A New Drug for Lung Cancer

Thursday night Genentech (NYSE: DNA  ) and OSI Pharmaceuticals (Nasdaq: OSIP  ) announced that the FDA had approved Tarceva, the duo's drug, for the treatment of non-small-cell lung cancer (NSCLC). In its clinical trials, Tarceva attained the gold standard for a cancer drug by increasing cancer patients' life spans. Because Tarceva showed a survival advantage versus placebo, approval was expected.

While Tarceva is the third drug targeting the cancer-boosting epidermal growth factor receptor (EGFR) to be approved, it is the first to show an improvement in patient survival. That should give it a competitive edge against AstraZeneca's (NYSE: AZN  ) Iressa, which was approved for use in NSCLC based on less robust tumor response rate data. The other EGFR drug on the market is Erbitux from ImClone Systems (Nasdaq: IMCL  ) and Bristol-Myers Squibb (NYSE: BMY  ) . Since Erbitux is approved for use in the treatment of colorectal cancer it is not truly a direct competitor.

The EGFR drugs have been a hot topic for years, and it has been great to watch them transition from concept to commercialization. While the drugs are early in their growth phase and aren't blockbusters yet, they've sold well. Through the third quarter of this year, Iressa sales were $309 million, and Erbitux's came in at $223 million. I expect that Tarceva should do just as well, possibly at the expense of Iressa.

These drugs demonstrate why I'm a big fan of investing in cancer drugs. The medical need for better products is obvious, and good drugs can quickly score big sales. This is a market where customers have a strong incentive to be early adopters, jumping on new and better drugs. For my money, small-molecule and antibody drugs hitting new targets involved in cancer growth are a good place to be these days.

For additional articles on the biotech industry, see:

• Finding Biotech's 50-Baggers
• Are Stem Cells a Rule Breaker?
• Biotech's 5-Baggers: Part 1
• Biotech's 5-Baggers: Part 2
• Biotech's 5-Baggers: Part 3

Fool contributor Charly Travers does not own shares of any company mentioned in this article. Charly is also an analyst for Motley Fool Rule Breakers. If you'd like to see what David Gardner and his team of analysts have cooking, we invite you to take a risk-free trial with no obligation.