Genentech ( DNA) leads off the big-name biotech earnings season April 7 with a lot of Wall Street analysts -- and even more oncologists and patients -- focused on the company's new colorectal cancer drug Avastin.

Early revenue projections for the drug -- which was approved by the Food and Drug Administration on Feb. 26 -- are promising, prompting some Genentech analysts to predict that Avastin will do better than they had anticipated.

"We expect a strong Avastin market launch," said Elise Wang of Citigroup Smith Barney, in an April 4 report. Wang raised her first-quarter sales estimate of the drug to $20 million from $14 million and her full-year sales estimate to $395 million from $356 million.

More importantly, Wang, who has a buy rating on Genentech, said the Avastin launch encouraged her to raise her first-quarter EPS estimate by a penny to 32 cents and her full-year EPS by 2 cents to $1.57. The consensus view of analysts polled by Thomson First Call places first-quarter EPS at 32 cents and full-year EPS at $1.54. (Wang doesn't own shares, but her firm says its "does and seeks to do business" with companies covered in its research reports.)

If Wang's predictions are correct, that's quite a vote of confidence for a drug that may account for 2% of Genentech's first-quarter sales and less than 10% of its full-year revenue. But Avastin's prospects have generated enough excitement on Wall Street to help the company's stock triple in the last 12 months. The excitement comes not only for Avastin's treatment of advanced colorectal cancer but also for the possible treatment of other cancers.

Genentech is continuing research to secure FDA approval for using Avastin to treat other cancers, including breast, lung, kidney and pancreatic forms. Federal law permits doctors to use Avastin for other cancers now, because the FDA already has approved it for treating one disease. That may be one reason why, as Wang noted, analysts' estimates of Avastin's first-quarter sales have been as low as $2 million and as high as $80 million. Analysts, however, doubt these so-called "off-label" uses will produce much revenue this year or next year, because insurers will be reluctant to pay for them.

Avastin "will become the gold standard" as a first-line treatment for colorectal cancer, said William Tanner, relaying the comments of medical consultants hired by his Boston-based investment banking firm Lerrink Swann & Co.

Tanner told clients on April 5 that the clinical data as well as the FDA's approval of a broad label for the drug -- allowing it to be used with several types of chemotherapy treatments -- should encourage many doctors to use it quickly and convince many insurers to pay for it. The drug costs $4,400 per month.

Tanner, who has an outperform rating on Genentech, predicted that Avastin will contribute $347 million in sales for 2004, a figure that could increase fourfold by 2007. (He doesn't own shares, but his firm says it plans to seek investment banking compensation in the next three months.)

Another investment banking firm measuring the pulse of cancer doctors' desire to use Avastin is SG Cowen. Its recent survey of 28 oncologists showed that Avastin would "quickly dominate" the first-line therapy market for advanced colorectal cancer, said analyst Eric Schmidt in an April 1 research report.

The doctors predicted Avastin would reach 55% of this market within six months and 65% in 12 months. The survey said 36% of physicians would use Avastin "off label." Most predicted that doctors would try the drug on kidney cancer patients.

Schmidt added that oncologists also expect to use Avastin as a second-line or third-line treatment for patients whose colorectal cancer has spread to other organs. Some cancer drugs are approved by the FDA as a treatment only if a patient fails to respond to one or two other therapies. Avastin has the advantage of being endorsed by the FDA as a first-time treatment, and the Cowen survey showed that 36% of the doctors would use the drug as a second-line therapy and 24% would consider trying it as a third-line treatment within six months. Within 12 months, those percentages climbed to 43% and 26%, respectively.

Avastin's launch "is likely to exceed lofty expectations," said Schmidt, whose firm stopped issuing ratings for all stocks on March 1. (Previously, Schmidt had a strong buy rating on Genentech, and his firm says it "does and seeks to do business" with companies covered in its research reports.)

Schmidt conceded that a broad prediction for Avastin's success based on interviews with 28 doctors "holds much potential for error," but he added that doctors' responses about Avastin's attractiveness "substantially exceed" the estimates of his economic model. He expects Avastin to produce $350 million in sales this year and $900 million next year, slightly above consensus estimates for both years.

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