Investors Rush to Sell Genentech Stock
Investors kept dumping Genentech’s stock Friday as reports circulated in the investment community that its heart attack drug, TPA, didn’t reduce the death rate as much as expected in a major clinical trial in England.
The heavy stock selling over the last two days sliced about about 10% off the value of the pioneering genetic engineering concern. In composite New York Stock Exchange trading, Genentech closed Friday at a 52-week low of $25.625, off $1.125, and was the 12th most actively traded stock. It fell $1.50 on Thursday.
The 5,000-patient mortality trial, which is being coordinated by Nottingham University Hospital in England, is a continuing study to determine the effectiveness of TPA.
Sales Below Expectations
The unconfirmed reports circulating on Wall Street were that, one month into the study, TPA was shown to have reduced the death rate by 20%--far less than the 51% reduction in mortality shown in an earlier study of 750 patients. If reports of the new study are accurate, that would make the $2,200-per-dose TPA about as effective as a much less expensive drug called streptokinase, made by Hoechst-Roussel Pharmaceuticals.
Fred Hoar, Genentech’s vice president for investor relations, said the company was not at liberty to discuss the new study’s specific findings. However, he added, “all indications are that the study will further confirm the efficacy of TPA in reducing the mortality from heart attacks.”
The one-month data is expected to be published shortly in the Lancet, a medical journal. The next report will come six months into the study.
The new report is the latest blow to South San Francisco-based Genentech, whose stock has fallen steadily from its 12-month peak of $53.50 a share in anticipation of federal approval of TPA. The drug’s estimated first-quarter sales of about $37 million--which accounted for more than half the company’s $63.5 million in revenue--were below analysts’ expectations of $40 million to $50 million, said Denise Gilbert, Montgomery Securities’ biotechnology analyst.
“The company overfilled the pipeline during the fourth quarter, when it sold $58 million of TPA,” she said. Another blow came earlier this year when the federal Health Care Financing Administration, in effect, said it wouldn’t reimburse hospitals for using TPA in Medicare patients.
“Genentech is still the leading biotech company, but even at these levels Wall Street has put too high a price on it,” said Gilbert, a leading bear on the stock.
Separately, Genentech told the Securities and Exchange Commission that it has adopted a poison-pill shareholders’ rights plan to ensure that potential acquirers negotiate with the company’s board before attempting a takeover.
The rights would make a hostile bid for the company prohibitively expensive. “We’re not aware of any proposal to acquire control of Genentech,” Hoar said, and analysts agreed that no bids were in the offing.
