Looking Askance at Biotech After ASCO - TheStreet

The meeting of the American Society of Clinical Oncology is over. And while fears of an "ASCO fiasco" didn't quite materialize, the cancer research confab didn't produce any standout performances, either, at least from Wall Street's perspectives.

The biotech sector -- bruised and battered this year -- reacted accordingly. Positive news at ASCO was discounted, while negative news was amplified -- that's what happens when skeptics rule the markets.

"This year's ASCO meeting was more incremental than anything else," says Salomon Smith Barney biotech analyst Elise Wang, who was among the 25,000 attendees walking the cavernous Orange County Convention Center in Orlando, Fla., for four days. "Results from key drugs were generally in line with expectations, so there wasn't any major news to report."

Rob Toth of San Francisco-based EGM Capital says he saw a wider breadth of companies reporting data this year, but much of that was from earlier-stage clinical trials compared with past ASCO meetings.

"The investor appetite for this kind of early data is a lot lower today because of the highly publicized rash of drug disappointments we've had to endure lately," he says. "Biotech investors just don't have a lot of confidence these days."

This skepticism can be seen best in the subdued reaction this year to new data from the class of targeted, experimental cancer drugs that includes

ImClone Systems'

(IMCL)

Erbitux,

AstraZeneca's

(AZN) - Get Report

Iressa, and

Abgenix's

(ABGX)

ABX-EGF. At the 2001 ASCO meeting, these so-called EGF inhibitors were the kings and queens of the prom -- drugs each destined to be billion-dollar sellers on the belief they would change the way cancer patients of all stripes are treated. EGF inhibitors try to stop the growth of cancer cells by blocking a key enzyme, the epidermal growth factor receptor.

Fast forward to this year, and the mood is less sanguine. Results from clinical trials unveiled at ASCO 2002, all designed as early- or midstage tests, were mixed. A late-stage, controlled trial of Erbitux, probably the most important indicator for the entire EGF inhibitor class at this year's meeting,

failed to meet its clinical endpoint.

No one is giving up on these drugs -- almost all the data suggest there's something there. But the favored opinion in the ASCO halls was that the most advanced EGF inhibitors like Erbitux and Iressa still have a lot to prove.

Wednesday,

The Wall Street Journal

reported that ImClone and partner

Bristol-Myers Squibb

(BMY) - Get Report

plan to start several, large, controlled, phase III trials of Erbitux. This suggests the companies have less confidence in gaining Food and Drug Administration approval next year, based on their current filing strategy, and that Erbitux could be delayed yet again. And a day after the meeting closed, ImClone CEO Sam Waksal announced he was

leaving the company.

"The mood concerning the potential for all the drugs in the EGF class was definitely more tempered this year," says Toth. "I kept hearing investigators describe data as 'intriguing,' but was any of it over the top? I'd say no."

It may be too early to predict, especially because none of these drugs is yet approved, but there seems to be a growing body of evidence suggesting that EGF inhibitors won't be the big revenue-generators once forecast, according to several fund managers who attended ASCO. In other words, these drugs may not reach sales into the billions of dollars like Bristol-Myers Squibb's Taxol. Instead, they might be more comparable to

Genentech's

(DNA)

breast cancer drug, Herceptin -- an innovative, modestly effective treatment that books annual sales in the $300 million to $500 million range.

The Good, the Bad, the Unpredictable

Some other, final observations from this year's ASCO meeting:

Wall Street loves to obsess about cutting-edge drugs because they're sexy and (usually) goose stock prices, but one of the biggest winners at this year's meeting was an old-fashioned chemotherapy drug. Oxaliplatin, when given in combination with two other standard drugs, significantly slowed tumor growth and extended the lives of patients with advanced colon cancer, according to findings from a phase III clinical trial. Oxaliplatin is sold by European drugmaker Sanofi-Synthelabo and is already approved in Europe. The drug is under review by the FDA for use in the U.S., and to hear some doctors talk, Oxaliplatin could change the standard of care for colon cancer patients. And here's a thought to consider: If Oxaliplatin does become one of the de rigueur colon cancer drugs and patients do show real benefits, it could cause problems for the up-and-coming EGF inhibitors because they'll have a higher hurdle to leap with drug regulators.

Get ready for the mother of all marketing battles as Amgen and Johnson & Johnson square off to convince doctors to use their respective anemia-fighting drugs on cancer patients weakened by red blood cell loss stemming from chemotherapy treatments. J&J's Procrit is the current king of the hill, but doctors must administer the drug once per week. Amgen's new drug, Aranesp, is a tweaked version of Procrit, and data presented at ASCO this year support patient dosing once every three or four weeks. That's more convenient for patients and doctors because most chemo regimens are given once every three weeks. Each side, or course, has a mountain of data supporting its own drug -- issues too complex to get into here, so choosing a winner could just come down to marketing, marketing, marketing. J&J is already broadcasting consumer ads for Procrit on television, and we might just see Amgen do the same thing for Aranesp once the drug is approved in cancer patients, which is expected this summer. By the way, the most visible swag given away at this year's ASCO meeting were bright yellow Aranesp tote bags, countered by ruby red, Procrit bags.

The award for biotech goat at ASCO 2002 goes to Protein Design Labs and its failed non-Hodgkins lymphoma drug, Zamyl. Ugly. But PDL actually closed higher Monday, after the bad news was announced. Go figure. Just goes to show you how crazy the biotech sector is these days.

The best biotech surprise: Telik and its experimental cancer drug, TLK286, which impressed observers with some positive, phase II data in patients with ovarian cancer.

The best biotech performer, in the nonsurprise category: Millennium Pharmaceuticals and its proteasome inhibitor, MLN341. The experimental drug produced positive, albeit preliminary, results in patients with multiple myeloma. But then, the results leaked out before ASCO, so much of the upside was likely priced into the stock before the meeting.

The red-faced CEO award goes to Cell Therapeutics' Jim Bianco, who battled false rumors about toxicity issues with the company's supercharged reformulation of the blockbuster cancer drug, paclitaxel, known better by the brand name Taxol. Actually, data presented on PG-TXL, now known as Xyotax, showed it to be safer and more convenient than paclitaxel -- all good things. But Xyotax disappointed at ASCO because it doesn't appear to be clinically superior to paclitaxel. Patients who are resistant to the paclitaxel didn't respond well to Xyotax either. Expectations were for Xyotax to be some kind of "Super Taxol" -- a claim the drug will now be hard-pressed to make, although planned late-stage trials could prove the critics wrong. You know what happens when Wall Street expectations aren't met, especially in the biotech sector these days: Shares of Cell Therapeutics, already hit hard going into the ASCO meeting, took another spill Monday.

Genentech was a big pre-ASCO loser after safety concerns about its experimental cancer drug, Avastin, leaked out to Wall Street in mid-April. Yet, lo and behold, the actual news on Avastin at the confab was decidedly positive, albeit preliminary. A gaggle of biotech fund managers gathered around an Avastin poster presentation early Monday morning to check out those rumored safety issues. The consensus: much ado about nothing. Of course, the most important, near-term Avastin data weren't presented at ASCO. Results from a phase III study of the drug in breast cancer patients should be released later this year.