April 13 (Bloomberg) -- Genentech Inc., the world's second- largest biotechnology company, is testing a breast-cancer treatment that may add $1.5 billion in annual sales to its Herceptin drug business.

The experimental therapy increased the effectiveness of Herceptin against drug-resistant cancer cells by linking the drug with chemical toxins, according to a study by the South San Francisco, California-based drugmaker. The treatment binds tumor- killing chemicals to Herceptin, causing fewer side effects by attacking cancer cells and mostly avoiding normal tissue.

The research may give Genentech a way to sell its standard Herceptin for early forms of breast cancer, and then provide the more-potent therapy after the disease progresses. The strategy may increase market share and spur new treatment practices for a disease diagnosed in more than 78,000 U.S. women a year, analysts and doctors say.

``It's unlikely this will cure breast cancer, but it's got a good chance of being a really helpful weapon,'' said Ian Krop, an oncologist at Dana Farber Cancer Institute in Boston who is studying the combination. ``We're about as excited about this one as we can get this early in the game.''

Herceptin had $1.2 billion in sales in 2006, making it Genentech's third-biggest drug, behind cancer therapies Rituxan and Avastin. The drug also adds revenue for Basel, Switzerland- based drugmaker Roche AG, Genentech's largest shareholder.

`Supercharged'

``A supercharged Herceptin could one day allow Genentech to basically double-dip with breast cancer patients,'' said Geoffrey Porges, an analyst with Sanford Bernstein & Co. in New York, in an interview. He estimated a new, more-potent form of the drug would generate as much as 25 percent more in sales yearly than the original medicine.

Shares of Genentech declined 30 cents, to $81.33 at 4 p.m. in New York Stock Exchange composite trading. Earlier in the day, the shares rose as much as 17 percent, reaching a 52-week high of $6.24. The stock is little changed this year, while the 20-member Amex Biotech Index has risen 6 percent.

Shares of ImmunoGen Inc. rose 27 cents, or 5 percent, to $5.57 in Nasdaq Stock Market composite trading. ImmunoGen, based in Cambridge, Massachusetts, collaborates with Genentech on antibody-drug linking technology.

The more-potent version could also help Genentech fend off competition from GlaxoSmithKline Plc.'s Tykerb, analysts said. The U.S. Food and Drug Administration approved the rival drug, which also targets HER-2 proteins, last month.

`Positive Data'

Emerging data on the combination therapy has been positive, said Marc Tessier-Lavigne, head of drug discovery for Genentech.

In a study involving 18 patients, the souped-up Herceptin was linked to a toxin made by ImmunoGen. The combination produced ``sustained anti-tumor activity'' at low doses in multiple patients who stopped responding to Herceptin and other drugs, Tessier-Lavigne said. The drug has also showed minimal side effects, the company said.

``If the empowered Herceptin works, it's going to attract a huge amount of interest in this technology,'' said Peter Senter, vice president of chemistry at Seattle Genetics Inc., a Bothell, Washington-based company that collaborates with Genentech on antibody-drug linking technology.

Senter said he will give a presentation on the new technology April 14 at the American Association for Cancer Research conference in Los Angeles.

Breast tumors are the second most common cancer among women in the U.S. behind skin cancer, with 40,910 patients expected to die from the disease this year, according to the U.S. National Cancer Institute, based in Bethesda, Maryland.

HER-2 Protein

About one-fourth of breast cancer patients have tumors that carry excess amounts of HER-2 protein, the protein that Herceptin, an antibody drug, is designed to target, Genentech says. The drug works by blocking HER-2 positive cancer cells from dividing and growing.

The new technology offers a different approach to earlier efforts that attached radiation to antibodies such as Herceptin, instead of toxic chemicals, Krop said. Those approaches struggled commercially because oncologists must collaborate with nuclear medicine specialists.

Included in the old approach is Biogen Idec Inc.'s radiation-antibody combination Zevalin, which recorded $16.4 million in sales in its fourth year on the market. The company is now seeking to divest that drug, according to the Cambridge, Massachusetts-based company's annual report with the Securities and Exchange Commission.

Past Combinations

Past combinations have failed because the toxins either snapped off in the blood before reaching the tumors or hit healthy cells on the way, causing side effects. Seattle Genetics says it has developed new synthetic linkers designed to remain stable in the blood, yet let go of its toxic payload inside tumors.

ImmunoGen has worked on the linking technology since it was founded in 1981. The company doesn't yet have a marketed drug, or one in the final stage of testing, according to its Web site.

If the high-powered version of Genentech's Herceptin advances, it could energize the field, said Mitchel Sayare, ImmunoGen's chief executive officer, in a telephone interview. ``It represents many years of hard work in trying to execute what should be a straightforward thing,'' Sayare said.

To contact the reporter on this story: Luke Timmerman in San Francisco at ltimmerman@bloomberg.net.

Last Updated: April 13, 2007 16:19 EDT