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Genentech reports jump in 1Q earnings
2008-04-11
Biotechnology giant Genentech Inc. is reporting a jump in its first-quarter profit of 12 percent compared to last year, but sales of its top-selling cancer drug disappointed Wall Street analysts. For the quarter ended March 31, the company earned $790 million, or 74 cents per share, compared with $706 million, or 66 cents a share, a year ago. Excluding special expenses, Genentech said Thursday it would have earned $895 million, or 84 cents a share. On that basis, the results beat the average per-share estimate among Wall Street analysts by two cents, according to research firm Thomson Financial. Revenue was $3.06 billion in the quarter, an increase of 8 percent from $2.84 billion a year ago but missing analysts' expectations by about $50 million. Sales of Genentech's top two cancer drugs, Avastin and Rituxan, both rose 13 percent. But Avastin's numbers disappointed analysts, who were expecting an even greater rise after its surprise February approval by the Food and Drug Administration to treat metastatic breast cancer. Avastin's sales rose to $600 million, compared to $533 million in sales for the first quarter of 2007. The drug brought in a total of $2.3 billion last year. "They beat on the bottom line but Avastin was a miss," said Jason Kantor, a biotech equities analyst with RBC Capital Markets, who predicted $622 million in Avastin sales. "This is a stock which trades on Avastin sentiment." The FDA's approval of Avastin went against the recommendation of the agency's own advisory panel. The drug is already approved to treat colon and lung cancer Genentech's share price has risen about 17 percent since the beginning of 2008, spiking nearly 10 percent on the news of the Avastin approval and nearly erasing the stock's losses during 2007. Sales of Rituxan, which treats non-Hodgkin's lymphoma and rheumatoid arthritis, also rose 13 percent to $605 million in the first quarter compared with the same period last year. Breast cancer fighter Herceptin posted first-quarter 2008 sales of $339 million, up 9 percent from a year ago. The increases come even as analysts continue to express concern that the market for Genentech's top drugs is becoming saturated. Company earnings have grown increasingly modest in recent quarters following a storied run of high-double-digit growth rates. In a conference call Thursday afternoon, company executives blamed worry among physicians after the FDA advisory panel's negative recommendation for Avastin's sluggish sales growth. The market was likely to pick up following the agency's approval for labeling the drug as a breast cancer treatment, said Ian Clark, executive vice president of Genentech's commercial division. "Since we've had the label, all of the signs are very good," Clark said. "But clearly we've only had the label for four or five weeks within the quarter." Avastin is designed to choke the blood supply that feeds tumors and was the first drug of its kind to be approved by the FDA. Genentech shares gained 14 cents in after-hours trading from its closing price of $78 on the New York Stock Exchange before the results were announced. (This version CORRECTS Avastin's first quarter sales for first quarter 2007 to $533 million, not billion.)
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