Roche’s Avastin Fails to Convince

ZURICH—Roche Holding AG came under pressure Wednesday after a U.S. regulatory panel said the Swiss pharma giant’s cancer drug Avastin failed to show hoped-for benefits in treating breast cancer, potentially erasing hundreds of millions of dollars in sales and raising doubts about the company’s drug-development setup in the wake of recent development failures.

The Oncology Drugs Advisory Committee, or ODAC, of the U.S. Food and Drug Administration, or FDA, Tuesday voted against a broader label for Avastin and recommended the FDA to revoke the provisional approval for the breast-cancer indication due to a lack of benefit when compared to the drug’s risks.

Avastin is one of Roche’s best-selling cancer drugs, having netted more than 6 billion Swiss francs, or about $5.7 billion, in revenue in 2009. The drug is approved to treat colon, lung, and other cancers. While it is approved in the European Union to treat breast cancer, the same indication has only been provisionally approved in the U.S.

The FDA is expected to decide by September 17 whether to fully approve the drug to treat breast cancer or to drop the label. The FDA usually, but not always, follows the recommendations by advisory panels. In 2008, the FDA granted Roche’s Avastin a provisional approval to treat breast cancer even though the panel voted against such a move.

Roche said it will continue to work together with regulators and said it was convinced its large trials showed that Avastin improved progression-free survival in breast cancer patients. Breast cancer kills nearly 400,000 women every year.

Shares of Roche, which have already shed nearly 20% this year due to several drug pipeline failures, dropped 4.2% Wednesday.

The FDA panel’s vote triggered analyst concerns that besides losing sales contribution of around 500 million francs for treating patients with breast cancer in the U.S., the negative verdict could also affect other cancer indications and prompt other regulators to reconsider their views.

“The negative … vote will raise doubts over a U.S. approval of Avastin in ovarian cancer and also give rise to a potential change in the EU label, although yesterday’s decision isn’t linked to any of the two,” UBS pharma analyst Fabian Wenner said. Due to the negative decision, Mr. Wenner said he doubts the FDA will grant an approval for Avastin in breast cancer.

Other analysts said Roche is likely to cut its peak sales estimate for Avastin by about 1 billion francs or more. Previously the market had expected Avastin to reach peak sales of about 9 billion francs before the drug’s patent will start to expire. Roche will report half-year earnings on Thursday.

Meanwhile, J.P. Morgan said the negative panel verdict could trigger a restructuring at the Swiss company as Roche will have to cut costs to make up for the shortfall in sales. They suggested Roche could cuts sales staff and curb marketing costs.

“However, we hope that in view of two major disappointments in the last four weeks, Roche may question their entire Pharma set-up and consider a more comprehensive restructuring,” J.P. Morgan said in a research note.

Roche in late June released disappointing trial data for its experimental diabetes drug taspoglutide. The medicine not only had a potential to reach sales of more than 2 billion francs but also carried the hope the drug would help reduce Roche’s dependence on cancer drug, which make up the bulk of the company’s revenues.

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