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has warned doctors about serious bleeding episodes that cropped up among patients enrolled in two late-stage studies of its experimental cancer drug Avastin.
Avastin is particularly important to Genentech's future growth because it's the only late-stage drug in the pipeline that isn't shared with a partner, so it figures large in the company's growth prospects. Unfortunately, the drug is also the biotech firm's riskiest drug-development program -- marred already by two significant clinical failures, including one study in which bleeding led to some patient deaths.
The number of patients impacted by the Avastin bleeding problem is very small -- and Genentech is downplaying any safety concerns -- but it was significant enough for the company to send out a warning letter to doctors involved in the studies and amend the investigator's brochure, a document that explains to doctors the design of the study and its risks to patients.
Genentech shares were lately down $1.60, or 4.6%, to $33.40.
Genentech is expected to release results from these two, phase III Avastin studies -- which enroll 1,100 colon cancer patients combined -- this summer. If Genentech continues to trade at its current valuation, these data could be a significant inflection point for its shares.
Late last year, seven patients enrolled in these studies were found to be suffering from intestinal perforations, or small tears in their gastro-intestinal tracts, resulting in serious bleeding. A Genentech spokeswoman says that per protocol, these adverse safety events were reported to U.S. regulators and an investigation was conducted by an independent safety monitoring board. The board found that Avastin was not likely associated with the side effect, and the study was allowed to continue enrolling patients.
But as a result, Genentech notified all doctors enrolling patients in its studies, warning them to look for additional cases. In addition, Genentech also notified the Eastern Cooperative Oncology Group, whose doctors are working on a separate Avastin colon cancer study. The company was not required to make any of this information public, but it was brought to my attention last month by a doctor who recently received a warning letter sent out by ECOG.
Bleeding episodes among Avastin patients, even very small numbers, are a concern because of the way the drug works. Avastin is the most advanced attempt to create a so-called antiangiogenesis drug. Simply put, the drug works by cutting off blood supply to tumors, which it does by blocking a chemical process in the body that encourages the formation of blood vessels that feed tumors.
But Genentech has run into problems in the past with Avastin-induced bleeding. In 2000, when the drug was testing as a treatment for non-small cell lung cancer, some patients suffered serious pulmonary bleeding episodes, resulting in four deaths. As a result, the drug is no longer under development for lung cancer.
Avastin also has a spotty efficacy record in late-stage trials. Last year, in a phase III study of 462 patients with advanced breast cancer, the combination of Avastin and the chemo drug Xeloda failed to show any ability to slow the growth of tumors, compared to a treatment of Xeloda alone.
In some respect, a failure in the Avastin colon cancer studies is priced into Genentech's stock by many of Wall Street's biotech traders. But some sell-side analysts do have Avastin revenue modeled in for 2004 -- based on a successful trial and FDA approval -- so if the study fails, revenue and profit forecasts will have to be cut.
Genentech has already stated that it will not ditch the Avastin program even if the colon cancer studies fail, but instead will forge on with new late-stage studies in kidney cancer as yet another way to get the drug to market. But Wall Street's patience with Avastin is running out, and if the drug chalks up another disappointment, expect to see some analysts take the drug out of their models entirely.
Apart from Avastin, Genentech faces other regulatory and clinical milestones this year, all of which directly impact the biotech firm's near-term growth objectives. In the second half of the year, late-stage clinical data on another experimental cancer drug, Tarceva, will be released. The FDA is also expected to issue an approval decision for the asthma drug Xolair in the middle of the year, and for the psoriasis drug Raptiva by the end of the year.
Genentech is buoyed by its non-Hodgkin's lymphoma drug Rituxan, which continues to post impressive sales figures, defying naysayers who constantly predict the drug's growth story to be over. But even strong Rituxan sales are not enough to sustain Genentech forever; it needs to get new products on the market, and soon, if it expects to meet investor growth expectations.
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Adam Feuerstein writes regularly for RealMoney.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send