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Cancer Drugs: At Last, a Tonic for Biotech

By Catherine Arnst The biotech industry is about to get a big shot of good news by way of Chicago. After two years of posting poor clinical-trial results, having drugs rejected by the Food & Drug Administration, and watching stock prices sink, several of the industry's leaders are expected to present positive data at one of the world's biggest medical meetings. The American Society of Clinical Oncology (ASCO) annual conference, to be held May 31-June 3 in the Windy City, is the premiere showcase for clinical trials, and "this year it's going to be a real meeting," says Jim McCamant, editor of the Medical Technology Stock Letter. "I think your going to see some very exciting results."

The main event will be a faceoff of sorts on June 1 between two controversial cancer drugs in development, Genentech's Avastin and ImClone System's Erbitux. Both drugs have stumbled in previous clinical trials. Erbitux has the added burden of being the backdrop for an insider-trading scandal that brought down former ImClone (IMCLE) CEO Samuel Waksal and ensnared his close friend, domestic doyenne Martha Stewart (who has not been charged with any wrongdoing).

LONG TIME COMING. In the past weeks, Genentech (DNA) and Merck KGaA (~~), ImClone's German development partner, have announced that they expect to present very positive results in Chicago. The stocks of both outfits soared on the news and carried the longtime-down Amex and Nasdaq Biotechnology indexes up with them. Each is up more than 30% since the start of the year.

For investors, it's about time. The biotech industry has been in a funk ever since the FDA rejected ImClone's application for Erbitux in December, 2001, because of inadequate clinical-trial data. Erbitux had been one of the most anticipated of a new generation of the biotech industry's so-called targeted cancer drugs, meant to to take out tumors with minimal side effects.

The FDA rejection not only led Waksal to tip off relatives to sell their stock ahead of the news -- he'll be sentenced for his crimes June 10 -- but it threw into question the whole field of targeted therapies. At last year's ASCO, scientists reported one disappointing clinical trial after another, including an Avastin trial in breast cancer.

Oncologists attending this year's ASCO, however, already have reason to be more cheerful, thanks to two new FDA approvals for targeted cancer therapies. On May 5, the agency gave the go-ahead for AstraZeneca's Iressa, a lung-cancer drug that aims at the same target as Erbitux, and Millennium Pharmaceuticals' (MLNM) Velcade for multiple myeloma on May 13. "We've got a user-friendly FDA now," says Dr. Mark Monane, analyst with Needham & Co. As a result, he says, "the fundamentals for biotech sure look better than they did six months ago." (See BW, 6/02/03, "The Right Doctor for the FDA").

"SLAM DUNK." Then there's Genentech's cancer-fighting drug Avastin. At this year's ASCO, the company will report much stronger results for Avastin when tested against colon cancer than against breast cancer. The data is embargoed until May 31, but Genentech has already said that the drug extended the lives of patients when combined with chemotherapy. Most targeted drugs have so far only shrunk tumors. "Survival data is what it's all about," says Michael King of Banc of America Securities.

King thinks that "this trial makes Avastin a slam drunk" for FDA approval, which he says could possibly come as soon as yearend. The findings also constitute the first proof of principle for a whole class of drugs designed to starve tumors by cutting off their blood supply. These so-called antiangiogenic drugs were widely hailed as possible cancer cures several years ago, after reversing cancer in mice, but have had little subsequent success in humans.

Merck has made no secret of the fact that there will be good news about Erbitux, also involving colon cancer, on May 31. Most significantly, the German outfit will be presenting data from an advanced clinical trial in which Erbitux was used alone. The trial that was rejected by the FDA in 2001 used Erbitux in combination with chemotherapy. The agency wanted evidence that the drug was effective on its own.

50-50 PROPOSITION. If the latest European data is strong enough, the FDA might accept it as a basis for a new filing from ImClone and U.S. partner Bristol-Myers (BMY), some analysts and industry experts believe. "I give it a 50-50 chance," says Felicia Reed, biotech analyst with Adams Harkness Hill. "It may be that ImClone and Bristol Myers have to finish their own randomized trial, but if the [Merck] data is very, very compelling, they'll probably sit down with the FDA and discuss it."

Erbitux is one of several drugs that blocks the epidermal growth factor (EGF), a key cancer mechanism found on a wide range of solid tumors. Iressa also blocks EGF, as does Tarceeva, jointly developed by OSI Pharmaceuticals and Genentech, and ABX-EGF, from Abgenix and Amgen. Interest in all of these drugs has surged on the strength of the Iressa approval and ImClone data. Reed says they will be among the most closely followed presentations at ASCO this year.

Ultimately, ASCO is meant to serve oncologists and cancer researchers, not the biotech industry. This year, though, the interests of the two groups may converge. Arnst is covering the annual cancer meeting for BusinessWeek

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