Genentech Shares Jump on Cancer Drug News

Shares of Genentech Inc, the world’s second-biggest biotechnology company, and its partner Roche Holding AG, soared after a study found their Avastin drug slowed the progression of breast cancer by about four months.

Avastin is sold to treat colon cancer and success against breast cancer may help boost peak sales to more than US$10 billion, investors including AIG Private Bank’s Orun Palit said. That would rival the world’s best-seller, Pfizer Inc’s cholesterol-lowering Lipitor, which brought in US$10.9 billion last year. Lipitor is the only drug with annual sales of more than US$5.5 billion.

“This news really puts peak sales for Avastin back to that crazy US$10 billion figure,” said Palit, who manages the equivalent of US$827 million including Roche.

“If this continues, Avastin could become the best-selling drug in the world.”

Shares of South San Francisco, California-based Genentech, which developed the medicine and is majority-owned by Roche, rose by US$10.72, or 18 per cent, to a 52-week high of US$69.35 at 4 pm in New York Stock Exchange composite trading on Friday.

The jump was the biggest one-day percentage increase since March 14, when Genentech and Basel, Switzerland-based Roche released results from another study showing Avastin also helped fight lung cancer.

Catching Amgen

Friday’s Genentech share gain moved the company’s market value to within US$2.54 billion of Amgen, the world’s biggest biotechnology company by that measure and by sales. Genentech’s market value climbed to US$72.6 billion compared with US$75.1 billion for Amgen.

Roche, the world’s biggest maker of cancer drugs, is counting on Avastin to help boost sales in that category to as much as 13 billion Swiss francs (US$11 billion) from 7.7 billion francs in 2004. Genentech reported US$202.9 million in US Avastin sales in the first quarter.

Avastin is the first approved drug that fights cancer by interfering with blood vessel growth, a process called angiogenesis. It is designed to slow tumor growth by cutting off the blood supply that feeds tumours. Genentech will meet the US Food and Drug Administration to discuss expanded approval of Avastin, said Genentech spokesman Neil Cohen. The company is also talking to the FDA about clearance for lung cancer.

The drug may get approved for breast cancer as early as next year, Steven Harr, an analyst at Morgan Stanley said in a note to clients. Prescriptions for breast cancer patients may add US$1.5 billion a year in sales, helping push worldwide Avastin revenue to at least US$7 billion a year, Harr said.

That would make Avastin the second-best-selling medicine in the world behind Lipitor.

Sales may be higher if the drug works against other types of tumour, according to Harr.

Prostate cancer

Genentech said earlier last week it would start a trial of Avastin as part of the last phase of testing in prostate cancer.

About 232,000 men in the US are diagnosed with prostate cancer each year, according to the American Cancer Society.

“This drug is going to work in every single solid tumour,” said Sven Borho, a partner at Orbimed Advisors in New York, which has about US$5 billion under management including more than 3 million Genentech shares. “What’s going to hold this drug back?”

The 5.7 per cent gain for Roche shares is the steepest since October 2002.

Shares of Genentech have climbed by 27 per cent this year, while Roche has risen 6.4 per cent.