Genentech Sales, Profit Surged in Fourth Quarter
By DAVID P. HAMILTON
Staff Reporter of THE WALL STREET JOURNAL
January 11, 2005
Genentech Inc. reported strong growth in net profit and revenue, although sales of its flagship cancer drug Avastin, and its reported earnings per share, slightly lagged analysts' expectations.
The South San Francisco, Calif., biotechnology giant said net profit in the fourth quarter rose 63% to $206.6 million, or 19 cents per diluted share, from $126.7 million, or 12 cents a share, in the year-earlier period. Revenues jumped 41% to $1.3 billion from $933.9 million a year earlier.
Those profit figures reflect a recurring accounting charge related to the 1999 redemption of Genentech shares by its majority owner Roche Holding Ltd. and litigation-related expenses. Setting aside such charges, as Genentech prefers to do, net profit would have risen 55% to $225.4 million, or 21 cents a share, from $145 million, or 14 cents a share.
Even so, Genentech's profit fell short of average estimate of analysts surveyed by Thomson Financial/First Call, which was 22 cents per share. Analysts had also predicted that sales of Avastin, a groundbreaking cancer drug approved early last year, would fall between $210 million and $220 million in the quarter. Actual fourth-quarter Avastin sales were $200 million, Genentech said.
Lower-than-expected Avastin sales in the quarter could be a harbinger of a more general slowdown for the drug, which single-handedly triggered a vast increase in Genentech's share price nearly two years ago. Some analysts have suggested that Avastin use will grow more slowly this year as it saturates the market for early use in colon cancer.
Changes in Medicare reimbursement for the drug may also make it less attractive for cancer specialists who otherwise might have been willing to prescribe Avastin for non-approved uses, suggest analysts such as Christopher Raymond of Robert W. Baird & Co.
Genentech officials said Avastin continues to make great strides among patients with newly diagnosed colon cancer, the drug's only approved use. At the same time, they acknowledged some "flattening" in Avastin usage among patients with more advanced colon cancer.
Genentech shares rose 18 cents, or 0.3%, to $54.43 in composite trading on the New York Stock Exchange at 4 p.m. In after hours trading, however, the stock slumped 3.7% to $52.40 according to Island ECN.
Write to David P. Hamilton at david.hamilton@wsj.com
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The product: Genentech's Avastin
The purpose: Also known by the generic name bevacizumab, Avastin limits the spread of colon cancer when given intravenously.
The list price: About $4,400 per average patient per month
The performance: The drug starves tumors by preventing the growth of blood vessels to the tumor. Studies showed patients taking the intravenous drug lived about five months longer than those who didn't. Fourth-quarter sales of the drug were $200.4 million, up 9.5% from the third quarter but below Merrill Lynch's forecast for sales of $218 million. Total revenue rose 41% to $1.32 billion and profit jumped 63% to $206.6 million.
The small print: In August, the FDA and Genentech warned that patients receiveing Avastin as part of their chemotherapy in clinical trials had a risk of blood clots that was twice as high as that of patients not taking Avastin. The drug's label has been updated to reflect the risk.
-- Kate Schlegel
Source: WSJ.com research
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