Roche has suffered a major setback on the news that its oncology blockbuster Avastin has failed in a study looking at the treatment’s effectiveness in early-stage colon cancer.

The Swiss major said that the results of the first Phase III trial, NSABP C-08, evaluating the use of Avastin (bevacizumab) plus chemotherapy (Folfox) for the treatment of colon cancer immediately following surgery compared to chemotherapy alone, did not meet its primary endpoint of lowering the risk of the cancer returning. This is the first trial of Avastin in early-stage cancer and results do not affect approved indications in advanced disease, Roche added.

Avastin was developed by Genentech, and Roche recently paid $46.8 billion for the remainder of the US biotechnology giant it did not already own. The drug, which is currently approved as a treatment for patients with colon, lung and breast cancers, is a huge seller, and had first-quarter sales of 1.49 billion francs, up 30%.

However, the failure of this trial concerns analysts deeply. Simon Mather at WestLB said he had attached $11 of the $95 a share Roche paid for Genentech to the success of Avastin in early-stage colon cancer and the failure was "a significant setback for Roche". James Knight at Collins Stewart, who cut his recommendation on Roche to hold from buy, issued a note saying that the results from NSABP C-08 called into question any value in using Avastin after surgery.

Hal Barron, Genentech chief medical officer, said that “while we are disappointed the C-08 study did not meet its primary endpoint, our initial review of the data leads us to continue to believe Avastin may be active in patients with early-stage colon cancer”. Fulll data from the trial will be presented at the American Society of Clinical Oncology meeting at the end of next month in Orlando and he added that “we remain fully committed to the ongoing Avastin adjuvant programmes in early-stage colon, breast and lung cancers”.

William Burns, chief executive of Roche's pharmaceuticals division, said that "in order to provide patients with the full potential benefit of Avastin in early-stage cancer, we believe the findings of the C-08 trial should be considered for the ongoing adjuvant trial programmes”. He added that the current studies and indications in advanced disease are not affected.

Speaking on a conference call, Mr Burns acknowledged that the likelihood of success of the study was never clear-cut. "It was always the toss of a coin," he said, while claiming that its failure did not mean Roche had paid too much for Genentech. "We always factored in the entire transaction," he said. "This study was never a binary event in the valuation…it is a much broader, strategic deal than one study”.

Investors are worried however and Roche shares fell back 10% on the news.