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Biotech / Medical : Abgenix, Inc. (ABGX) -- Ignore unavailable to you. Want to Upgrade?

To: nigel bates who wrote (234)	6/13/2003 7:41:45 PM
From: mopgcw	Respond to of 590

Least I can do for you good folk. Here is SSB info: Details from ASCO Abstracts May 30, 2003 SUMMARY We provide our analysis of the preliminary data now available from the abstracts for certain of the key presentations at ASCO. * Although no abstract is available for DNA's Avastin, we believe the detailed Phase III data will show a 40-50% reduction in death with a median overall survival benefit of approximately 5 months. Supportive positive data for Avastin in this setting is provided from an abstract describing the results from an ECOG study (E2200) using a higher dose of Avastin. * Promising preliminary data on the first 23 patients with refractory metastatic colorectal cancer treated with AMGN/ABGX's ABX-EGF alone show a 3/23 (13%)achieved a partial response and 9/23 (39%) achieved stable disease. * We believe these promising data on Avastin highlighting its blockbuster potential will positively impact DNA's stock. We Marketweight the biotech sector. OPINION The abstract book containing preliminary data for certain of the key presentations at the American Society of Clinical Oncology (ASCO) meeting is now available. We provide our analysis of these data but remind investors that updated data will be presented during the meeting. As a reminder, this meeting is scheduled to take place from Saturday, May 31, to Tuesday, June 3, in Chicago, Illinois. In our opinion, the preliminary data in the abstract book is generally in line with our expectations with supportive positive data for DNA's Avastin and the class of EGFR inhibitors as novel agents for cancer. For DNA's Avastin: No abstract is available for the recently announced positive Phase III data in metastatic colorectal cancer given the late- breaking news. However, we believe the results will indicate that Avastin with the Saltz chemotherapy regimen will demonstrate a 40-50% reduction in the risk of death (as reflected in a hazard ratio of 0.50-0.60) with a benefit in median overall survival of approximately 5 months in comparison to the Saltz regimen alone. Although not directly comparable, the FOLFOX regimen with Sanofi-Synthelabo's Eloxatin with 5-FU/LV demonstrated a 33% relative reduction in the risk of death (hazard ratio-0.67) and a benefit in median overall survival of 4.5 months compared to the Saltz regimen. Data from an ECOG study (E2200) using Avastin at a higher dose (2x as high) than studied in the Phase III in combination with the Saltz regimen in metastatic colorectal cancer demonstrated supportive positive results with an overall response rate of 45.7% (32/70 patients) with complete responses in 2.9% (2/70). In addition, the side effect profile showed not statistically significant difference in overall severe adverse events (grade 3 or 4) based on the starting doses of the Saltz regimen. Most of the bleeding events, which has been a concern with Avastin therapy, were relatively mild. In general, the side effect profile appeared better-than-expected. For DNA/OSIP's Tarceva: Tarceva in lung cancer--Data of a combination of a Phase I study of Avastin and Tarceva in recurrent non-small cell lung cancer demonstrated this combination was safe and well-tolerated with preliminary promising efficacy data showing 2 partial responders out of 9 patients. Tarceva in brain tumor--Data from an abstract of Tarceva with a chemotherapy called Temodar in a type of brain tumor (glioblastoma multiforme) show compelling results with 24% partial responders (6/25 patients). This data is promising when compared with a 6% response rate seen with Temodar in previous studies and in comparison to data from study (abstract 396) of AstraZeneca's Iressa, a similar EGF-R small molecule inhibitor to Tarceva, in this type of brain tumor showing only 1 partial responder out of 52 patients. For AMGN/ABGX's ABX-EGF: As previewed, data from the interim analysis in the first 40 patients will be presented. The abstract shows data on the first 23 patients demonstrating 3 partial responders (13% response rate) and 9 stable disease (39% response rate). All 23 patients had a skin rash but it is unclear if there was a correlation between severity of skin rash and response. We expect updated interim data on 40 patients to be presented on Saturday. In the meantime, this Phase II study has completed enrollment of approximately 100 patients with results expected later this year. For BMY/IMCLE's Erbitux: Data from the BOND study, Merck KGaA's Phase III study in CPT-11 refractory metastatic colorectal cancer patients treated with either Erbitux monotherapy or Erbitux with CPT-11 combination therapy. Data from the abstract indicates that the combination regimen showed an overall response rate (complete responders (CR) + partial responders (PR)) of 17.9% with a median time to progression of 126 days while the monotherapy arm showed an overall response rate of 9.9% with a median time to progression of 45 days. These data are based on investigator assessment of the responses and data from an independent blinded analysis will be presented at the oral presentation on Sunday. Merck KGaA had previously indicated that it will file for European approval of Erbitux based on this data this year. Potential stock impact: We expect the near term release of the Phase III data for Avastin will reinforce its blockbuster potential and DNA should be a core holding in biotech. We remain relatively cautious on the potential impact on ABGX as we await more detailed data from the Phase II study on Saturday. In addition, given the robust data we expect to see with Avastin in front-line therapy for metastatic colorectal cancer, we believe Avastin will alter the treatment paradigm for these patients and therefore, may impact the clinical development pathway of the EGFR inhibitors, such as ABX-EGF and Erbitux, in advanced colorectal cancer. VALUATION AND RISKS Abgenix (ABGX--$10.65; 2S) Valuation In order to value Abgenix shares, we used a discounted earnings analysis based on the first full year of profitability (i.e., when a number of the more advanced products in the pipeline are commercially released), which we estimate to be 2007. Our discount rate is 45% and our PE multiple is 25x. We believe these parameters are in line with those biotech companies with products in mid-stages of development. As a result, our price target is $10. We arrived at our price target by applying a PE of 25x to our 2007 earnings of $1.33 discounted back 45%. Risks Risks to ABGX achieving our valuation target include the following: Like all biotechnology companies developing proprietary products, Abgenix is subject to clinical development setbacks, which could delay or hamper profitability. Currently there is an acute shortage of manufacturing capacity in the monoclonal antibody area and many companies, including Abgenix, are building new commercial-scale facilities to address this issue. Furthermore, any patent issues in the EGFr antagonist field will likely have a negative effect on the shares of Abgenix. <snip>