To the average investor, it might mean nothing. To anyone who has a firm grasp on the intricacies of breast cancer drugs, however, Monday’s news from and about Roche Holding (RHHBY) is a game-changer.
That news is Roche’s cancer drug Perjeta (the trade name for pertuzumab) is the first breast cancer drug to be approved by the FDA for use before surgical removal of a breast tumor. Prior to Monday, any drug used to fight breast cancer — in the United States, anyway — was only administered after surgical removal of the tumor, and then only in conjunction with existing drugs like Herceptin and/or chemotherapy.
It’s a natural progression for the drug, which already has been approved to treat breast cancer that has spread to other parts of the body.
The reason for the Food & Drug Administration’s allowance of the new treatment sequence is simple … the revised sequence of treatment works. Nearly twice as many patients receiving Perjeta before surgery were found to be free of invasive cancer compared to patients receiving pre-surgical regimens of Herceptin and chemotherapy alone. Nearly 40% of patients in the study saw their breast tumors shrink to undetectable levels when combining chemo, Herceptin and Perjeta.
That’s huge, and part of the reason why the FDA was willing to accelerate the cancer drug’s approval for this purpose.
On the flipside, the pool of breast cancer patients this new regimen would affect is relatively small. Perjeta is specifically aimed at tumors with a high concentration of a protein called HER2, which has been linked to more aggressive forms of breast cancer that are more apt to metastasize. Only about 20% of breast cancer patients are HER2-positive, or about 46,000 of the 262,000 women diagnosed with breast cancer every year in the United States alone.
Of course, at an average cost of $38,000 for a fairly typical 14 weeks’ worth of the new combo-treatment, the small pool of cancer patients that could use Perjeta before surgery still would be something of a windfall for Roche, which also owns Genentech, which happens to own Herceptin.
The details are academic at this point, though. What’s so compelling from here is where this is all going now that the FDA has opened its mind to a new breast cancer treatment approach.
What’s at Stake
While the Herceptin/Perjeta duo alone could prove to be a solid revenue center, what Roche might have in mind here is a renewed portfolio of HER2 treatment options that will keep the company competitive against new competition as well as against biosimilars.
Herceptin’s patent in the United States expires in 2019 (2014 in Europe). While still six years away, in the drug development world, that’s just around the corner. For perspective on just how close that is, Amgen (AMGN), Pfizer (PFE) and Novartis (NVS) are all reportedly already working on a generic version of the cancer drug they can sell as their own.
And well they should. Herceptin generates about $6.0 billion annual revenue per year. At the typical generic drug’s price tag of about 15% of the original drug’s cost, the Herceptin franchise will only be worth about a billion bucks per year, but with the clearly superior combination of Herceptin and Perjeta on the table, Roche has breathed new life into an old drug … an improvement that will keep copycats at bay.
Roche even hopes to replace Herceptin with a better cancer drug called Kadcyla. Kadcyla delivers the same active ingredient to the tumor that Herceptin does, but its delivery mechanism is superior.
Between the two upgrades to the treatment regimen — not to mention the potential effective extension of the patent’s expiration — Roche has put some distance between itself and its competitors, including its most potent rival on the breast cancer drug front, GlaxoSmithKline (GSK).
GlaxoSmithKline is working on Tykerb, which has been approved to treat a couple forms of cancer depending on the continent in question. In the European Union, one of those cancers is HER2-positive breast cancer, if used in conjunction with — ironically — Herceptin. Perjeta in conjunction with Herceptin is still superior to Tykerb in terms of staving of breast cancer metastasis. But even if Tykerb wins approval, as long as Herceptin is the yardstick, Roche wins. And, if the heir apparent to Herceptin — Kadcyla — becomes the new yardstick in the United States and/or Europe (which is fairly likely), then Roche really wins.
Or if none of that is compelling, maybe this will be.
Some analysts predict Perjeta will eventually reach annual peak sales of $8.5 billion, which will make it one of the world’s most successful drugs ever.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.