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Genentech Inc. profits surge 58 percent
2006-10-11
Despite third-quarter profits that jumped 58 percent at Genentech Inc. on the back strong drugs sales, concern about its newest drug kept a lid on its stock price. During a conference call with analysts Tuesday, questions swirled around how long the patients will stay on new eye-disease drug Lucentis and how many current patients on competing drugs will switch to Lucentis. Still, the South San Francisco-based Genentech reported a profit of $568 million, or 53 cents a share, for the quarter compared to $359 million, or 33 cents a share, for the same period last year. If not for special expenses, including employee stock options, the company said it would have earned $637 million, or 59 cents a share. On that basis, the company exceeded Wall Street analysts' expectations by 8 cents a share, according to research firm Thomson Financial. The company said it expected earnings per share to grow by 65 percent to 70 percent for the full year. Genentech shares fell 68 cents, or 0.8 percent, to close Tuesday at $85.60 on the New York Stock Exchange. In extended trading, after the release of the results, the shares fell $1.25, or 1.5 percent. The company's revenues rose 36 percent to $2.39 billion for the quarter, largely because of the continued popularity of Genentech's pricey cancer-fighting drugs. The sales of non-Hodgkin's lymphoma treatment Rituxan rose 12 percent to $509 million for the quarter while sales for its colon cancer staple Avastin shot up 34 percent to $435 million. The Food and Drug Administration approved the drug in 2004 for use by the sickest colon cancer patients. But a number of recent scientific studies show it's likely to combat several other forms of cancer, including cancers of the lung and breast. However, the Food and Drug Administration demanded more scientific data before it approved Avastin for treating breast cancer. The company said it hopes to reapply in the middle of next year. Avastin is designed to choke the blood supply that feeds tumors and is the first drug of its kind to be approved by the FDA. When used with chemotherapy, it extends the life of the sickest patients by an average of about five months. Analysts expect the drug, which costs each patient about $4,400 per month, to surpass $2 billion in annual sales by 2007. Company executives said on a conference call with analysts that they hope Avastin will receive FDA approval to use Avastin for the treatment of lung cancer as soon as Wednesday. Lucentis, which treats the macular degeneration, had sales of $153 million in the quarter. The FDA approved Lucentis on June 30. Macular degeneration is the leading cause of blindness among the elderly and Lucentis is rapidly becoming the primary treatment for the disease. "We are encouraged by strong initial physician acceptance of Lucentis," said Genentech chief executive Arthur Levinson. Lucentis costs about $2,000 an injection and the company expects the average patient to take one shot a month. But on a conference call Tuesday, many analysts expressed concern that Lucentis sales could soon taper off after an initial splash in the market. "There is going to be a number of potentially conflicting dynamics going on," conceded company vice president Ian Clark. One of the biggest issues for the company is that many eye doctors are treating macular degeneration with Genentech's Avastin instead of Lucentis. Lucentis is derived from Avastin, which is one-tenth the cost of Lucentis, but it's approved for use against macular degeneration. Many doctors report that Avastin is just as effective as Lucentis and there's concern the new drug's popularity will wane. Muzi.com News
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