Annual Cancer Conference Becomes Laboratory for Stocks
By ANDREW POLLACK
Published: June 8, 2004
Source: New York Times
NEW ORLEANS, June 7 - Shares of the biotechnology company ImClone Systems jumped Monday as investors responded to better-than-expected results of a study of its Erbitux cancer drug that were reported over the weekend at the annual cancer-care conference.
Shares of Telik, a small biotechnology company, rose 90 cents, to $24.43. Data here showed its drug Telcyta had impressive effectiveness against ovarian and lung cancer when combined with chemotherapy in small, uncontrolled trials.
But shares of some other companies that presented seemingly positive test results, including Genentech and OSI Pharmaceuticals, dropped, partly because the results were not as good as some investors had expected.
With so many biotechnology companies developing cancer drugs, the annual meeting of the American Society for Clinical Oncology has become perhaps the most important medical meeting of the year for the biotechnology industry and its investors. Analysts, many of them with medical or science degrees, pack the meeting rooms and photograph the presentation posters with digital cameras.
Shares of ImClone rose $8.89, or more than 12 percent, to $81.38, after results were announced showing that Erbitux, when given with radiation, could double the survival time of patients with advanced head and neck cancer, compared with radiation alone.
The results were more promising than expected and raise the possibility that Erbitux, which was approved in February as a last-ditch treatment for colorectal cancer, might also win Food and Drug Administration approval for use with head and neck cancer. Or at least it might be used for that purpose by doctors, who are free to prescribe any federally approved drug for any treatment they choose.
Other results announced here suggest that Erbitux might be useful when used earlier in colon cancer, which could also expand its sales. A trial for lung cancer showed some benefit, although the improvement was small.
It has been a remarkable comeback for ImClone, which was tarred by a stock trading scandal that led to the imprisonment of its founder, Samuel D. Waksal, and the conviction of Martha Stewart.
The shares are now above the $75 or so they reached in December 2001, when Erbitux first seemed on the brink of F.D.A. approval. Its shares plummeted later that month, after the agency rejected the company's application - but not before Mr. Waksal and Ms. Stewart had sold the stock.
Genentech and OSI Pharmaceuticals are partners in developing the drug Tarceva. The companies had announced last month that the drug extended the lives of lung cancer patients by at least 33 percent.
The actual data, released here, showed the extension to be two months, or about 43 percent. While that met or even slightly exceeded expectations it did not blow past them. "People were expecting a positive surprise, but did not get it," said Bob Ai, an analyst at Bennett Lawrence Management, a New York hedge fund.
Shares of Genentech fell $2.36, to $57.25, while shares of OSI Pharmaceuticals were off $3.33 each, to $75.20.
A big question is how well Tarceva, which is expected to win approval by early next year, will compete with Iressa from AstraZeneca, a similar lung cancer drug that is already approved.
Eric Ende, the biotechnology analyst for Merrill Lynch, upgraded OSI to buy from neutral Monday, saying the Tarceva results were strong. Since Tarceva has now been shown to lengthen life, it should have an advantage over Iressa, which has not. He said in a note to clients that the selling of Genentech and Tarceva shares was overdone.
But other analysts cited data from the Tarceva trial showing the drug did not shrink tumors any more than Iressa does. "Doctors are likely to view Tarceva as undifferentiated from Iressa," Eric Schmidt, a biotechnology analyst at SG Cowen, wrote Monday.
Shares of Millennium Pharmaceuticals rose 14 cents, to $15.02, on the company's report of test results for its drug Velcade, an approved treatment for multiple myeloma, a bone cancer.
Matt Geller of CIBC World Markets said results from tests of using the drug earlier in the disease were encouraging. But some analysts were looking to see if the drug worked in more common cancers. Mr. Schmidt of SG Cowen said a midstage Velcade trial in lung cancer was active "but not overwhelmingly so."
In some cases, stocks had increased sharply earlier in the year in anticipation of the data. And it is possible that some trading was done before the conference based on possible leaks of information from abstracts of tests, which are provided in advance of the meeting to members of the American Society for Clinical Oncology.
In the past, the society would provide members with abstracts weeks in advance, and stock trading on the data was common. A few years ago the society began hearing criticisms that some traders with access to the data, perhaps because they were members themselves or worked closely with the group's members, were receiving an advantage over smaller investors without such access.
Last year, as a result, the group did not provide even its members with abstracts until the conference. Members complained that they could not prepare in advance, and this year the abstracts were given to members about two weeks ahead of the meeting, along with a warning against leaking information or trading on it.
"Our responsibility is to the members, and it's the members' individual responsibility to follow the law," said Dr. Bruce E. Johnson of the Dana-Farber Cancer Institute, who is to become chairman of the society's communications committee Tuesday. One stock that changed direction in advance of the conference was Onyx Pharmaceuticals, a biotechnology company working with Bayer on a drug for kidney cancer and melanoma.
A year ago, Onyx stock was trading for about $11. It rose as high as $60 early last month as excitement grew about the drug, called BAY 43-9006. But then the stock began falling, losing almost a third of its value.
The data presented at the conference from early-stage trials showed signs that the drug has activity against both cancers, but perhaps not as much as some investors expected. Moreover, a somewhat similar drug from Pfizer seemed to impress analysts more, particularly since the design of Pfizer's clinical trial was easier to understand. Pfizer stock was up 40 cents a share Monday, to $36.02.
On Monday, shares of Onyx fell an additional $2.46, to $40.68.