Genentech's Battle with Cancer--and Investors

Is Avastin, now in trials, the blockbuster the company needs?

Marlene Ochoa had grim expectations when she was diagnosed with advanced colorectal cancer in April, 2001. But on May 17, 2002, she felt well enough to go out for a celebration--and dance till 1 a.m.--to mark the one-year anniversary of the day she started taking Avastin, an experimental drug from Genentech Inc. (DNA ) The drug, which Ochoa received in a clinical trial, shrank a number of large metastasizing tumors in her liver by 50%. Today, the 53-year-old real estate agent from Diamond Bar, Calif., is back at work, jogging a half-mile a day, and living symptom-free with a disease that normally kills within 12 months.

Her story highlights Genentech's hopes for Avastin, a drug positioned not to cure cancer, but to keep it in check so that the patient can live a longer, productive life. If the drug delivers on that promise, Genentech might have a blockbuster on its hands. But it's far too soon to bank on such an outcome. Now in late-stage trials for colorectal and breast cancer, Avastin is an anti-angiogenesis drug, meaning it's designed to slow the growth of tumors by choking off their blood supply. A few years ago, some cancer researchers promoted this approach as a magic bullet--only to be disappointed by blowups such as Semaxanib, an angiogenesis blocker developed by Pharmacia Corp.'s Sugen Inc. subsidiary that failed in clinical trials in February. It could be many months before doctors have enough data to say that Avastin works in a significant number of patients.

In the meantime, Genentech is at the mercy of its very jittery investors. On Apr. 11 the stock dropped 15%, to $37, when word leaked that Avastin might cause bleeding and blood clots. On May 19, at the American Society of Clinical Oncology (ASCO) conference in Orlando, Genentech presented upbeat data showing that the drug was well tolerated in most patients, but its stock has yet to recover. "People have learned to be really skeptical about anti-angiogenesis drugs," says Dr. Susan D. Hellmann, Genentech's chief medical officer.

The company, though, cannot afford to be skeptical. Avastin is pivotal to fulfilling a promise Genentech CEO Arthur D. Levinson made in 1999: to achieve average annual earnings growth of 25% by 2005. Earnings are expected to grow 18% this year. Genentech's two cancer drugs, Rituxan and Herceptin, accounted for half of the company's $2.2 billion in sales last year. Rituxan has met Genentech's expectations, but Herceptin's growth is slowing. To hit Levinson's goals, the company needs at least one more drug generating sales of more than $100 million a year.

Genentech has three other drugs in late-stage trials, for lung cancer, asthma, and psoriasis, but they all face obstacles. Analysts say Avastin is the only one with the potential to become a blockbuster. "This drug is key to helping Genentech regain its luster," says Kris Jenner, manager of the T. Rowe Price Health Sciences Fund.

Some shine has definitely come off Genentech over the last year. One arm of a study aimed at expanding Herceptin's market was suspended because some patients suffered heart problems. Last year, the Food & Drug Administration requested more data on Genentech's psoriasis drug, Xanelim, and its asthma drug, Xolair, pushing potential approval back to 2003. Genentech did get some good news in May: Its lung cancer drug, Tarceva, was granted fast-track approval status by the FDA. But Tarceva will face fierce competition from Iressa, a similar drug being developed by AstraZeneca PLC.

As for Avastin, Genentech may have to struggle to prove it prolongs patients' lives long enough to balance the risk of side effects such as nosebleeds, hypertension, and fever. The data aren't in yet, and the science itself is perplexing. Blocking the blood supply to tumors clearly slows their growth, but it doesn't kill them. In data just presented from a study of patients with advanced kidney cancer, Genentech could show only that Avastin delayed the time it took for the cancer to worsen from two months to five. "I'm delighted from a tumor-response standpoint, but we are still a long way from a cure," says Dr. George W. Sledge, a professor of oncology at Indiana University Cancer Center.

Genentech plans to release data from studies of Avastin in breast cancer by the end of September, and in colorectal cancer in mid-2003. It can only hope for more stories like that of Marlene Ochoa.

By Arlene Weintraub in Los Angeles, with Catherine Arnst in Orlando

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