Genentech Stock Slips on News of Probe

Genentech Inc.’s stock slipped 5.3% on Tuesday as investors winced at news that the U.S. attorney’s office in Philadelphia was conducting an investigation into the marketing of the firm’s top-selling drug, Rituxan.

Shares in the world’s second-largest biotechnology company closed down $2.86 at $51.13 on the New York Stock Exchange the day after South San Francisco-based Genentech revealed that it had received a subpoena requesting documents related to the promotion of Rituxan, which is used to treat the blood cancer non-Hodgkin’s lymphoma. More than $1.3 billion of the drug was sold last year in the U.S.

Genentech is cooperating with the investigation, the first federal probe of Rituxan since it was approved in 1997, spokeswoman Debra Charlesworth said. She declined to elaborate on what marketing practices the government was looking into.

A spokesman for the U.S. attorney’s office in Philadelphia, Rich Manieri, declined to comment on the Genentech investigation, which is both civil and criminal.

Federal authorities have been examining other drug companies’ marketing practices and analyst Geoffrey Porges of Bernstein & Co. said he wasn’t surprised that the feds were knocking on Genentech’s door.

“It’s not a good thing,” he said, “but just about every company in the industry is the subject of one of these” investigations.

Genentech’s marketing practices don’t appear different from competitors’ and may not be as aggressive, Porges added. “I suspect they have less exposure than other companies.”

In September, Cephalon Inc. received a subpoena from federal prosecutors in Philadelphia for documents related to sales and marketing practices of its anti-drowsiness drug Provigil. Eli Lilly & Co. and Bristol-Myers Squibb Co. have received similar demands from that office.

The U.S. attorney’s office in Boston is investigating Johnson & Johnson’s sales and marketing practices for its epilepsy drug Topamax. And J&J;, Wyeth and Forest Laboratories Inc. are the subjects of a federal probe into the marketing of their popular antidepressants.

Federal concerns tend to center on drug companies’ promotion of uses for their products that haven’t been approved by the Food and Drug Administration. Doctors may prescribe such “off-label” applications, but drug companies aren’t supposed to market them.

Genentech and its partners, Roche and Biogen Idec Inc., are testing Rituxan as a treatment for other forms of lymphoma but have not received FDA approval for such uses. The company expects to apply for federal approvals of other uses as early as next year, Charlesworth said.