DNA Summary: Big Three Shows Strength

Genentech (DNA - commentary - Cramer's Take) reported a mix quarter, but overall delivered a nice top line story in face of an uncertain M&A environment. For the quarter just ended, the company posted EPS of 81 cents on total revenue of $3.4 billion. Total product revenue came in at $2.45 billion on strength in all the big three products. The company narrowed guidance for the full year to a range of $3.40-$3.45 (from the prior range of $3.40-$3.50). The company is taking an 8-cent hit to EPS in order to enact a retention program for key employees.

'Big Three' Product Sales:

Avastin -- Has sales of $704 million and represents 18% year-over-year growth. This was about $10 million better than expected.

Rituxan -- Saw sales of $655 million, up 15% year over year and about $5 million-$10 million better than the Street forecast.

Herceptin -- Made sales of $368 million, up 15% year over year and also better than expected.

The retention program is meant to be proactive in light of uncertainty. Management said it is not seeing any change in employee turnover since the Roche announcement. Other than that, they offered no real comments on the Roche deal and cited legal reasons for doing so.

Overall, I think it was a solid quarter and will retain my positive view on the company. I have no idea if the Roche deal will go through, and if so, at what price, but I think the company is doing well on a standalone basis.

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At the time of publication, Thomas was long Genentech calls, although holdings can change at any time without notice.

Ben Thomas, CFA, is the founder and managing principal of Waycross Partners. Waycross Partners is a long/short hedge fund that focuses on the technology and health care sectors. Before Waycross, Ben was a portfolio manager and senior equity analyst at INVESCO, where he was part of a team that managed over $20 billion in assets. While at INVESCO, he was the lead manager for the INVESCO Midcap Growth fund as well as the firm?s senior equity analyst covering technology stocks.

Prior to INVESCO, Ben worked for Banc One Securities and Prudential Securities. He graduated from the University of Kentucky with a bachelor?s degree in finance and went on to earn his MBA from Indiana University. Ben is a member of the CFA Institute and serves on the board of directors for the CFA Society of Louisville.