Ronald Ellis of Leerink Swann writes in a research note.

The company's experimental kidney cancer drug Sorafenib showed disappointing tumor-response rates in phase III trials presented at the ASCO meeting. Only 2% of patients showed a partial response to the drug, or tumor shrinkage of at least 50%. However, according to lead investigator Dr. Bernard Escudier, 74% of patients receiving Sorafenib, co-developed with

Bayer

(BAY)

, saw tumor shrinkage of less than 50%.

Also, because the trial's goal was to determine response rates based on tumor size, cases of significant tumor-cell death weren't included, Dr. Escudier says.

At a recent price of $26.50, Ellis thinks Onyx shares are fairly valued at $20, and the analyst downgraded the stock to market perform. Ellis sees Sorafenib reaching the market as early as the first quarter of 2006.

Bear Stearns' Akhtar Samad thinks otherwise. He upgraded the stock to outperform and set a 2006 year-end price target of $40. Samad believes tumor response is a poor indicator of overall survival, and a higher incidence of fatigue among patients taking

Pfizer's

(PFE) - Get Report

competing drug Sutent may limit that drug's acceptance. Samad predicted that Sorafenib sales could peak at $800 million in kidney cancer, liver cancers and melanoma. Bear Stearns makes a market in Onyx securities.

The European Pact

Another prospective treatment to monitor will be one from two European developers,

Novartis

(NVS) - Get Report

and

Schering

(SHR)

. The companies announced disappointing results at ASCO for the

experimental drug PTK/ZK, saying the once-daily therapy failed to improve progression-free survival in patients with colorectal cancer.

According to Dr. Alan Sandler, lead investigator in the Avastin lung trial, some oncologists believe the effectiveness of PTK/ZK is dependent on the dosing schedule. Because of the drug's short half-life, higher efficacy might be achieved with, say, twice-a-day dosing.

But medical oncologist and therapeutics researcher Przemyslaw Twardowski of the City of Hope Cancer Center in Duarte, Calif., cautions that any oral cancer drug taken more than once a day raises concerns that the patient won't stick to the dosing schedule. Even if PTK/ZK were proven as effective as Genentech's Avastin, a once-a-week infusion of Avastin may help ensure that patients get the right dose of the drug regularly and receive attention from cancer specialists at the same time.

Novartis and Schering expect to file for approval of PTK/ZK in the U.S. and Europe in early 2007. "Our analysis of this trial is helping us understand how PTK/ZK may be used to treat patients with metastatic colorectal cancer," Novartis said during ASCO. "We look forward to ... exploring PTK/ZK in other tumor types."

Competitive Forces

As predicted by Smith Barney's Yaron Werber and others,

ImClone's

(IMCL)

Erbitux wasn't exactly a hit at this year's ASCO, despite the company's big presence.

"The competitiveness of the colorectal cancer market is likely to increase and detract from ImClone's stock performance," Werber wrote. While the analyst sees Avastin sales for colorectal cancer almost doubling to $1.05 billion in 2005, he expects Erbitux sales for the same period up only 43%, to $373 million.

"Until we see signs that Erbitux is poised for an upswing, we remain cautious in the outlook for the stock," Werber writes, however, "sales could reaccelerate modestly over the balance of the year as patients who fail Avastin are switched to Erbitux," he says, referring to cases when Avastin doesn't work as a first- or second-choice treatment.

ImClone plans to begin pivotal trials of the front-line use of Erbitux with paclitaxel and carboplatin in ovarian cancer, Werber notes, and data on Erbitux plus Folfox in front-line colorectal cancer won't be available until 2007 at the earliest. Smith Barney is a part of Citigroup Global Markets, which makes a market in companies its analysts cover.

New data on trials of Panitumumab,

Amgen's

(AMGN) - Get Report

competitor to Erbitux, could heat up competition in 2006 among single-agent advanced colorectal cancer treatments, according to Werber.

Joel Sendek of Lazard Capital Markets believes Amgen could file for approval for Panitumumab as a third-line treatment for colorectal cancer as soon as the fourth quarter. Sendek also expects the company to report phase II data on advanced non-small-cell lung cancer and renal cell carcinoma in the second half of this year. Lazard makes a market in the securities of companies it covers. Panitumumab was co-developed by Amgen with

Abgenix

(ABGX)

.