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Genentech (NYSE:DNA) and its partner, Roche, announced that in the Phase 3 AVAIL study of Avastin in 1st-line lung cancer, both low and high doses were effective in improving progression free survival:

- Deutsche Bank notes that in their view, the AVAiL data, while supporting Avastin use in NSCLC, will likely cause physicians to strongly consider using lower Avastin doses. Maintains Hold rating.

- Goldman Sachs says the the cost of low dose is about $4,000/month versus $8,000/month for high dose Avastin. They estimate the sales potential of Avastin in lung cancer to be $0.5 - $1.0 bn. It would be reduced 50% if all patients were shifted to the low dose. However, Avastin may behave differently with different chemotherapy.

Furthermore, physicians are attempting to prolong survival as much as possible with Avastin. Therefore, the firm does not expect more than 50% of the physicians to shift to low dose Avastin in lung cancer until there is further data on low dose Avastin plus carboplatin and Taxol. Assuming 50% of the Avastin use in lung cancer is at the low dose, the reduction in sales may be $200mn, or $0.10 in EPS.

The shares of Genentech may be under pressure based on the news. GSCO maintains their Buy rating as the potential EPS impact is manageable.

Notablecalls:
Think the downside is somewhat muted in DNA. Would be keeping an eye on the stock for a bounce.

Source: Genentech: How Much Downside From Avastin News?