At Genentech's annual meeting for investors and analysts in New York City, CEO Arthur Levinson wasn't going to let a little bad publicity rain on his parade. The biotech has come under fire of late from patient advocates and some publications over its hit colon cancer drug, Avastin. The drug costs about $50,000 a year, and recent press reports suggest that if it is approved to treat lung and breast cancer, the price tag could double. (The company has not yet disclosed how much it will charge for lung and breast cancer treatments.)
The drug's success has already transformed South San Francisco-based Genentech. In 2005, its operating sales jumped 46% to $5.5 billion and its net profit soared 63% to $1.3 billion. Levinson bristles at allegations that the company is enriching itself at the expense of patients who might not be able to afford Avastin, a drug that works by choking off the blood supply to tumors.
After the Mar. 17 event, Levinson sat down with Science Department Editor Arlene Weintraub to discuss Avastin and some of Genentech's other endeavors. Edited excerpts follow.
What's your response to critics who say Avastin is too pricey? There have been a lot of articles on the pricing of Avastin that I think are missing important points. They're focusing on the annual cost, but I prefer to put that in the context of all the priorities the government has for health care. In the last couple of months, cancer has become the leading cause of death for Americans.
About $2.5 trillion a year is spent on health care, and 12% of that is on prescriptions. Of that spending, 6% is on anti-cancer drugs. I think that's relatively modest. I told the audience today that 40% of them will get cancer and 42% of those who do will die. That's a lot of people. It's a serious disease that deserves serious efforts. It won't bankrupt the American economy.
What about patients who can't afford the drug? We took a look at access and discovered that the vast majority of patients have insurance. So their out-of-pocket expense per month [on co-payments] averages $129. We don't think that's terribly onerous. And we have among the most generous patient assistance plans in the industry. Our view is if someone can't afford the drug, we should provide it to them. We get no credit for doing that.
Explain why it may be necessary to boost the cost of Avastin. Selling twice as much of the drug means it's going to cost us twice as much in production expenses. For our overall drug portfolio, though, prices have increased only 4% a year on average for the last five years. I think that's very responsible. If we reduced the prices of our drugs by 35% we'd go broke. Then who benefits? The patients don't benefit.
We're taking the revenues and funneling them back into research and development, so we can find new cures for cancer. We're trying to cure the leading cause of death in this country. The expense needs to be seen in that context.
One of your other big drugs is Rituxan, currently approved to treat non-Hodgkin's lymphoma. The drug is showing some promise in treating the autoimmune disease rheumatoid arthritis. How do you plan to position Rituxan against blockbuster RA treatments already on the market, such as Amgen Inc.'s Enbrel? This is a very competitive disease area. Initially we plan to go after patients who fail to respond to [other biotech treatments]. Roughly half don't respond well. Rituxan does a very good job of helping those patients. We understand this drug relatively well. We see it interrupting the [cellular progression] in autoimmune disease. Might Rituxan someday help patients as a front-line therapy? We don't know.
Genentech has been lobbying the U.S. Food & Drug Administration to resist efforts by companies that want to make generic biotech drugs, including a generic version of one of your flagship products, human growth hormone. Critics might think you're trying to impede that effort to shield Genentech from generic competition. What's your reasoning? Our concern is that the bar for approval should be relatively high. Making a follow-on biologic is not the same thing as making generic Mevacor or Zocor, where you're recapitulating a simple chemical structure. We're dealing with large molecules in ill-defined environments here. These are highly complex molecules whose properties depend on variables we sometimes don't even fully understand.
If we're going to allow bio-generics, fine, but we need to make sure they're not going to hurt patients. We think the FDA should require the drugs be tested in trials and that they require excellence in manufacturing capacity. From a public policy point of view, we want to make sure people understand how difficult it is to validate these molecules. We're putting that view forward with the FDA.
During the meeting for Wall Street folks, you said it's important for Genentech to stay "scared and worried" about the future. What scares and worries you? Competitors are targeting us now. They've seen our success and they're going after a lot of our markets, including Avastin. We continue to invest in the science. We're trying to stay ahead of the competition by investing in mechanism-of-action studies. By understanding more about how the drug works in principal, we believe we can engineer it to work ten times better. I want to make sure we're respectful of the competition and we don't get slack. We can't make mistakes.
Weintraub is the Science Editor for BusinessWeek in New York
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