Genentech Inc. on Thursday won Food and Drug Administration approval of its colon cancer drug Avastin, the first medication to shrink tumors by choking the blood vessels that feed them.
Industry analysts said the drug could become a $2-billion-a-year product, which would make it the best-selling cancer medication to date. Wall Street drove Genentech's shares up 7%, adding $3.8 billion to the total market value of the South San Francisco company.
At a cost of $4,400 a month, Avastin would also be one of the most expensive cancer treatments available, analysts said. The addition of Avastin to standard chemotherapy would raise the annual cost of treatment to $60,000 to $80,000, said Geoffrey Porges of investment advisor Sanford C. Bernstein & Co.
Avastin, which was shipped to wholesalers Thursday and should reach patients next week, must be used with two standard chemotherapy drugs, fluorouracil and leucovorin.
It is the first of a class of drugs called angiogenesis inhibitors, which close off blood vessels that nourish tumors. The area became a hot subject of research in the 1990s when Judah Folkman of Children's Hospital in Boston showed that an angiogenesis drug could cure cancer in mice. But the field yielded mostly disappointment until Genentech announced its success with Avastin in June.
The big biotech firm revealed that the drug added five months to the lives of colon cancer patients in a large clinical trial, when taken with chemotherapy. Patients on Avastin lived an average of 20.3 months, almost one-third longer than the 15.6 months for patients on chemotherapy alone.
Since then, Genentech's stock price has nearly tripled as investors have added $34 billion to the company's market value. Genentech's shares closed Thursday at $103.10, up $7.02 on the New York Stock Exchange, nearing the record high of $117 reached in 2000.
On a conference call with Wall Street analysts after the stock market closed, Chief Financial Officer Louis Lavigne cautioned against "overly aggressive assumptions" about Avastin sales.
"We are optimistic about the drug but we are concerned that expectations are getting ahead -- please don't get ahead of us," he said.
Analysts said that, based on the price announced by Genentech, the drug should have sales of $400 million to $580 million this year.
Patient advocates welcomed the drug but also cautioned against hyping its significance.
"It is always great to have a new treatment, but it is not a miracle drug," said Priscilla Savary of the Colorectal Cancer Network. She said its cost would probably put it beyond the reach of some patients, particularly those without health insurance.
The price set for Avastin is more than double the predictions for the drug on Wall Street, which ranged from $1,500 to $2,000 a month.
Ian Clark, general manager of Genentech's cancer drug business, said the price reflects the value the drug provides to patients including "a significant survival benefit."
"We feel the price we fixed is a fair one and we think customers will see it that way," Clark said.
Clark predicted that Avastin would not face insurance reimbursement problems. The company expects that Medicare will cover the drug "straight away" and that private health insurers will follow the federal program's lead, he said.
Analysts agreed that Avastin would be covered by insurers as a colon cancer treatment. But some on Wall Street predicted that Medicare and private health plans would balk at covering the drug as a treatment for other cancers for which Avastin has shown promise, such as kidney cancer. Typically, Medicare and private insurers cover such "off-label" use.
"I think this could be the straw that breaks the camel's back," said Porges of Bernstein & Co. "I think it will be the end of automatic reimbursement of off-label chemotherapy."
The FDA approved the drug as a first treatment for patients with metastatic colon cancer, or disease that has spread to other organs. The drug was approved for use with any chemotherapy regimen that includes fluorouracil and leucovorin, a broad approval that was a pleasant surprise to Wall Street.
Colon cancer is the second-leading cause of cancer death in the United States, next to lung cancer, and 148,000 new cases will be diagnosed this year, about half of them will have metastatic disease. Gwen Fyfe, vice president for oncology at Genentech, said that 20% of patients in the company's clinical trial did not benefit from Avastin and that the reason was not known.
"That is an ongoing area of interest for us," she said.
Avastin was invented by Genentech scientist Napoleone Ferrara, who was hired to work on a childbirth drug that later flopped. But in his spare time, Ferrara searched on his own for a mysterious protein that caused blood vessels to grow.
In an e-mail Thursday, Ferrara said his first thought went to patients: "The idea that our work may bring some help to suffering people is simply fantastic."
He said he was also grateful to pioneers of angiogenesis who paved the way for his discovery.
"This is really a milestone," said Folkman, also a professor at Harvard, who started his research in the 1970s. "It is a very compelling validation of a theory. But it took a long time."