Genentech Forecasts Strong Earnings Through 2005
Biotechnology giant Genentech Inc. on Friday forecast strong sales and earnings growth through 2005, signaling it expects to win government approval this year for new drugs to treat psoriasis and asthma.
The South San Francisco-based biotechnology company said its revenue would exceed $3 billion this year and $4 billion by 2005, driven by sales of new medications and existing cancer drugs. Genentech’s earnings should rise by at least 20% annually through 2005, said Chief Financial Officer Louis Lavigne.
The company also expects its first-quarter 2003 results to beat analysts’ forecasts of 26 cents a share, partly because of a lower tax rate, although it provided no further details.
Genentech, the world’s second-largest biotech company, made its projections at a meeting with analysts in New York. Swiss pharmaceutical firm Roche owns 58% of Genentech.
On Friday, Genentech’s shares slid 32 cents to $32.26 on the New York Stock Exchange.
The company said some of its earnings growth would be fueled by increased demand for two current drugs: Rituxan, to treat lymphoma, and Herceptin for breast cancer. Genentech is awaiting Food and Drug Administration approval for asthma medication Xolair and psoriasis treatment Raptiva.
Genentech’s chief operating officer, Myrtle Potter, said it expects both new drugs to be on the market by year’s end. Some 500,000 people in the U.S. would be candidates for Xolair, and Raptiva could be used by 530,000 psoriasis patients, the firm said.
Psoriasis is a key emerging market for biotech companies, and Raptiva will face competition from Biogen Inc.’s psoriasis drug Amevive and Amgen Inc.’s Enbrel, an arthritis drug that is being tested on psoriasis.
But if Genentech’s Xolair is approved for sale, it would be the first biotech drug for asthma. Genentech, however, must split profit from Xolair with two partners, Swiss drug maker Novartis and Tanox Inc., a small Texas biotechnology company.
In addition, Genentech said its drug Avastin is in the final stage of human tests to treat colon cancer and the results should be available by midyear. Avastin works by reducing the blood supply to tumors. Genentech would not need to share profits from Avastin with any partners.
“If Avastin works, it is our drug, and the margins will be tremendous,” said Genentech Chairman and Chief Executive Arthur D. Levinson.
By midyear Genentech also expects to see the data from a large human test of a potential lung cancer drug called Tarceva.
However, analysts said scientific concerns remain about the two experimental drugs. Avastin caused bleeding and blood-clotting in tests with breast cancer patients, and Tarceva is similar to an experimental drug by rival AstraZeneca that failed to prolong the lives of lung cancer patients.
“Although there’s a good reason to believe results could be positive for Avastin and Tarceva, I believe there is a fairly high probability of failure for both drugs,” said Jason Kantor of WR Hambrecht & Co.
Genentech Chief Medical Officer Susan Desmond-Hellman said the company “controlled the problem” of blood clots with Avastin and does not believe that side effects such as nosebleeds and high blood pressure would discourage use of the medication in cancer patients.
Genentech also changed its revenue reporting to exclude interest income, and adjusted figures for the last two years. Revenue for 2002 was revised to $2.58 billion from $2.72 billion. Revenue for 2001 was revised to $2.04 billion, from $2.2 billion. The changes did not affect earnings.
Times wire services were used in compiling this report.
