Genentech Shares Drop 4% After Profit Report

Genentech Inc. shares dropped more than 4% on Wednesday after the biotech company reported a profit for the fourth quarter that failed to beat Wall Street expectations.

South San Francisco-based Genentech said after the markets closed Tuesday that its profit rose 64% in the quarter, yet that wasn’t good enough to replicate its recent history of surpassing expectations.

Net income for the three months ended in December totaled $339.2 million, or 32 cents a share, compared with $206.6 million, or 19 cents, a year earlier.

Fourth-quarter revenue hit $1.89 billion, a 44% increase from the previous year.

If not for accounting expenses unrelated to its ongoing operations, Genentech said it would have earned 34 cents a share to equal the average estimate among analysts surveyed by Thomson Financial.

It marked the first time in a year that Genentech’s quarterly earnings didn’t exceed analyst expectations by at least 4 cents a share.

Genentech’s shares sank $4.12, or 4.4%, to $89.22. Its stock price had risen about 70% last year, adding $40 billion in shareholder wealth, as the company overtook Amgen Inc. of Thousand Oaks as the biotech industry’s most valuable company.

Arthur Levinson, Genentech’s chief executive, said in a conference call for analysts Tuesday that the company would be able to balance Wall Street’s desire for short-term financial growth while continuing to develop new drugs that often required years of expensive testing.

In a bullish sign, Levinson said Genentech planned to hire about 1,400 additional employees this year, a 15% increase from its current workforce of 9,500 worldwide. Genentech added roughly 1,900 workers last year, a 25% increase from 2004.