From: Reuters
Published November 30, 2007 08:23 AM

Avastin panel tops make-or-break period for Roche

By Sam Cage

ZURICH (Reuters) - Roche Holding AG's richly-valued stock could take a significant hit next week if a U.S. regulatory panel advise against approving its key Avastin drug in breast cancer, analysts said.

The U.S. Food and Drug Administration has delayed approval of Avastin as a first-line treatment for metastatic breast cancer but its advisory panel will review the blockbuster next Wednesday, Dec 5.

That's just part of a vital few weeks for Roche, with milestones coming up on two other potential blockbusters in its pipeline, R1583 for diabetes and cholesterol drug R1658. The latter could be a mega-blockbuster if it succeeds where Pfizer Inc's torcetrapib failed.

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"We expect Avastin to be recommended for approval," Landsbanki Kepler analyst Denise Anderson said in a report.

"However, risks remain, especially given that we will not know if the FDA has other issues with the drug until right before the panel meets," Anderson said.

Roche trades at about 17.0 times its forecast 2008 earnings, according to Reuters data, ahead of an average multiple of 14.7 for the European pharmaceuticals sector thanks to promising pipeline and the possibility of using drugs like Avastin in additional indications.

The FDA usually, but not always, follows the advice of advisory panels and has until February 23 to decide on the indication after the drug was filed by Roche's U.S. partner Genentech Inc. Doctors already prescribe Avastin as an off-label treatment for breast cancer.

Analysts expect Avastin -- already approved in colorectal and non-small cell lung cancers in the United States and Europe -- to be one of the world's biggest selling drugs, but it faces competition from several other medicines including Erbitux from ImClone Systems Inc and Merck KGaA.

KEY FACTOR

Approval of Avastin, one of a new class of drugs that work by blocking the blood supply to tumors, in breast cancer is a "key swing factor," Dresdner Kleinwort said in a note.

Kepler's Anderson expected off-label prescribing of Avastin in breast cancer to continue regardless of FDA approval, but a positive decision would bring more reimbursement.

A delay in approval would thus probably lower Anderson's 2008 Avastin forecast by about $449.2 million, she said.

Citigroup analysts estimated non-approval would cut estimated 2010 earnings by 3-4 percent.

Further down Roche's pipeline, positive data from a mid-stage clinical trial on R1583 in diabetes -- due in December -- would herald a decision to take it into Phase III tests.

The company will probably announce whether it will take its experimental R1658 drug, to boost "good" cholesterol, into late-stage development at its full-year results January 30.

Roche Chief Executive Franz Humer told the Reuters Health Summit earlier this month he remained confident about R1583, despite the recent failure of Pfizer's similar drug torcetrapib, and speculated it could have annual sales above $4 billion.

Morgan Stanley also anticipates a combination of Avastin and another Roche cancer drug, Xeloda, in colorectal cancer to be recommended for approval in Europe December 12.

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