Analysts embrace Lilly cancer candidate

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An experimental drug for gastric cancer grabbed the Street's attention Monday with the release of broad feedback about Phase III data on Eli Lilly's ramucirumab. Lilly revealed that the clinical trial hit its primary endpoints for improved overall survival and progression-free survival among metastatic gastric cancer patients. The experimental drug was used as a solo second-line treatment and was linked to adverse reactions that included high blood pressure, diarrhea and headache.

It remains unclear just what this means, in terms of survival and progression-free survival rates, among other information points. Lilly is expected to release the data at a later time, but the lack of detail did not deter analysts from rooting for the drug, which the company acquired when it bought ImClone four years ago for $6.5 billion. Among the rationales for the upside perspective is that the drug tracks closely with Genentech/Roche's Avastin, a broad-based cancer therapy that garnered almost $5.7 billion in sales for Roche/Genentech last year. Avastin is not indicated for stomach cancer, which the Mayo Clinic says is rare in the US but more common abroad. However, Lilly is also testing ramucirumab as a treatment option for breast-, liver-, lung- and colorectal- cancer patients, which could put it in Avastin's market space.

Monday's study was among second-line stomach cancer patients, which ISI analyst Mark Schoenebaum estimated in his webcast to be a patient population of about 12,000, as  opposed to the larger first-line gastric cancer population which he said is closer to around 54,000 patients. Schoenebaum said the potential patient population of second-line candidates is smaller by the nature of its place in therapy for reasons that include first-line patients who do not survive to pursue a second-line treatment, those who refuse a second line therapy and patients who do not need another line of treatment.

The smaller population has analysts forecasting sales of around $500 million for this indication, though ISI's Schoenebaum is higher, at around $600 million, and Credit Suisse's Catherine Arnold puts it around $620 million.
Lilly has not revealed pricing information, but Schoenebaum speculated during his webcast that it could be around $8,000 to $9,000 a month, putting it between $6,000-a-month Avastin and Lilly's $10,000-a-month Erbitux. Schoenebaum cautions that the $8,000 to $9,000 price is realistic for the US and that ex-US pricing would most likely run about 30% less.

Cost, however, may not be the only market consideration. Unlike Avastin, for example, which binds to VGEF ligands, Lilly's candidate binds to the receptors to which VGEF ligands adhere. Schoenebaum said by taking this approach, Lilly and ImClone essentially argued that it could be a better strategy because “you don't know what else binds to the receptor, things that we just don't know about that makes a cancer cell happy.” Bernstein analyst Tim Anderson also addressed the single-therapy results as a possible advantage, asking in his Monday research note if “this could speak to its theoretically greater potency?” given that Avastin and other anti-angiogenesis drugs usually have to be teamed up with other treatments.

Correction: An earlier version of the article indicated Lilly spent $7.5 billion to purchase ImClone. It has been corrected to $6.5 billion. We regret the error.

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