Analysts said Celgene Corp. and Genentech Inc. are their top picks heading into the 44th annual American Society of Clinical Oncology meeting, or ASCO, taking place May 30 to June 3 in Chicago.
Abstracts of clinical data to be presented at the meeting were released late Thursday. ASCO is considered one of the most important medical conferences of the year for the biotech industry, as the sector derives much of its revenue and profit from selling cancer treatments.
Jefferies analyst Eun K. Yang expects ASCO to be neutral for most stocks in the sector, but thinks Celgene's new Revlimid midstage data for relapsed non-Hodgkin's lymphoma could garner the company early approval. Celgene continues to plan for Phase III trials.
Friedman, Billings Ramsey analyst Jim Reddoch also said Celgene would be the stock he is "overweighting" going into the conference. He said the combination treatment of Revlimid/Velcade looks impressive as a first-line treatment for myeloma with 65 percent of patients showing a very good partial response or better, and maintenance data also was solid.
Lazard Capital Markets analyst Joel Sendek said Celgenes Revlimid/Velcade combination in front-line myeloma appears "marginally more effective" than each drug alone, but said acute myeloid leukemia data was uninspiring, and debate over Revlimid's ability to successfully harvest stem cells continues.
Celgene shares rose $1.80, or 3 percent, to close at $61.09.
Genentech said it now expects final safety and effectiveness data from a trial of its cancer drug Avastin in colon cancer patients to be ready by 2009, a full year earlier than previously forecast. It also said it will present encouraging results from a midstage study of Avastin in glioblastoma multiforme (GBM), an aggressive type of brain cancer.
UBS analyst Maged Shenouda doesn't read anything into the early completion of the trial, but said that if adding Avastin to treatment in colon cancer delivers a significant disease-free survival benefit, it would mean upside to his Avastin estimates.
Shenouda currently forecasts 2008 Avastin sales of $2.9 billion growing to $4 billion in 2011. He rates Genentech a "Buy" with a $92 price target.
Rodman & Renshaw's Michael King is relieved Avastin appears to be safe in the colorectal cancer setting, and was pleased that the combination of Avastin and Erbitux in GBM produced impressive response rates in patients who had received chemotherapy. He backed a "Market Outperform" rating and $90 price target on the stock, saying Genentech is ready to show renewed earnings growth in the coming years.
PiperJaffray's Thomas Wei also is encouraged by the initial safety profile and believes risks with Avastin treatment will be considered acceptable if the trial shows the the drug works well.
PiperJaffray's Caroline Y. Stewart noted that Avastin does appear safe in lung cancer patients with brain tumors, a population for which the drug currently isn't prescribed. But Stewart still thinks that even with this data, only one-third of patients will be eligible to receive Avastin and believes Erbitux has significant opportunity to gain market share among other Avastin-ineligible patients.
Genentech shares rose $1.36, or 2 percent, to finish Friday's session at $70.19.
Separately, Eli Lilly & Co. said giving advanced lung cancer patients its Alimta drug after chemotherapy increased patients' survival without tumor recurrence or progression.
Lazard's Sendek said Alimta improves patients' ability to maintain progression-free survival, but doesn't improve survival when used as a first-line lung cancer treatment and adds toxicity. While he thinks Genentech's Tarceva could rival Alimta in this setting if year-end trial data shows equal effectiveness, Sendek does think Alimta has the opportunity to serve a substantial number of patients eligible for maintenance therapy, given that nothing is currently approved.
Lilly shares ended up 24 cents at $48.91.
Oppenheimer & Co. analyst Brian Abrahams said Genzyme's data on Clolar from its CLASSIC-II trial confirm the drug's potential use in elderly acute myeloid leukemia patients unfit for standard chemotherapy.
"While we do not expect major movement for GENZ shares on this data, we believe that clofarabine will be a meaningful revenue line in the out-years," Abrahams said in a note to clients. "With nearly 24,000 older patients worldwide with AML, we believe that sales in this setting could approach $170 million by 2011."
The company's shares fell 55 cents to close at $69.08.
Citi Investment Research analyst Yaron Werber anticipates positive data at ASCO showing that Imclone Systems Inc.'s Erbitux is highly active in tumors with the KRAS wild type gene, which could drive usage in 2nd-line colon cancer over time, a larger and more lucrative market than use as a third-line treatment.
Rodman & Renshaw's Michael King also said Imclone remains one of his top names for 2008, and backed a "Market Outperform" ratings and $62 price target.
But JPMorgan's Matthew Roden said he's skeptical on Imclone going into ASCO, given "lofty expectations for the FLEX trial of Erbitux in first-line non-small-cell lung cancer, and KRAS data that is academically intriguing, but probably not commercially viable."
Imclone shares fell 97 cents, or 2.3 percent, to end at $41.72.
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