NEWS

Bullish Sentiment Stays (Mostly) High for Investments in Cancer Drugs and Biotechnology

Jennifer Roemer

With worldwide oncology drug sales expected to nearly double from $7.84 billion in the year 2000 to more than $13 billion in 2005, participants in a recent New York Society of Security Analysts' meeting in New York were largely bullish about the benefits of investing in oncology drugs and biotechnology. But there were some who were bearish as well.

The meeting touched on current cancer news, along with the risks and benefits of investing in new cancer agents. The main purpose of the conference, sponsored by the not-for-profit educational organization NYSSA, was to provide "not only a better understanding of [cancer drug] investments, but also the process of cancer research," according to Ann M. Barber, M.D., vice president of investments, Reliance Insurance Co., New York, who organized the day-long event.

To that end, presenters at the NYSSA affair included representatives from Memorial Sloan-Kettering Cancer Center, New York, pharmaceutical companies like SmithKline Beecham, Philadelphia, and the New York investment firm Merrill Lynch & Co., Inc., among others. Also on hand to evaluate cancer research news in the media was Nathaniel I. Berlin, M.D., a former director of the National Cancer Institute. Berlin is an advisor to the director of the Sylvester Comprehensive Cancer Center at the University of Miami.



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Dr. Nathaniel I. Berlin

 
At a time when cancer research efforts are ever-burgeoning, and the words "cure" and "cancer" appearing in the same sentence ignite a media frenzy, the investment opportunities oncology drugs offer are "phenomenal," observed Steven Tighe, a pharmaceuticals analyst with Merrill Lynch.

There are several reasons for this bullish attitude, including the rise of an aging and therefore cancer-prone population and the tendency for newer cancer drugs to "slow, not cure cancer," said Barber. One such drug is Rituxan (rituximab), a monoclonal antibody used in the treatment of non-Hodgkin's lymphoma. Developed by IDEC, San Diego, and marketed by Genentech, Inc., South San Francisco, Rituxan treats the disease while purportedly lessening the adverse side effects associated with chemotherapy. First approved by the U.S. Food and Drug Administration in 1997, Rituxan went on in 1998 to become "the fastest-selling cancer drug" in the nation.

But the road to financial success pharmaceutical and biotechnology firms must travel in order to develop oncology agents is time-consuming, costly, and risky. Based on data gathered by Joseph A. DiMasi, Ph.D., director of economic analysis at the Tufts Center for the Study of Drug Development, Boston, it takes approximately 15 years for an anti-neoplastic drug to go from concept to approval by the FDA and at least $312 million to see it through preclinical and clinical phases of testing. At any time along the way, the drug may be abandoned due to lack of efficacy, poor safety, or economic considerations.

Blockbuster Drugs

Given the money and time they spend on drug development, "pharmaceutical firms need an occasional blockbuster drug to remain profitable in the long run," explained DiMasi, a presenter at the conference. The idea of pursuing cancer agents has to do with the enormous "potentials" they offer, remarked Randall K. Johnson, Ph.D., director of oncology research at SmithKline Beecham. When asked to explain the rationale behind the pharmaceutical giant's decision to proceed with a new compound against non-Hodgkin's lymphoma, Johnson acknowledged that "there is potential for contributing to the cure of [this disease]," as well as the ability of the company to "make a large financial impact," because non-Hodgkin's lymphoma "is a fairly major tumor."

This sort of confidence buoys oncology drug research and contributes to the belief of biotechnology analysts like Eric M. Hecht, M.D., first vice president of Global Securities Research and Economics at Merrill Lynch, that oncology drugs are worth investing in because they offer strengths that other pharmaceuticals do not. Cancer drugs have great pricing power and are marketed toward a relatively small number of clinicians with whom the pharmaceutical companies have contact. Moreover, Hecht continued, these drugs occupy a "small, niche market" and are targeted at a captive audience of patients.



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Dr. Eric M. Hecht

 
Yet some speakers advised investors not to be too hasty in their decision to invest in oncology research. In his talk "How We Evaluate Cancer Research News," Berlin entreated conference participants to carefully scrutinize the information they receive about cancer drugs from the media. "You're dependent on the media," Berlin told the audience before going on to explain that the term "scientific breakthrough" is thrown around rather loosely in today's news.

In order to ensure that investors get the most reliable information about drug research, Berlin recommended going directly to the source. "I do not know how you can get good scientific information other than from scientists themselves," he emphasized.

Echoing Berlin's advice, Merrill Lynch's Tighe told the audience to "do your homework" by waiting for clinical trial results and contacting physicians and researchers directly. Hecht also prudently approaches his investment decisions: "A drug hits my radar screen when I hear some patients are responding to it," he explained. Currently, some of the cancer agents Hecht said Wall Street are following are monoclonal antibodies, angiogenesis inhibitors, and signal transduction inhibitors.

Tapping the Source

Describing oncology drug development as a strong market in which to invest has led some observers to urge caution, like Barron H. Lerner, M.D., Ph.D., who teaches medical ethics at Columbia University College of Physicians and Surgeons, New York.

"When you're dealing with cancer patients," Lerner began, "it's not just like any old business. These are people who are sick, and it is essential that profits do not take precedence over doing what is best for cancer patients."

Hecht also stressed that investing in oncology drug research offers both opportunity for investors as well as hope for cancer patients. "Without economic incentive," said Hecht, "we wouldn't have as aggressive development of cancer drugs as we do now."



             
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