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FDA Approves Tarceva™ for Non-Small Cell Lung Cancer... What's Next for Biotech Investors?

Ed Wijaranakula, Ph.D.
Chief Investment Strategist, Infotix Systems, Inc. - 
November 22, 2004

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Almost two months ahead of schedule, the U.S. Food and Drug Administration (FDA) said on late Thursday that it approved Tarceva™, the OSI Pharmaceuticals, Inc. (NASDAQ: OSIP) and Genentech (NYSE:DNA) drug for treating advanced cases of non-small cell lung cancer, the most common form of lung cancer. Despite the good news, the share price for OSI Pharmaceuticals plunged at the market opening on Friday, November 19, as much as 14.4 percent as Wall Street raised concerns about the lack of future revenue guidance for Tarceva sales as well as issues surrounding the inclusion of information on the package insert regarding the epidermal growth factor receptor (EGFR) protein that could potentially limit the sales of the drug. 

Traders and hedge-fund managers began questioning Tarceva's pricing, $2,060 for a 30-day supply, and the effectiveness of Tarceva on patients that are current or former-smokers. Over 18.5 million OSI Pharmaceuticals shares were traded on Friday, eleven times more than the three-month daily average. The shares closed at $58.16, down 9.48 percent from the previous day's closing price. Genentech's share price on the other hand, closed at $48.89, down just 1.98 percent with trading volume only slightly above average.

Why is the Epidermal Growth Factor Receptor (EGFR) so Important? - Normal epithelial cells produce low levels of epidermal

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growth factor receptor (EGFR) protein on their surface. An increased level of EGFR protein found in the tumor tissue causes the tumor to grow aggressively and to metastasize. A number of EGFR-targeted agents including the EGFR inhibitors gefitinib ('IRESSA®', ZD1839) and erlotinib ('Tarceva™', OSI-774), and the monoclonal antibody cetuximab ('Erbitux', IMC-C225) have been developed for a variety of anti-cancer treatments.  

For the non-small cell lung cancer treatment, gefitnib, developed and commercialized by London, UK-based AstraZeneca (NYSE ADS :AZN), and erlotinib, co-developed and commercialized by OSI Pharmaceuticals, Inc. and Genentech, which is majority-owned by Switzerland's Roche Holding AG (OTC ADR : RHHBY.PK), work by attaching itself to the EGFR and thereby inhibiting the attachment of the EGFR to the epidermal growth factor (EGF). 

In cell biology, an attachment of the EGFR to the EGF activates the enzyme tyrosine kinase, which causes the cell to grow and multiply. Hence, an EGFR tyrosine kinase inhibitor will cause cells to stop growing. Human epidermal growth receptor 1 (HER1), for example, is one of the several proteins which are found on the surface of many tumor cells.

What is the Real Issue Concerning the EGFR Protein Expression Status and Tarceva's Competitiveness in the Lung Cancer Drug Market?  -  Analysis of the impact of EGFR expression status, as determined by immunohistochemistry (IHC) found in the Tarceva's package insert, based upon 238 study patients, or one-third of the tested population, shows that the survival of patients with the positive EGFR expression status is greater than that with the negative EGFR expression status.

Immunohistochemistry (IHC) using the EGFR pharmDx™ kit from Carpinteria, Ca-based DakoCytomation, Inc., is a quantitative analysis to identify the EGFR expression in normal and neoplastic tissues. In this analysis, specimens from the biopsy are IHC stained and visually inspected. EGFR-negative is defined if cells are absent from staining within the tumor. In the Tarceva study, EGFR-positive was defined as having at least 10% of the cells stained, in contrast to the 1% cut-off specified in the Dako EGFR pharmDx™ kit instructions. 

According to DakoCytomation, the EGFR pharmDx™ kit is FDA-approved and is currently used to identify the treatment eligibility for colorectal cancer patients with Erbitux™.  Nonetheless, the use of the pharmDx™ kit has not been validated for use in non-small cell lung cancer tissue. The analysis for EGFR expression in cell tissues is quite routine. Anatomic pathology laboratories such as Riviera Beach, Fl-based AmeriPath, Inc., can run the analysis and provide results within 24 hours from the receipt of the specimen.

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About NMS Research Analysis: NMS Research Analysis is a private independent research entity of Infotix Systems, since 1999, bridging the gap between cutting-edge scientific research and the investment community. We offer in-depth research analysis of companies and emerging technology in sectors ranging from semiconductors, biotech, nanotechnology, novel materials for aerospace and energy industries. Dr. Wijaranakula's portfolio holds long positions or controls in DNA and OSIP.