December 6 2007: 11:46 AM EST
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Genentech's silver lining

The FDA's rejection of Avastin as a treatment for breast cancer was certainly a setback, but the drug giant may yet prevail.

By John Simons, Fortune writer

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WASHINGTON, D.C. (Fortune) -- Genentech scientists won't waste any time fretting the FDA panel decision to reject Avastin as a breast cancer treatment. The reason: The biotech giant has at least three clinical breast cancer trials underway - at least one of which is likely to succeed.

In a 5-4 vote, the Food and Drug Administration's Oncology Drug Advisory Committee found insufficient evidence that Avastin's risks outweighed its benefits for women with advanced breast cancer. Genentech (Charts) shares fell 8.4 percent on Wednesday's news, before trading on the stock was halted. Shares were down on Thursday.

While their initial dismay isn't surprising, investors shouldn't overreact. Genentech is rare among biotechs: It has a vast, mature pipeline and a diversity of 13 medicines on the market (including breast cancer treatment Herceptin).

Avastin has already been approved by the FDA, but only to treat lung and colon cancer. For years, however, doctors have been using the drug "off label" - and in combination with chemotherapy - to treat women with locally recurrent or metastatic breast cancer. As a result, Avastin is Genentech's second most popular medicine. In 2006, Avastin sales rose 54 percent, to $1.7 billion, and accounted for almost one-fifth of the company's total sales.

Wednesday's decision was dispiriting for Genentech. "We are disappointed by the split vote of the committee," the company's president of product development, Susan Desmond-Hellmann, said in a statement. "We believe that Avastin can help meet a significant unmet medical need for women with metastatic breast cancer, and we are committed to working with the FDA to make Avastin a viable treatment option for these patients."

But the setback is likely temporary. The panel never said that Avastin wasn't a viable treatment for breast cancer. It merely decided that Avastin's risk/benefit profile wasn't equal to other approved treatments for breast cancer.

And therein likes the silver lining. Genentech will have several more chances to prove Avastin's worth in breast cancer treatment. The company is conducting three trials in particular that should put regulators at ease about Avastin's usefulness for breast cancer patients. Two of those studies - one named "Ribbon-1" and the other, "AVADO" - are likely to yield better safety and efficacy data for Avastin next year.

Another study, dubbed "Ribbon-2," is expected to conclude in 2009. "There is a good chance one of those three trials will work - and that's all they need, says Shiv Kapoor, an analyst with Ferris Baker Watts in San Francisco. " We believe Genentech is going to be a major presence in breast cancer."  To top of page

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