Genentech

Back in mid-March, Genentech/NYSE: DNA announced patients with non-small cell lung cancer treated with Avastin along with standard chemotherapy lived longer. The news gave Gententech's shares, which were on a three-month slide a much-needed boost. The National Cancer Institute sponsored the study that showed patients who received Avastin along with the standard chemo drugs paclitaxel and carboplatin lived a median of 12.5 months compared to 10.2 months for patients given standard chemotherapy alone. The results were published early because they showed some benefit in the treatment of a cancer that has a dismal cure rate. Additional details of the trial will be released at the May 2005 ASCO meeting. Genentech said it would seek FDA approval to market Avastin for lung cancer.

The next big news for Genentech will be for the use of Avastin in metastatic breast cancer, with data released in late 2005 or early 2006. The study, E2100, is a Phase III study in HER2 negative, chemotherapy-naive metastatic breast cancer patients. The primary endpoint is progression-free survival. Non-small-cell lung cancer and metastatic breast cancer each represent market opportunities comparable or greater than colorectal cancer. In addition to the big solid tumor indications, Avastin is in Phase III trials for first-line renal cell carcinoma.

Avastin is the first-in-class angiogenesis inhibitor approved by the FDA in February 2004. Avastin was approved for first-line treatment of colorectal cancer. Genentech has initiated discussions with the FDA to submit an Avastin sBLA for second-line colorectal cancer (CRC) based on the positive ECOG 3200 study data, which combined Avastin and the FOLFOX chemotherapy regimen. On March 21, near-term competitor Novartis and Schering AG announced its oral angiogenesis inhibitor PTK/ZK was ineffective in stopping the progression of colorectal cancer in a key Phase III clinical trial. PTK/ZK is being tested in both first- and second-line CRC in combination with FOLFOX. This news should give Avastin a significant marketing advantage since Novartis and Schering AG said they could file a BLA for PTK/ZK in early 2007, a delay from their original filing.

Avastin has become the standard of care for CRC with more patients receiving Avastin than any other branded therapy for CRC. Moreover, Avastin is broadly being evaluated in multiple new tumor indications as well as in various combinations with chemotherapy and biological drugs. Even if Avastin faces an increasingly competitive market for CRC, it can expand into new indications ahead of the competition, and the broadest label in the class would support long-term growth. As we see it, Genentech should have no problem reaching its long-term financial goals for 2006-2010, with a targeted average annual EPS growth of 20%. Avastin will remain a major contributor to revenue and an earnings growth driver. Look for angiogenesis inhibition to be a hot topic at the upcoming ASCO meeting in May.

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