Genentech profit up 41 percent on Rituxan, Avastin
Last Updated: 2007-07-12 11:00:29 -0400 (Reuters Health)
By Lisa Baertlein
LOS ANGELES (Reuters) - Genentech Inc. said on Wednesday that second-quarter profit rose 41 percent, fueled by growth from cancer drugs Rituxan and Avastin.
The world's second-largest biotechnology company also slightly boosted its full-year profit forecast, but shares inched down as healthy but largely in-line sales of key products failed to excite investors waiting for Genentech's next big revenue driver.
"It seems like Genentech is in a bit of a holding pattern for the time being," said Cowen and Co analyst Eric Schmidt, who has said Avastin colon cancer trial results expected next year were one of the next key events for the company.
Genentech posted net income of $747 million, or 70 cents per share, compared with year-earlier net income of $531 million, or 49 cents a share.
Excluding stock-based compensation expenses and other items, earnings per share were 78 cents. Genentech reported total operating revenue of $3.0 billion, up from $2.2 billion a year ago. Results beat Wall Street forecasts.
Analysts, on average, had expected the South San Francisco- based company to post second-quarter earnings before items of 71 cents per share on revenue of $2.85 billion, according to Reuters Estimates.
Robert Baird & Co analyst Chris Raymond said the most notable element of the report was that the $582 million in sales of Rituxan, a treatment for non-Hodgkin's lymphoma and rheumatoid arthritis, eclipsed forecasts by about $12 million.
Company officials, on a conference call, attributed Rituxan's strong showing to new demand from arthritis patients.
"All the other products seem to be in line or slightly above forecasts," said Raymond.
Investors had also been focused on results for Avastin, which is approved to treat colon and lung cancers. Some doctors also are using it to treat breast cancer patients. Avastin sales grew 33 percent to $564 million for the quarter, on increased use for spreading non-small-cell lung cancer and breast cancer.
The company now expects 2007 full-year earnings per share excluding special items to grow 28 percent to 32 percent, which would translate into earnings of $2.85 to $2.95 per share. It previously forecast growth of 25 percent to 30 percent.
Genentech Chief Financial Officer David Ebersman said no single product was responsible for the increase.
The company which also produces breast cancer drug Herceptin and Lucentis, which treats blindness-inducing macular degeneration, also told analysts it planned to accelerate spending on marketing, sales and research and development during the remainder of this year.
The shares of Genentech and of rival Amgen Inc. are down 6 percent and 19 percent, respectively, this year.
Genentech shares fell 30 cents to $75.63 in after-hours trading on the heels of the company's quarterly report card. They had closed up $1.08, or 1.4 percent, at $75.93 in the regular session on the New York Stock Exchange.
Genentech shares trade at around 21 times expected 2008 earnings.
The shares of its larger but slower-growing rival, Amgen, whose 2006 revenue of $14.2 billion topped Genentech's $9.1 billion in annual sales, have been trading at just over 12 times expected 2008 earnings.
(Additional reporting by Ransdell Pierson in New York)
