Cancer Drug Sales Lift Genentech Profit

Genentech Inc.’s profit rose 37% in the fourth quarter on higher sales of its cancer drugs, the biotechnology company said Wednesday.

Earnings rose to $126.7 million, or 24 cents a share, from $92.8 million, or 18 cents, a year earlier. Revenue rose 26% to $933.9 million from $743.2 million, driven by mainstay drugs Herceptin for breast cancer and Rituxan for non-Hodgkin’s lymphoma.

Excluding special charges related to litigation and other items, Genentech had a fourth-quarter profit of $145 million, or 27 cents a share, up from $124.2 million, or 24 cents, a year earlier. Wall Street had expected earnings before charges of 25 cents, according to a survey of analysts by Thomson First Call.

For the year, the South San Francisco-based company posted profit of $562.5 million, or $1.06 a share, up from $63.8 million, or 12 cents, in 2002, when Genentech recorded a $500-million court judgment against it. The judgment stemmed from a contract dispute with City of Hope National Medical Center in Duarte and is under appeal.

Revenue in 2003 rose 28% to $3.3 billion from $2.6 billion in 2002. Cancer drugs accounted for $2 billion of 2003 total revenue.

Chief Operating Officer Myrtle Potter said in a conference call that Genentech was pleased with sales of two new drugs launched in the second half of 2003.

Xolair, the first biotech drug for asthma, had fourth-quarter sales of $18.5 million, up from $6.8 million in the previous quarter, Potter said. Raptiva, a psoriasis drug that Genentech launched Nov. 17, had sales of $1.4 million in the quarter.

The drugs cost more than $12,000 a year and managed-care companies have taken steps to limit their use, so investors are closely monitoring sales.

Potter told investors that a cut in 2004 Medicare reimbursement for Rituxan would mean that some doctors would make less profit on the drug.

She said Genentech did not expect the cut to significantly hurt sales but the company was watching the situation.

Genentech announced its results after the market closed. Its shares rose 42 cents to $90.67 on the New York Stock Exchange. In after-hours trading, they rose to $91.50.

Genentech’s stock has more than doubled since the company announced in May that its experimental cancer drug, Avastin, added five months to lives of cancer patients in a large clinical trial. If the Food and Drug Administration approves Avastin, analysts say it could generate $1 billion in annual revenue.

Genentech expects the Food and Drug Administration to approve the drug by the end of March.