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Biotech / Medical : IDPH--Positive preliminary results for pivotal trial of ID -- Ignore unavailable to you. Want to Upgrade?

To: Don Cheng who wrote (1552)	4/24/1998 5:50:00 PM
From: Ben Nildus	Read Replies (1) \| Respond to of 1762

FYI, Lehman Brother Research Reports on IDEC and Genentech, Requires Adobe Acrobat Reader to read them, which is available free at adobe.com. Note these reports came out before IDEC's earnings. Headline: IDEC Pharm: 1Q98 End-user sales of Rituxan $37.7 MM, $13.4 MM for March lehman.com Headline: Genentech: Reports Solid 1Q Results; lehman.com Headline: IDEC Pharm: 1Q98 End-user sales of Rituxan $37.7 MM, $13.4 MM for March Author: CA Butler,PhD/E.Ende,MD(212)526-4410 Rating: 2 Company: IDPH Country: COM CUS Industry: BIOTEC Ticker : IDPH Rank(Prev): 2-Outperform Rank(Curr): 2-Outperform Price : $42 1/8 52wk Range: $47-16 Price Target: $ 59 Today's Date : 04/14/98 Fiscal Year : DEC EPS 1997 1998 1999 2000 QTR. Actual Prev. Curr. Prev. Curr. Prev. Curr. 1st: -0.12A 0.16E 0.16E - -E - -E - -E - -E 2nd: -0.63A 0.26E 0.26E - -E - -E - -E - -E 3rd: -0.51A -0.03E -0.03E - -E - -E - -E - -E 4th: 0.43A 0.11E 0.11E - -E - -E - -E - -E Year:$ -0.83A $ 0.50E $ 0.50E $ 0.85E $ 0.85E $ - -E $ - -E Street Est.: $ 0.51E $ 0.52E $ 1.16E $ 1.19E $ - -E $ - -E Price (As of 4/14): $42 1/8 Revenue (1998): N/A Return On Equity (98): N/A Proj. 5yr EPS Grth: N/A Shares Outstanding: 19.2 Mil. Dividend Yield: N/A Mkt Capitalization: 808.8 Mil. P/E 1998; 1999 : 81.9 X; 48.2 X Current Book Value: $2.95 /sh Convertible: None Debt-to-Capital: 3.9 % Disclosure(s): C * Rituxan sales for 1Q98 are $37.7 million which is slightly higher than our estimate of $37.6 million. March sales are estimated at $13.4 million which is higher than February's $11.1 million and January's $13.2 million. * As a result of the strong sales reported for Rituxan, we remain confident in our 1Q98 EPS estimate for Idec which is $0.16. * Idec reports its first quarter on April 20th before the bell with a conference call at 11 AM EST. * We reiterate our 2-Outperform rating and our price target of $59. BUSINESS DESCRIPTION: Expertise in immunologically active antibodies. Core pipeline products include therapies for AIDS, non-Hodgkins B cell lymphomas, malignant melanoma and autoimmune diseases. Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the past three years a public offering of securities for this company. B-An employee of Lehman Brothers Inc. is a director of this company. C-Lehman Brothers Inc. makes a market in the securities of this company. G-The Lehman Brothers analyst who covers this company also has position in its securities. Headline: Genentech: Reports Solid 1Q Results; Reaffirm Outperform Author: CA Butler,PhD/R.Rouse (212)526-4410 Rating: 2 Company: GNE Country: OPR CUS Industry: BIOTEC Ticker : GNE Rank(Prev): 2-Outperform Rank(Curr): 2-Outperform Price : $70 52wk Range: $73-57 Price Target: $76 Today's Date : 04/14/98 Fiscal Year : DEC EPS 1997 1998 1999 2000 QTR. Actual Prev. Curr. Prev. Curr. Prev. Curr. 1st: 0.25A - -E 0.32A - -E - -E - -E - -E 2nd: 0.19A - -E 0.31E - -E - -E - -E - -E 3rd: 0.25A - -E 0.30E - -E - -E - -E - -E 4th: 0.33A - -E 0.31E - -E - -E - -E - -E Year:$ 1.02A $ 1.19E $ 1.24E $ - -E $ 1.46E $ - -E $ - -E Street Est.: $ 1.20E $ 1.21E $ 1.41E $ 1.47E $ - -E $ - -E Price (As of 4/14): $70 Revenue (1998): $980 Mil. Return On Equity (98): N/A Proj. 5yr EPS Grth: 20%+ Shares Outstanding: 128.8 Mil. Dividend Yield: N/A Mkt Capitalization: $9.0 Bil. P/E 1998; 1999 : 56.5 X; 47.9 X Current Book Value: $16.40/sh Convertible: YES Debt-to-Capital: 6% Disclosure(s): None * Genentech reported 1Q98 earnings of $0.32 versus $0.25. This surpassed the Street's $0.26 consensus forecast and was led by initial sales of Rituxan, given that all other products actually experienced a decline in the quarter. * We believe that Rituxan will continue to be a driver for the stock this year and project $164 million in end-user sales moving to $227 million next year. * Additional catalysts for the stock include clinical data presentations such as the ASCO conference in mid-May whereby the company will present data on both Rituxan as well as Herceptin for breast cancer. * Genentech will continue to improve its financial results and will continue to deliver late-stage clinical data. Accordingly, we view the company as being very well positioned in light of Roche's buyout option or as a stand-alone entity. * We reaffirm our 2-Outperform rating. FINANCIAL SUMMARY Genentech reported first quarter financial results of $0.32 per diluted share versus $0.25 a year ago. This was well ahead of the $0.26 Street consensus. Product sales increased 7% to $164.7 million (ahead of our $163.6 million estimate) and were led by strong initial sales of Rituxan (at $37.7 million). Product royalties actually decreased by 1% to $64.5 million. Contract revenues also declined 30% to $14.9 million due primarily to fluctuations in Roche-related income. PRODUCT SALES / (GROWTH) Rituxan $37.7 Mil. ( n/a) Activase $55.7 Mil. (-26%) Growth Hormone $50.9 Mil. (- 9%) Pulmozyme $19.5 Mil. (-13%) Cost of goods of $33.6 million represented 20% of sales and compares to an 18% cost of sales a year ago. This increase reflects the addition of Rituxan to the product mix. R&D burn declined year-over year by 20% to $98.2 million while SG&A spending increased 21% to $75.0 million. After net interest income and tax considerations (a 28% effective tax rate), the resulting net income of $41.0 million compared favorably to last year's $31.6 million. We are taking this opportunity to update our forecast to better reflect current sales and spending trends. Accordingly, we are raising our 1998 estimate slightly to $1.24 per share. Management actually suggests that by yearend, a result of $1.27 may even be possible, however we will await additional quarterly results with the plan to revisit our assumptions at such time. For 1999, we are initiating a formal estimate of $1.46 per share. PRODUCT SUMMARY The company launched Rituxan in December in conjunction with partner IDEC Pharmaceuticals (IDPH, $39 3/4, 2-Outperform) for the treatment of non-Hodgkin's lymphoma. Though the drug has only been on the market for 4 months, initial sales results are strong. The $38 million recorded in the current quarter was, in fact, the driving force behind Genentech's growth. We continue to anticipate sales of $164 million this year and $227 million next. Sales of the company's lead drug, Activase (tPA), declined again in the period due to (a) competition from Centocor's (CNTO, $41 1/4, 1-Buy) Reteplase and (b) competition from mechanical reperfusion versus drug therapy. We believe that this trend will subside and that Activase's market share will begin to firm up. Sales of the growth hormone products, Protropin and Nutropin, also declined in the period however we expect this trend to reverse with the recently added label in adults. Finally, sales of Pulmozyme also declined in the quarter due to fluctuations in ordering patterns. We expect the new pediatric label expansion to help stem this trend as well. On the clinical front, a host of data will be presented at the upcoming American Society of Clinical Oncologists (ASCO) conference in May, including data on Rituxan and Herceptin. Recall that Herceptin for the treatment of breast cancer has been given fast track' status by the FDA and we would expect the company to file its NDA this quarter. On Sunday May 17, the company will host a special symposium at ASCO to discuss the Herceptin data. Additionally this quarter, we look forward to the initiation of multiple Phase II programs including those with VEGF, anti-VEGF, and anti-CD18. The ProLease growth hormone Phase III trial has completed enrollment as has the Phase III utilizing NGF in diabetic peripheral neuropathy. CONCLUSION The introduction of Rituxan was the primary contributor to Genentech's growth this quarter. We expect that to continue to be the primary financial driver this year and that clinical data will provide additional momentum for the stock. We continue to believe that the company remains very well positioned both clinically and financially to incentize Roche to exercise its buyout option in mid-99. Whether this occurs or not, we believe that the prospects for Genentech remain attractive. Accordingly, we remain comfortable with our Outperform rating on the stock at current prices. BUSINESS DESCRIPTION: Genentech is a leader in biotechnology with a focus on recombinant DNA technology. It currently manufactures and markets 5 products in the US and receives royalties on 5 additional licensed products. Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the past three years a public offering of securities for this company. B-An employee of Lehman Brothers Inc. is a director of this company. C-Lehman Brothers Inc. makes a market in the securities of this company. G-The Lehman Brothers analyst who covers this company also has position in its securities.]