Genentech’s Profit Surges 73% on Cancer Drug Sales

Genentech Inc.’s hot streak continued Monday when the biotechnology company said second-quarter profit soared 73% on higher sales of its cancer drugs.

Net income was $296.2 million, or 27 cents a share, compared with $170.8 million, or 16 cents, in the year-earlier quarter.

Excluding costs related to litigation with City of Hope National Medical Center, net income was $328.6 million, or 30 cents, compared with $201.8 million, or 19 cents. On that basis, South San Francisco-based Genentech beat Wall Street’s consensus forecast by 4 cents, according to Thomson First Call.

Revenue was $1.53 billion, up 35% from a year earlier.

“This was another strong quarter for us,” Chief Financial Officer David Ebersman said.

The company reported the results after the markets closed. Its shares gained 33 cents to $83.50 in regular trading Monday and rose to $84.15 after-hours.

Ebersman cautioned that net income would not continue to grow at the same pace throughout the year because the company expected to boost drug research and development costs to expand its product pipeline and find new uses for existing drugs.

Sales and marketing expenses also are expected to rise, Genentech said.

The company forecast earnings-per-share growth of more than 35% for all of 2005, buoyed by the strong second-quarter performance. Genentech previously forecast growth of more than 30% for the year.

Avastin, a colon cancer drug launched in February 2004, had sales of $245.7 million, in line with Wall Street expectations. Genentech said it was in discussions with the Food and Drug Administration about marketing Avastin to lung cancer patients and breast cancer patients, based on positive results in two recent clinical trials.

Chief Executive Art Levinson said Avastin was driving much of the increase in R&D; spending. He said Genentech planned to invest “very, very heavily” to develop Avastin, which has shown promise in a variety of cancers.

“We are on the cusp of potentially turning Avastin into a really big drug,” Levinson said.

Many on Wall Street believe that the drug will have sales of $1 billion this year.

Herceptin, a drug for advanced breast cancer, had sales of $152.4 million, ahead of Wall Street’s forecast of $139 million. Ian Clark, chief of cancer drug sales for Genentech, said physicians were beginning to prescribe the drug for patients with early stage breast cancer whose tumors were surgically removed, based on a recent positive clinical trial.

Genentech said it was in discussions with the FDA over the wording of a letter to physicians about the cardiac risks associated with Herceptin. The drug has a warning on its label about congestive heart failure, but the information applies to advanced breast cancer.

The recent clinical trial has prompted physicians to ask about risks to patients who receive Herceptin to prevent a recurrence of cancer after surgery, Genentech said.

Sales of Tarceva, a pill for lung cancer co-marketed with OSI Pharmaceuticals Inc., were $70 million, ahead of analysts’ expectations of $60 million.