No one could blame the analyst for his doubts, because Avastin had previously failed in breast cancer patients, and there was no real reason to expect it to perform well in the treatment of colon cancer. But perform it did, extending the lives of colon cancer patients by more than 30% when used with standard chemotherapy. Of 800 previously untreated patients with spreading colon cancer, Avastin combined with chemotherapy increased the chance for survival by 50%. In the world of cancer treatment, this is not just good news, but a breakthrough.

Within a day of the Banc of America rating cut, DNA soared by almost 40% in value to more than $52 per share, and continued rising to above $70 per share, giving the company a market cap of approximately $37 billion. The company had just $2.7 billion in revenue last year, but Avastin is expected to generate up to $2 billion in revenue alone, so its impact on DNA obviously will be quite dramatic. The drug is currently being tested to treat lung and kidney cancer, and Genentech already makes Rituxan (for non-Hodgkin’s lymphoma) and Herceptin (for breast cancer). Colon cancer is the second leading cause of cancer death in the U.S., so Avastin’s success will be studied and improved upon in coming years.

The other big story was ImClone Systems’ (NASDAQ: IMCL) cancer-fighting drug Erbitux, which, unlike Avastin, was expected to show positive results in its latest clinical trial. As the cancer world now knows, the latest trial, completed by IMCL’s German partner, Merck KGaA, included 329 colorectal cancer patients who had failed to respond to chemotherapy alone, and produced almost the identical results as the trial in 2001 that was rejected by the FDA because of methodology issues. Just like the first time, 11% of the patients taking Erbitux alone saw a 50% reduction in the size of their tumors, while 23% saw a similar shrinkage when taking it in combination with standard chemotherapy.

By the end of this year, Erbitux could be approved for sale in Switzerland, which has agreed to a fast-track review of four months, and elsewhere in Europe in 2004. ImClone and its U.S. partner, Bristol-Myers Squibb (NYSE: BMY), may file with the FDA by the end of this summer, and there will be a lot of pressure on the agency. There have been questions raised as to why Merck KgaA did not have a control group who received just chemotherapy in order to bolster their case. But the response had more to do with ethics than clinical standards: Since these patients had already failed to respond to standard chemotherapy, why subject them to another meaningless round when some of them would respond favorably to Erbitux? A logical answer, but IMCL does not need any more clouds over its procedures.

After reaching a low of $5.24 per share last September (when BMY may have thought about tendering for the remaining 80% of IMCL it does not already own), ImClone jumped to over $47 per share before settling back into the $34 to $36 per share range. Although not as high as the $73 per share attained before the first clinical trial was turned down in late 2001, and the ensuing insider trading scandal, shareholders who had faith in the merits of Erbitux (and not management) have finally been rewarded for their patience.

Not to throw a damp towel on the oncologist love-fest, but many questions do remain. The studies do not detail the quality of life for the extra three to six months that colon cancer patients may have, nor do they begin to explain why, in the case of Erbitux, 89% of patients who received just Erbitux, and 77% of those who received the combination therapy, had little or no improvement. When the scientists are able to figure out why it worked on the minority of patients and why not on the others, then we will have a real breakthrough, and that will be where the real money is made.

The other issue, which is the same for any new therapy, is cost. Calls to ImClone seeking information about the potential cost were not returned, as perhaps the staff was more interested in watching the news for the sentencing of their ex-boss, Sam Waksal. The unfortunate reality is that almost 80% of those who will ultimately receive Erbitux combined with chemotherapy, assuming it is approved by the FDA, will not benefit. And how will it be determined which new therapy is used on colon cancer patients, if we do not know why they work on some and not on others? Despite these nagging questions, significant progress has been made and answers will be forthcoming. But the euphoria, at least from an investment perspective, may be a bit overdone.

Several biotech stocks saw their share prices soar by 50% to 500% after the ImClone and Genentech clinical trial results were made public. Abgenix (NASDAQ: ABGX) is developing a drug with similarities to Erbitux, and its price jumped by more than 60% recently and is up 145% since February. The company has minimal revenues but its market cap has now topped $1 billion. Entremed (NASDAQ: ENMD), which completed the previously mentioned study on mice five years ago, has a drug in the same family of drugs as Avastin, and its shares soared by 100% in May and 390% since the beginning of the year.

Little Vion Pharmaceuticals (NASDAQ: VION) has increased by nearly 500% since early January, with its shares rising from $0.40 to $2.35. The company has two experimental cancer drugs that have shown promising results against tumors in early stage trials. The company has even terminated a Phase I trial on another cancer drug candidate to divert funds for Phase II trials of these two other drugs.