OSI shares jump on lung cancer study data

Shares of the Melville, N.Y.-based company rose $5.03, or 14.1 percent, to $40.39 in afternoon trading. The stock has traded between $32.10 and $53.71 over the last 52 weeks.

The companies said the drug stopped the spread of advanced non-small cell lung cancer for significantly longer than a placebo, following treatment with chemotherapy. The study involved 889 patients who were given at least four cycles chemotherapy and were then treated with either once-daily Tarceva or a placebo if the disease did not progress during chemotherapy.

The trial was conducted by Roche Holding of Switzerland and full results will be reported at a future medical conference.

Tarceva is already approved as a secondary treatment for patients who have not responded to earlier chemotherapy and the companies hope to gain approval for the drug as part of a first line of treatment.

BMO Capital Markets analyst Jason Zhang reaffirmed a "Outperform" rating on OSI, saying the drug could bring in $1 billion in sales globally for the companies.

"We expected this trial to be positive given its unique design and many supporting evidences," he said, in a note to investors.

He considered the drug a unique possible choice for lung cancer patients, citing its oral administration and mild side effects.

Goldman Sachs analyst May-Kin Ho, meanwhile, remains more cautious on the stock with a "Neutral" rating as she awaits more detailed data. The recent study results will likely be compared with study data from the already approved lung cancer drug Alimta, made by Eli Lilly & Co., she said.

"Without detailed data on SATURN (Tarceva study), it is difficult to assess the benefit of Tarceva versus Alimta," she said, in a note to investors.