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New cancer drugs -- who profits?
Pfizer, Genentech present cancer drugs, steal stage from German drug giants.
May 16, 2005: 1:52 PM EDT
By Aaron Smith, CNN/Money staff writer

NEW YORK (CNN/Money) - Pfizer is planning to launch a new drug, possibly by year-end, to treat a rare but deadly form of stomach cancer, that could bring in up to $800 million a year for the world's biggest drugmaker, an industry analyst said Monday.

In addition, Genentech presented some promising data with its cancer drug Avastin at the American Society of Clinical Oncology (ASCO) this weekend, according to another analyst, but two German giants, Schering AG and Merck KGaA, failed to bring forward potential blockbusters.

The new Pfizer (up $0.19 to $28.05, Research) drug, SU11248, would treat patients with gastrointestinal stomach tumors, or GIST. The drug recently completed late-stage testing, Pfizer reported.

"Pfizer is clearly a winner here," said Robert Hazlett, analyst for Suntrust Robinson Humphrey, who has been attending the meeting. "Pfizer is clearly putting their solid foot forward. They've got a good franchise and it's good potential for the next couple years."

Hazlett said Pfizer, the world's biggest drug company, could file its findings on SU11248 to the Food and Drug Administration within the next few weeks and be on the market by the end of this year "in the most optimistic scenario."

Pfizer spokeswoman Susan Bro would not confirm Hazlett's projection that the drug could make up to $800 million and she provided a more conservative estimate for the drug's application and approval timeline.

"Our intent is to file for application with the FDA this year," said Pfizer spokeswoman Susan Bro. "The review could potentially take 12 months. It's quite early to project cost and revenue."

Patients diagnosed with GIST are often prescribed Gleevec, a blockbuster from Swiss company Novartis (down $0.05 to $48.33, Research) that made $1.6 billion last year. But some patients' bodies become immune to Gleevec, rendering the drug ineffective within two years, according to Pfizer.

"After about 24 months Gleevec is no longer effective and the disease progresses," said Bro. Bro said that SU11248 is "able to stop the progression of the tumors and eliminate the cancer in 40 percent of the cases."

The new product, SU11248, "is being developed as a drug that can be used once Gleevec failed," said Hazlett, of Suntrust Robinson Humprey.

SU11248 is also being tested to treat kidney cancer, breast cancer and some forms of tumors, Pfizer said.

Two other companies unveiled new products at the conference this weekend.

Cytos Biotechnology, a Swiss company, unveiled an anti-nicotine injection to help smokers quit the habit. The injection has proved effective in testing in humans, according to Cytos, but the drug still has to go through late stage testing for safety in the general population.

Also, researchers revealed that chemotherapy patients with a certain type of lung cancer who took Avastin, a drug produced by Genentech, took longer to relapse than patients treated with chemotherapy alone. Genentech (down $0.06 to $72.64, Research), a San Francisco company, is majority owned by Swiss giant Roche.

But while "expectations are high" for the drug, it remains unclear how profitable Avastin will be for Genentech, Eric Schmidt, drug analyst at S.G. Cowen, said in an e-mail to CNN/Money.

"Avastin is a great drug long-term, but has to be for [Genentech] to grow into valuation," said Schmidt. Genentech shares trade at 45 times earnings per share for 2006 estimates, compared to 25 times for the biotech industry, said Schmidt.

Schering AG (down $2.59 to $65.21, Research) is "one of the losers" at the ASCO conference, as its data for PTK787, a drug designed to block tumor cells from growing, was "quite disappointing," Schmidt said. Merck KgaA, had some late-stage presentations on colorectal cancer drug Erbitux, "but not enough to change commercial expectations for the drug," said Schmidt.

Merck KgaA, which is not related to Merck & Co., Inc. of Whitehouse Station, N.J., is licensed to market Erbitux outside the U.S. Erbitux was developed by ImClone Systems Inc. (down $0.11 to $33.24, Research), the New York City company that launched the drug last year, totaling sales of $261 million.

Hazlett does not own stock in these companies, but an affiliate of his company has conducted business with at least one of them. Schmidt does not own stock in these companies and his firm does not do banking with them.  Top of page

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