The Wall Street Journal-20080115-Earnings Digest -- Pharmaceuticals- Genentech Posts Disappointing Sales- Profit Increases 6-4-- But Individual Drugs Don-t Meet Expectations
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Earnings Digest -- Pharmaceuticals: Genentech Posts Disappointing Sales; Profit Increases 6.4%, But Individual Drugs Don't Meet Expectations
Genentech Inc.'s earnings rose 6.4% in the fourth quarter, but sales of its major drugs, including the blockbuster cancer treatment Avastin, missed market expectations and sent the company's shares lower in after-hours trading.
"There aren't really any bright spots here," said Mike King, an analyst with Rodman and Renshaw, referring to the company's individual-drug sales.
The South San Francisco, Calif., biotech company gave a range for 2008 earnings that includes current analyst expectations, though Genentech faces slowing growth as it becomes larger and some of its product lines mature.
Genentech, which is majority-owned by Switzerland-based Roche Holding AG, said revenue rose 9.4%, in line with forecasts.
Excluding items, the company's earnings would have been 69 cents a share, compared with expectations of analysts surveyed by Thomson Financial for 67 cents a share.
Shares of Genentech, which reported results after regular trading, fell 1.4% to $69.63 after hours. The shares changed hands at $70.64, down 1.2%, in 4 p.m. composite trading on the New York Stock Exchange.
Avastin, approved to treat lung and colorectal cancer, had U.S. sales of $603 million in the fourth quarter, up 23% from a year ago but below Wall Street's estimate, which Genentech gave as $615 million.
"Whether we will see significant growth quarter on quarter every quarter remains to be seen," said Ian Clark, executive vice president of commercial operations. Mr. Clark said Avastin's growth in the quarter came from increased penetration in the lung-cancer market.
He also said usage of high-dose Avastin stabilized in the fourth quarter after declining from the second to the third quarter on the heels of a study, released early last year, that showed that Avastin is as effective in treating lung-cancer patients with half the drug's current recommended dose as it is using a full dose.
Mr. Clark warned that high-dose Avastin sales could come under pressure again upon release of another study, which compares high- and low-dose Avastin in breast cancer.
In addition, Genentech is striving to persuade the U.S. Food and Drug Administration to approve Avastin as a first-line treatment for metastatic breast cancer. An FDA advisory panel in December voted against approval. But Susan Desmond-Hellmann, Genentech's president of product development, said, "We remain convinced the drug helps patients."
The FDA is slated to rule next month.
Genentech's second-biggest-selling drug, Rituxan, a treatment for cancer and rheumatoid arthritis, posted sales of $596 million for the quarter, up 6.4% but also less than Street views of $603 million, the company said.
The breast-cancer drug Herceptin's sales grew just 1.6% to $327 million, less than the expectation of $332 million.
The company's eye treatment Lucentis posted sales of $197 million, down 9.2% and about in line with estimates.
Avastin continues to cut into sales of the higher-priced Lucentis, which is chemically similar to the cancer drug but much more expensive.
Genentech had pledged in October to stop making Avastin available as of Jan. 1 to compounding pharmacies, which repackage the drug into syringes that are dosed for use in the eye, in a bid to curb its use in treating eye disease.
Genentech expects 2008 earnings of $3.30 to $3.45, excluding items. Analysts' mean estimates were for 2008 earnings of $3.37.
After an uproar, the company reached an agreement in December with two societies of eye doctors to allow physicians to purchase Avastin and have the drug delivered to compounding pharmacies.
