Genentech's Cancer Quest

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Progress in cancer treatment has advanced remarkably in recent years. Nevertheless, the disease remains a vicious and much-feared killer; this is especially true of lung cancer. According to the National Cancer Institute, the five-year survival rate of those who were diagnosed with lung or bronchus cancer from 1995-2000 was just 15.2%.

Clearly there is plenty of room for improvement in treatments for lung cancer. Enter biotech company Genentech (NYSE: DNA). The company already has had significant success in fighting numerous other forms of cancer, as is evident from its earnings. On Monday, the South San Francisco, Calif.-based firm reported that its first-quarter revenue rose 50% to $1.46 billion from the same period in 2004, while net income jumped 61% to $284.2 million.

In the lung cancer arena, the company is still at a relatively early stage. Genentech's recently approved treatment for non-small-cell lung cancer (NSCLC), Tarceva, contributed $47.6 million in its first full quarter of sales. Tarceva is a "second chance" treatment with a fairly narrow indication, since the drug is approved to treat locally advanced or metastatic NSCLC after the failure of at least one chemotherapy regimen. In fact, Tarceva doesn't provide any benefit in combination with platinum-based chemotherapy. Still, Tarceva's admittedly modest application represents an important step forward in extending lung cancer patients' lives.

Greater potential may reside in Genentech's drug Avastin. First-quarter sales of that medicine, approved to treat metastatic colorectal cancer, surged 433% year over year to $202.9 million. But new possibilities may soon open up for Avastin. As Fool contributor Charly Travers recently noted, Avastin appears poised to become a standard first-line therapy in combination with chemotherapy.

Unfortunately, Genentech is priced dearly. Still, the company has proved to be exceptionally good at developing oncology treatments, even for those cancers that have been particularly stubborn such as lung cancer. This kind of in-house expertise is worth a premium, but for now, would-be investors are best served by waiting patiently.

For more:

• A New Drug for Lung Cancer
• The Best Company I've Never Owned
• Genentech's Pricey DNA

Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.