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Avastin trial Halted 3/23/2007


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March 23 (Bloomberg) -- Genentech Inc. said researchers halted a trial of its second-biggest cancer drug and sales this quarter stalled, driving shares of the biotechnology company down the most in almost seven months.

The clinical trial of the drug, Avastin, was stopped in patients with a form of lung cancer after some patients developed holes in their gastrointestinal tract and windpipe. One patient died, a Genentech spokeswoman said today.

Avastin, already approved for colon cancer and a more common form of lung cancer, generated $1.7 billion in sales last year, behind $2.1 billion from the arthritis and cancer drug Rituxan. The disclosure of the failed study, at a company meeting with investors, worsened a slide in the stock price that began after Genentech reported no pickup in sales for this quarter from $2.1 billion in the final quarter of 2006.

``It's disappointing,'' said Eric Schmidt, an analyst with Cowen & Co., in an interview at the investor conference in New York. ``This is supposed to be a growth stock.''

The shares of Genentech, which is based in South San Francisco, California, fell by $2.72, or 3.2 percent, to $82.56 at 4:19 p.m. in New York Stock Exchange composite trading. The decline is the biggest since shares fell 4.6 percent on Sept. 11, 2006. Genentech is the world's second-biggest biotechnology company, behind Amgen Inc. of Thousand Oaks, California.

American depositary receipts for Switzerland's Roche Holding AG, which owns 56 percent of Genentech's stock, fell 80 cents to $91.45. Each ADR equals half an ordinary share.

The Avastin Study

The Avastin study enrolled 29 patients, and was halted after two patients developed holes between their trachea and esophagus, and one patient died, said Genentech spokeswoman Kristina Becker, in a telephone interview. The trial, based at Sarah Cannon Cancer Center in Nashville, Tennessee, tested Avastin in combination with radiation and chemotherapy, an unapproved use, Becker said.

When the holes develop, patients can inhale saliva and fluids, which can cause choking, according to the National Institutes of Health, a U.S. agency.

The study was in patients with small-cell lung cancer, the rarer of two forms of the disease. Avastin was approved for the more common non small-cell kind in October.

Still, about 45,000 to 50,000 patients with non-small cell lung cancer have taken Avastin, Becker said. Safety in those patients is ``well-characterized'' Becker said.

No Explanation on Sales

The company didn't say why companywide sales faltered. Schmidt, the Cowen & Co. analyst, said growth may be starting to flatten for the breast cancer drug Herceptin and the eye treatment Lucentis. Schmidt doesn't own any shares.

Lucentis, for a leading cause of blindness, macular degeneration, was Genentech's most successful new product, with $217 million in fourth-quarter sales. Herceptin generated $322 million in revenue last quarter, up 29 percent from a year earlier.

Profit this year will still rise 25 to 30 percent, as previously forecast, and ``overall product demand remains strong,'' the company said today in a statement.

``The company reported 21 medicines in development, more than twice as many as 15 months ago. Management raised its research goal by 50 percent, now planning to create more than 30 novel compounds by 2010, up from 20.

Swinging for the Fence

``We're about going after breakthrough drugs; we're not about incrementalism,'' said Art Levinson, the chief executive officer. ``We're shooting for home runs, and recognize that most will be strikeouts, but once in a while, we'll hit a home run.''

Genentech said it entered a lease agreement to build a 1,000-liter plant in Singapore to make Lucentis. Construction will start in the second quarter, and the unit would be licensed by early 2010, the company said.

The company reduced some of the pressure on its factories to keep up with demand for Rituxan, Herceptin and Avastin, officials said. The plants are running at 85 percent of capacity, down from almost 100 percent.

About 85 percent of the patients with lung cancer, the nation's leading cancer killer, have the non-small cell form of the disease, according to the American Cancer Society. Lung tumors are the leading cancer killer in the U.S., causing 162,000 deaths a year, according to the group.

To contact the reporter on this story: Luke Timmerman in San Francisco at ltimmerman@bloomberg.net

Last Updated: March 23, 2007 16:30 EDT

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