Genentech Posts 79% Gain in Profit
Genentech Inc., the world’s No. 2 biotechnology company, said Tuesday that its second-quarter net income rose 79% as doctors prescribed more of the company’s medicines for colon and breast cancers.
The results beat analysts’ expectations. However, Genentech shares fell in after-hours trading. Though U.S. sales of the colon cancer treatment Avastin climbed 72% to $423 million, they were short of what investors were expecting, said Eric Schmidt, an analyst at Cowen & Co. in New York.
Genentech’s growth depends on Avastin because the drug will account for 37% of the South San Francisco-based company’s product sales by 2010, Schmidt estimated. Avastin and three other targeted therapies, including Herceptin for breast cancer, make Genentech the biggest U.S. seller of tumor-fighting drugs.
“The Avastin issue is the hiccup here -- everything else is very strong,” said Geoffrey Porges, an analyst at Sanford C. Bernstein & Co. in New York, who rates the shares “market perform” and doesn’t own the stock. “Avastin is maturing in its initial indication, colorectal cancer, and we’re having trouble figuring out the growth trajectory in other indications.”
Genentech’s revenue rose 44% to $2.2 billion. Net income climbed to $531 million, or 49 cents a share, from $296 million, or 27 cents, a year earlier, when the company wasn’t required to deduct employee stock-option costs. The 2006 quarter included a gain from investments of 4 cents a share.
Herceptin sales more than doubled to $320 million. The medicine’s use has been growing after research released last year showed that it reduced the risk of relapse in women after breast tumors were removed by surgery. The drug hadn’t been used in such cases previously.
The company released its earnings after U.S. markets closed. Shares of Genentech, which is majority-owned by Swiss drug maker Roche Holding, fell $2.35 to $81.71 in after-hours trading. The shares rose 33 cents to $84.06 in regular trading.
Full-year profit excluding some items will climb 55% to 60% this year, higher than a previous estimate of 45% to 55%, said Chief Financial Officer David Ebersman. He declined to give a more specific estimate.
Excluding stock options and other items, Genentech said it earned 56 cents a share in the second quarter. Genentech had been expected to earn 47 cents, the average estimate of 24 analysts in a Thomson Financial survey.
Avastin, approved in 2004, was the first cancer medicine to work by blocking the growth of tumor-nourishing blood vessel networks, a process known as angiogenesis. Genentech and Roche, which has rights to the medicine in Europe, say researchers are testing the drug to treat 25 types of tumors.
Genentech asked the Food and Drug Administration in the second quarter to approve Avastin’s use in patients with lung and breast cancers.
