Genentech Profit Up as Sales Climb 30%
Genentech Inc. continued its hot streak Wednesday as strong first-quarter sales offset the cost of launching its newest cancer drug, Avastin.
Net income increased 17% to $176.6 million, or 33 cents a share, from $151 million, or 30 cents, in last year’s first quarter.
Excluding special charges related to litigation and other items, profit was $207.6 million, or 38 cents, the company said. Wall Street had expected earnings before charges of 31 cents, according to analysts surveyed by Thomson First Call.
Revenue soared 30% to $975.1 million.
Genentech announced its results after the market closed. Its shares rose to $113.10 in after-hours trading after closing at $108.36, down $1.79, on the New York Stock Exchange.
A highlight in the quarter was the performance of Avastin, a much-anticipated medicine for colon cancer. The drug won regulatory approval on Feb. 26 and had sales of $38.1 million in the quarter.
Analysts said Avastin was on track to post sales of $400 million this year, despite a price tag of $4,400 a month, making it one of the costliest cancer medications.
“It was an excellent launch,” said Sena Lund, an analyst with Cathay Financial.
Sales of Genentech’s mainstay cancer drugs rose from a year ago. Rituxan, a drug for non-Hodgkin’s lymphoma, posted a 17% sales gain. Sales of Herceptin, a drug for breast cancer, jumped 21%.
Compared with the fourth quarter of 2003, sales of the cancer drugs eased slightly, but at least one analyst was unconcerned. Herceptin sales were off 1% and Rituxan fell 3% from the fourth quarter. Genentech said Rituxan was affected in part by a decline in Medicare reimbursement on the drug.
“Rituxan was below expectations, but with Avastin coming in front of this, it really doesn’t matter,” said Lund of Cathay Financial. “The fundamentals of the business remain strong.”
Two drugs launched last year had sales in line with expectations. Xolair, the first biotech drug for asthma, had sales of $30 million in the quarter. Raptiva, a drug for psoriasis, had $6.3 million in sales. The drugs cost more than $12,000 a year, and managed-care companies are taking steps to monitor their use, so investors are closely watching sales.
Separately, Genentech spokeswoman Debra Charlesworth said the company supported the right of shareholders to vote against company proposals.
On Tuesday, the California Public Employees’ Retirement System, the biggest U.S. pension fund, said it would withhold support from four Genentech directors over corporate governance issues. CalPERS also said it would vote against ratifying the company’s auditors, Ernst & Young, because it performed non-auditing work in the past.
The big pension fund also is voting against Genentech’s stock-option plan because CalPERS believes it is “excessive” and not linked to performance goals.
Lund of Cathay Financial said CalPERS’ action would have little effect on the company. Its shares have more than doubled since last May.
