Shares of OSI Pharmaceuticals Inc. rose Friday after a Thomas Weisel Partners analysts initiated coverage of the biopharmaceutical company with an "Overweight" rating, citing accelerating sales of the cancer drug Tarceva.
Tarceva, which is approved to treat non-small cell lung cancer and pancreatic cancer and was developed by OSI, is sold by Genentech Inc.
Analyst Stephen Willey said Tarceva sales could get a boost from data expected in the second half of the year from two trials. One of the trials is examining the drug in combination with Genentech's Avastin, and the other is Tarceva by itself as a maintenance therapy. The drug also could see approvals outside the U.S., also stimulating growth.
Willey projects Tarceva sales of $1.13 billion in 2008.
Although Tarceva currently faces competition in lung cancer treatment from Eli Lilly & Co.'s Alimta and AstraZeneca PLC's Iressa, as well as potential competition from Bristol Myers Squibb/ImClone System's Erbitux, Willey said Tarceva sales should be protected as the drug has shown effectiveness treating specific patient groups, such as nonsmokers.
OSI will also benefit from growing sales of Merck's new diabetes drug Januvia because OSI receives royalties related to patents it controls on the drug class Januvia belongs to, DPP-IV inhibitors, Willey said. OSI has similar agreements with other major drug makers developing drugs in the class. According to Willey, for each $5 billion in DPP-IV drug sales, OSI gets $100 million.
Willey has a $54 price target on OSI.
OSI shares rose $1.00, or 2.6 percent, to $40.28 in morning trading.
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