Roche Gets Another Setback With Avastin

Bit by bit, it seems that Roche's (RHHBY) oncology drug Avastin is losing its luster. Last year, the company reported data that adding Avastin to early-stage colon cancer did not improve outcomes. Now there is word that it is not particularly useful in breast cancer either.

Simply put, follow-up studies have not replicated initial studies that indicated Avastin could shrink tumors and prolong life. In a decision that was controversial at the time, the FDA allowed Genentech (which Roche later fully acquired) to market Avastin for breast cancer on the basis of this initial data, with the proviso that future data would have to back up that decision.

Well, it hasn't ... so now the FDA has to decide whether to pull the labeling claim for this indication. A panel will be meeting on this issue on Tuesday, and as I have often said - the FDA does not have to do what its panels recommend, but it generally does.

You would think it would be a no-brainer - the drug just does not seem to help all that much. What's more, it is a very expensive drug and it does produce side-effects, so it is not as though supporters can argue "go ahead, it won't hurt to try". All of that being said, the FDA has never pulled a drug before under these circumstances, so maybe it is not as much of a slam-dunk as it might seem.

Avastin is clearly a major drug for Roche - it should do over $6 billion in sales this year, with breast cancer probably accounting for about one-fifth of that. So while the loss of Avastin in breast cancer will not cripple the company, it will hurt. Of course, it also bears mentioning that removing the label is not the same as removing the drug - once a drug is approved, doctors can more or less do what they like with it. So although the FDA has recently cracked down on "off-label marketing" by major drug companies, it still happens and Avastin may still be used in breast cancer; probably just not as often.

Even with this news, I'm a fan of Roche. Still, the company has had a few setbacks lately, so it is probably time to run another valuation analysis on this name.