Merrill on Erbitux flop in pancreatic cancer.
Erbitux negative, competition reduced
Erbitux did not improve overall survival in pancreatic cancer, minimizing potential
competition for Tarceva. Although full data have not been disclosed, we do not
expect measurable off-label Erbitux use in pancreatic cancer. In addition,
Tarceva's oral dosing and lower pricing should further discourage residual Erbitux
usage. Overall, we estimate the negative Erbitux data represents $1.25 upside for
OSIP. Maintain BUY.
No Erbitux survival benefit
Erbitux did not meet its primary endpoint of increasing survival in pancreatic
cancer, reducing the likelihood for off-label use, and minimizing competition for
Tarceva. Erbitux was tested in combination with gemcitabine in a Phase III
SWOG trial involving 700 front-line pancreatic cancer. Although full data have not
been disclosed, we do not expect Erbitux addition to demonstrate a meaningful
survival benefit.
Tarceva's oral dosing, lower price would trump numerical
benefit
Even if final Erbitux data suggest a numerical improvement in survival in
pancreatic cancer, we would still expect minimal, if any off-label use due to
Tarceva's proven survival benefit, oral dosing, and lower pricing. In addition,
physicians have now had substantial experience with Tarceva, discouraging
switching to an unproven therapy.
Tarceva competition reduced, $1.25 upside
Although Pancreatic cancer represents only about 15% of total Tarceva revenues,
the negative Erbitux data reduce potential competition, providing approximately
$1.25 upside to the stock. We estimate negative Erbitux data will result in
Tarceva pancreatic cancer revenues of $68.7 mn in 2007, $78.7 mn in 2008,
$90.2 mn in 2009, and $103.4 mn in 2010. |
