Genentech’s Net Income Climbs 52% on Strong Demand for Cancer Drugs

Genentech Inc.’s net income soared 52% in the third quarter on strong sales of Avastin and other cancer drugs, the company reported Wednesday.

The South San Francisco-based company also raised its earnings forecast for the year.

Genentech reported net income of $230.9 million, or 21 cents a share, compared with $152 million, or 14 cents, a year earlier.

Excluding litigation-related charges and other special items, Genentech had pro forma net income of $259.6 million, or 24 cents a share, up from $143.9 million, or 14 cents, in the same quarter of 2003. Wall Street had expected the company to earn 21 cents on that basis, according to a survey of analysts by Thomson First Call.

Revenue surged to $1.2 billion, up 47% from $817 million last year, as total product sales reached $1.01 billion, the first time in the company’s history that quarterly sales surpassed the billion-dollar mark.

For all of 2004, Genentech said, it expects pro forma earnings per share of 80 cents to 83 cents, up from its July estimate of 75 cents to 80 cents.

Avastin, the company’s drug for colon cancer, had sales of $183 million in the quarter. The drug was launched in February, and analysts said it was on its way to becoming a $1-billion product.

The drug, with a price tag of $4,400 a month, has been hailed as a breakthrough because in clinical trials it prolonged the lives of colon cancer patients by five months when taken in concert with chemotherapy.

Genentech said 40% of patients with metastatic colon cancer were using Avastin as a first treatment, compared with 20% of patients in the second quarter of this year.

Myrtle Potter, co-president of operations, said sales of the drug were not hurt by a warning the company issued in August stating that Avastin could elevate the risk of blood clots, heart attacks and strokes. The company said patients most at risk were older than 65 and had a history of blood clots.

“I can’t say there was no impact, but I do believe the impact was minimal,” Potter said.

Sales of Rituxan, a drug for non-Hodgkin’s lymphoma, rose 18% to $437.7 million from $371.7 million in last year’s third quarter. Sales of Herceptin, a breast cancer drug, increased 17% to $126 million from $107.7 million in the year-earlier quarter.

Oncology drugs accounted for 74% of Genentech’s total product sales in the quarter.

The company announced its results after the market close. On the New York Stock Exchange, Genentech shares fell 88 cents to $50.25; in after-hours trading, the company’s shares rose to $51.

The stock had dropped $2.86 on Tuesday after the company disclosed that it had been subpoenaed by federal investigators for documents related to its marketing of Rituxan. Genentech reiterated Wednesday that it did not promote the drug for off- label use.