Market Spotlight: Cancer drug conference
NEW YORK—With cancer drugs making up the bulk of sales for many biotech companies, Wall Street is gearing up for one of the year's most anticipated medical conferences, the American Society of Clinical Oncology's annual meeting starting Friday in Chicago.
Thousands of clinical study abstracts were released to the previewing public on May 15, and two large biotechs creating a lot of buzz are Celgene Corp. and Genentech Inc.
Friedman, Billings, Ramsey & Co. analyst Jim Reddoch said Celgene is his top biotech pick going into the conference. He was particularly impressed with study data showing 65 percent of patients with the blood cancer multiple myeloma responded positively to first-line treatment with the company's drug Revlimid in combination with Millennium Pharmaceuticals Inc.'s Velcade.
Charles C. Duncan, an analyst with JMP Securities, added that data examining Revlimid for a new use, non-Hodgkin's lymphoma, looked promising, with 28 percent of patients having a measurable response.
Celgene shares have had a nice run so far in 2008, rising 28 percent year-to-date. Genentech, the world's largest biotechnology company in terms of market capitalization, will make three major presentations on its drug Avastin. Results are expected from a late-stage trial in breast cancer, for which the drug was just approved in February, and from a mid-stage study in glioblastoma multiforme, an advanced type of brain cancer. Safety data from an early-stage colon cancer trial combining Avastin with a standard chemotherapy regimen also will be presented.
Banc of America Securities analyst Katherine S. Kim said Genentech remains her top biotech pick due to Avastin's recent approval as a first-line breast cancer treatment and its potential to be approved as an add-on treatment for early-stage colon cancer, which she thinks could add $10 to $15 to the stock. She anticipates Avastin sales of $2.6 billion this year, growing to $4.8 billion in 2012.
Genentech shares have traded flat year-to-date.
Cowen and Co. analysts say all signs suggest Erbitux, made by Germany's Merck KGaA, biopharmaceutical firm ImClone Systems Inc. and drug maker Bristol-Myers Squibb Co., will be a major player in the lung cancer market. The companies announced in September that Erbitux met the main goal of their late-stage European FLEX trial in improving lung cancer patients' survival, but no specific data from the trial has yet been provided ahead of the companies' June 1 presentation at ASCO.
Cowen said ImClone investors have been somewhat skeptical of Erbitux's prospects, but its analysts believe the drug could capture 15 percent to 25 percent of the first-line lung cancer market, generating sales of more than $700 million in 2012.
Among smaller cap biotechs, Poniard Pharmaceuticals and Ariad Pharmaceuticals are two companies with highly anticipated presentations.
Poniard will show mid-stage study data of picoplatin for prostate cancer and colorectal cancer. The drug is currently in late-stage development as an initial treatment for relapsed non-small cell lung cancer. An application for Food and Drug Administration approval is slated for filing in 2009.
Ariad Pharmaceuticals will offer data on an oral formulation of its lead candidate, deforolimus, which acts by depriving cancer cells of the protein mTOR, involved in cell growth. Deforolimus is currently in late-stage testing to treat sarcoma, though other oncology indications are also being pursued with its partner, Merck & Co.
Oppenheimer & Co. analyst Bret Holley rates Poniard at "Buy" because picoplatin could be just as effective but more tolerable than rival drug Eloxatin, made by Sanofi-Aventis SA. Lazard Capital Market analyst Joel Sendek is bullish on "Buy"-rated Ariad, noting that by targeting mTOR, deforlimus could potentially be used to treat other cancer types -- widening its revenue opportunities.
Despite Wall Street's enthusiasm, both companies' shares have taken a beating this year. Since January, Poniard shares are down 24 percent while Ariad's are down 53 percent.
