Roche's Avastin Loses FDA's Support

Roche Holdings Ltd. (RHHBY) has been a regular topic of discussion of late, but this time it is in the news not for positive reasons. The company announced that the US Food and Drug Administration (FDA) has withdrawn the approval of Avastin (bevacizumab) for the treatment of metastatic breast cancer (mBC).

The regulatory body believes that Avastin is not safe and effective to be used as a treatment of mBC, as a result of which it has annulled the approval of the drug for use in the US.

Moreover, we note that the FDA’s decision to revoke the US approval of Avastin does not hold good for other approved indications of the drug. However, it does not impact the use of Avastin in other countries, for mBC or other indications.

Apart from breast cancer, Avastin is marketed worldwide for the treatment of colorectal cancer, non-small cell lung cancer, glioblastoma (brain cancer) and metastatic renal cell carcinoma (kidney cancer).

Despite the FDA’s decision, Roche plans to initiate a new late-stage trial of Avastin in combination with paclitaxel in previously untreated mBC patients.

Apart from Avastin, cancer treatments currently available in the market include Eli Lilly & Co. (LLY - Analyst Report) and Merck KGaA’s (MKGAF) Erbitux.

We currently have a Zacks #4 Rank (short-term Sell rating) on Roche. Though we were expecting the FDA to withdraw the approval of Avastin for mBC, this development concerns us. We note that in the first half of fiscal 2011, Roche reported Avastin sales of CHF 2.7 billion, down 8% from the year-ago period. Lower sales in the US and Western Europe, due to regulatory and reimbursement uncertainties regarding the mBC indication, coupled with European austerity measures, led to the decline.

We expect Avastin sales to decline further, given the regulatory body’s decision.

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