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I’d like to share a tidbit with ya’ll about Genentech, and specifically, about Avastin sales.

Monoclonal Antibodies are all the rage in drug research right now. You can usually spot them by the “mab” in the actual (generic) name of the drug (infliximab, basiliximab, abciximab, e-i-e-i-o). Many of them act as immunomodulators, and along with the theory that many of our current chronic diseases actually have an autoimmune basis, have caused a paradigm shift in the treatment of things like asthma, Crohn’s Disease, and rheumatoid arthritis. (P.S. Stay on the lookout, much of cardiovascular disease has an autoimmune component as well, and cardiology is where the drug companies see BIG $$$.)

Genentech is a leader in developing MABs, and their cancer pipeline is very strong. Their drugs include well-known names like trastuzumab (Herceptin®) and rituximab (Rituxan®).

Bevacizumab (Avastin®) is the new kid on the block- it’s only been around a couple of years and has been mostly used for colorectal cancer. But anyone who deals with chemo (Avastin’s not chemo as in “cytotoxic antineoplastic” like cisplatin or fluorouracil, but chemo as in “used to treat cancer”- it’s actually an anti-angiogenesis drug) recognizes it immediately- it’s the one that routinely busts the purchasing budget. This drug is expensive with a capital EX.

Until very recently (i.e. the last couple of weeks), the vast majority of Avastin you’d see would be dosed at 5 mg/kg, or 375mg in a 75kg patient. Every once in a while there’ll be a 10 mg/kg dose, but they’re rare. Those doses have been the only approved doses for its only indication so far- metastatic colorectal cancer. Avastin comes in 400mg and 100mg vials, but we usually just buy the 400’s because we use so much of it already.

Now the news: You may have read that Avastin’s been approved for NSCLC. What you may not have read is that NSCLC is the most common form of lung cancer, the second most common cancer overall, and the most common cause of cancer deaths in the U.S.

So, we’re gonna use it on a very common cancer. That’ll increase sales. Yeah, but then there’s the fine print. The dose of Avastin for NSCLC is 15 mg/kg! The first few times I was in the “cage” (one of our cleanrooms) making chemo and ran into one of these new massive doses, my reaction would be WTF?, but on our usual double-check of our double-check, I’d see that the oncologist was using it for the new indication, so the dose was kosher. We’ll now be routinely seeing doses of Avastin well over 1000mg per patient.

The upshot - the use of Avastin will go up dramatically, because we’ve added an indication, and the dose for that indication is three times what it would have been for the previous one.

According to Genentech’s press release of 10 Oct 2006, sales of Avastin were $435 million out of total product sales of $1,941 million, in other words, a very significant amount, which means the increasing or decreasing sales of this drug can have a major impact on this big compay’s bottom line. I’m here to tell ya, they’ll be increasing.

What does this mean for our trading? Should I run out and buy DNA (Genentech)? Hell no! What are you, a fundamentalist? Leave the fundamentalism to Jerry Falwell and Robert Tilton (that video’s given him new life, no?).

Let’s Look At The Chart:

Where’s DNA gone in the last 9 months? Nowhere. What’s its 52-week range? 75-100, or so. Could we wake up soon with anti- drug- company “reforms” from the new congress? Absolutely. What if some new horrible side effect emerges with large-scale post-approval use of Avastin? Its revenue goes to zero and Genentech is defending lawsuits.

So why am I writing this? So that, in the more likely scenario that none of the above gloomy events occurs, Genentech’s revenue from Avastin will be accelerating very rapidly as its use for NSCLC expands. Avastin already has to be drop-shipped (i.e. directly from the manufacturer) in most areas because it’s so expensive, and we’re all having to vastly increase our already jaw-dropping inventory levels.

If the increasing Avastin sales begin to affect the chart, a break above 85-86 could provide a very nice trade entry. A nice, longer-term trade entry, not a few-day swing. This thing moves too slowly. Dust off your longer moving averages and weekly candles, and check up on this one from time to time.