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Genentech Avastin Early Sales Data Suggest Broad Use In Colorectal Cancer

Executive Summary

Genentech is receiving public reimbursement for use of Avastin in both first-line and relapsed/refractory metastatic colorectal cancer, the company told investors April 8

Genentech is receiving public reimbursement for use of Avastin in both first-line and relapsed/refractory metastatic colorectal cancer, the company told investors April 8.

"On the public payor side, timely payment by Medicare contractors and Medicaid programs has been confirmed," Commercial Operations President Myrtle Potter said on a first quarter conference call.

"To our knowledge, there have been no issues with coverage of Avastin for first-line or relapsed/refractory metastatic colorectal cancer," Potter added. "We are not aware of any denials by large commercial payors, although we continue to collect data."

Avastin (bevacizumab) cleared FDA Feb. 26 for first-line treatment of metastatic colorectal cancer in combination with intravenous 5-fluorouracil-based therapy (1 (Also see "Genentech Avastin Clears FDA; Colorectal Cancer Drug Costs $4,400 A Month" - Pink Sheet, 1 Mar, 2004.), p. 9).

Although Genentech intends to "report off-label information, I want to remind you that our sales force does not promote our products in off-label indications," Potter said.

In addition to the relapsed/refractory setting, Avastin appears to be getting use in other off-label indications, including the second- and third-line metastatic colorectal cancer settings.

"Weekly data suggests that in the first-line setting, Avastin use has been consistent with its broad indication," including use in combination with Sanofi-Synthelabo's Eloxatin (oxaliplatin)and Pfizer's Camptosar (irinotecan), Potter said. "Additionally, data suggests that Avastin has been used in second- and third-line metastatic colorectal cancer."

Genentech expects to receive a C-code for Avastin by July 1. Payment under the C-code will be retroactive to the Avastin approval date, Potter said.

The C-code will facilitate Medicare and Medicaid coverage of Avastin in the outpatient hospital setting until the company receives a J-code, which could happen "as early as January 2005, or more likely in January 2006," Potter said. Until then, physicians in private practices "will use a non-specific J-code to file for Medicare reimbursement of Avastin."

In its first five weeks on the market, Avastin generated $38.1 mil. in sales.

"During the first week of product availability, almost 500 accounts placed an order for Avastin, including more than 35% of our tier-one accounts and more than 25% of our tier-two accounts," Potter said.

"Since that time, the number of accounts placing orders have increased to approximately 1,500, including 76% of tier-one accounts and almost 58% of tier-two accounts. Among all accounts ordering drug, approximately 52% have placed reorders."

As a result of the oncologic's early performance, Genentech now feels that an increase in earnings "in the range of 20% to 25% is possible" for 2004, CFO Louis Lavigne said.

Since the Avastin approval, Genentech has been attempting to rein in investors' expectations about the potential upside. The company held earnings guidance at 20% growth for the year until early Avastin sales data were available.

"We're clearly pleased with initial sales of Avastin," Lavigne said. "The strong performance of Avastin, along with the strength of our other marketed products, provides us with choices on how to best manage the business on a go forward basis."

Genentech's "choices" for 2004 include "making significant investments in our new product launches and possibly increasing our R&D and commercial investments beyond those currently planned for future growth potential," Lavigne said.

With the incremental Avastin revenue, Genentech also could choose not to "offset in-licensing expenses with biotech stock gains," Lavigne said.

In the meantime, "we now need to gain more experience with Avastin in the marketplace in order to make any updates for our expectations for 2004...recognizing that analyst expectations are already ahead of our comments," Lavigne said.

Genentech reported revenue growth of 30% in the first quarter to $975.1 mil. Earnings were up 14% to 33¢ per share.

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