Genentech News Slices Small Rival’s Stock
Biotechnology stocks have long been risky propositions, and investors got a stark reminder Tuesday of just how perilous they can be.
Shares of Eyetech Pharmaceuticals Inc., a small New York company that was a darling of investors when it went public last year, plunged 46% after the outlook for its only product dimmed.
On Monday, data released by industry giant Genentech Inc. showed that its Lucentis drug improved or maintained eyesight in 95% of patients who took it in a large clinical trial. In previous studies, Eyetech’s Macugen drug improved or maintained vision in 70% of patients.
The drugs treat the “wet” form of age-related macular degeneration, caused by an abnormal growth of blood vessels in the eye. Though far less common than the “dry” form of the disease, which is caused by a weakening of eye tissue, it is considered a leading cause of blindness in the elderly.
Macugen’s defenders, including the company’s chief executive and a UCLA researcher involved with both drugs, said investors overreacted. They said that Genentech’s data were very preliminary and that its drug wasn’t likely to reach the market until 2007.
And Eyetech CEO David Guyer said Macugen was being tested on other eye diseases that could open up large new markets for the drug.
“When you put all that together, I would say that the reaction of the market today has been harsh,” Guyer said.
The sell-off marks a sharp reversal for Eyetech, a 5-year-old company focused on vision care. It went public at $21 a share in January 2004, and investors pushed the price of its shares to $50 by last summer. When Macugen was approved in December, some Wall Street analysts predicted it would become a $1-billion-a-year product.
All bets were off Monday after Genentech’s announcement.
Eyetech shares closed Tuesday at $12.95, down $11.02, on Nasdaq, as many on Wall Street predicted that Lucentis would become the preferred drug for a condition that affects more than 1 million Americans. Genentech’s shares rose $2 to $78.60 on the New York Stock Exchange.
The case of Eyetech demonstrates the pitfalls of trying to predict the next big blockbuster product. John McCamant of the Medical Technology Stock Letter said investors became overly optimistic last year when pharmaceutical giant Pfizer Inc. agreed to help market Macugen.
The biotech sector “is made up of a volatile group of companies,” said analyst Joshua Schimmer of SG Cowan & Co.
“Investors need to be cautious and keep their eye on other drugs in development,” Schimmer said.
Peter Kaiser of the Cleveland Clinic’s Cole Eye Institute said that because the drugs prune abnormal blood vessels in a similar way, only one of them was likely to succeed. Although complete results from the Lucentis study won’t be known until a medical meeting in July, Kaiser said Genentech’s drug was the likely winner.
“Macugen is a good drug; unfortunately for it, Lucentis is better,” Kaiser said.
Macugen’s defenders, however, said it was too soon for either drug to declare victory.
Steven Schwartz of UCLA’s Jules Stein Eye Institute said Lucentis looked promising but it was not fair to compare it with Macugen based on the data released Monday.
Schwartz said Macugen was tested in patients with aggressive age-related macular degeneration but Lucentis was not, and that could at least partially explain the different results.
Genentech said patients with the aggressive form of age-related macular degeneration were participating in a separate clinical trial scheduled to end in the fourth quarter of this year. That trial is a head-to-head study of Lucentis against Visudyne, a drug that is used with lasers to slow the disease.
Genentech, based in South San Francisco, would not predict when Lucentis might reach the market or how it would fare against Macugen. The company said the Food and Drug Administration typically wants to see the results of two large studies before considering approval of a drug for age-related macular degeneration.
