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Genentech Shares Continue to Soar on Avastin News

The stock hits another 52-week high as some analysts issue bullish reports on the firm and its colon cancer drug.

June 03, 2003|Karen Robinson-Jacobs | Times Staff Writer

Genentech Inc.'s shares hit another 52-week high during trading Monday, as investors reacted to detailed reports over the weekend that its experimental drug Avastin increased the survival time for colon cancer patients by 30%.

South San Francisco-based Genentech hit a high of $70.50 on Monday before closing at $66.73, up $4.12, on the New York Stock Exchange.

On May 19, Genentech released preliminary results of a large human clinical trial of Avastin, which blocks the formation of blood vessels that feed colon tumors, saying the test exceeded its expectations. Since then Genentech's stock has climbed 76% in value.

On Sunday, more data from the Avastin tests were released at a meeting of the American Society of Clinical Oncology in Chicago.

At the conference, results were released from another study done by the Mayo Clinic in Minnesota, showing that a new cocktail of existing chemotherapy drugs was as effective in colon cancer patients as the Avastin trials. Some analysts had predicted that would prompt a sell-off in Genentech shares.

Instead, several analysts issued bullish reports Monday on Genentech, based on the promise of the new therapy.

"We believe Avastin in combination with [a chemotherapy] regimen will become the standard of care for the first-line treatment of metastatic colorectal cancer," Elise Wang, senior biotechnology analyst with Citigroup's Smith Barney, wrote Monday.

Analysts expect the Food and Drug Administration to approve Avastin for sale, possibly as early as this year.

Annual sales of Avastin will easily top $1 billion for colon cancer treatment alone, estimated Mark Schoenebaum, biotech analyst with U.S. Bancorp Piper Jaffray. If the drug is shown to have substantial benefits in treating other cancers, "it could easily be $2 billion," he said.

But Christopher Raymond, an analyst at Robert W. Baird & Co., was more cautious.

"We may be jumping in front of a freight train," Raymond wrote. He downgraded Genentech to "neutral" from "outperform," citing the stock's recent sharp rise.

Meanwhile, shares of New York-based ImClone Systems Inc. continue to bounce back from insider-trading investigations in 2001.

At the ASCO conference, ImClone released a study showing that its experimental drug Erbitux could shrink tumors in patients with colon cancer that otherwise would be untreatable.

ImClone's stock gained 18% on Monday, closing at $33.50, up $5, on Nasdaq.

Reuters was used in compiling this report.

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