Subpoena May Spoil Genentech's Earnings Party

Avastin was approved by the Food and Drug Administration in late February, adding to the company's anticancer drug arsenal that includes Herceptin, for advanced breast cancer, and Rituxan.

Avastin produced $133 million in sales for the second quarter, and Porges said he was raising his third-quarter estimate by $28 million to $169 million and his fourth-quarter revenue prediction by $24 million to $183 million.

Illustrating the what-have-you-done-for-me-lately approach on Wall Street, Porges noted that "the focus for Genentech and its investors recently shifted" from Avastin to Tarceva, because of the recent release of clinical test results on Tarceva's treatment of patients with non-small-cell lung cancer and the company's application to the Food and Drug Administration for that treatment.

High Hopes for Tarceva

The FDA recently announced that Tarceva would be evaluated under an accelerated review program. Genentech's partners in developing and marketing Tarceva are OSI Pharmaceuticals(OSIP Quote) and Switzerland's Roche, which owns 58.3% of Genentech's common shares.

Two weeks ago, the companies unveiled results of a late-stage clinical test showing that Tarceva, plus a standard chemotherapy drug, provided a small but statistically significant benefit in treating patients with advanced pancreatic cancer. These patients were compared with patients who had received chemotherapy plus placebo.

Despite the promise of Tarceva and the momentum of Avastin, Porges pointed out potential risks for Genentech's financial progress, most notably the recent company warning of "serious thromboembolic adverse events" linked to taking Avastin. Those events include stroke, heart attacks, heart-related chest pains and death caused by blood clots. In tests involving patients with advanced colon cancer, the warning says, the risk of a dangerous side effect was approximately twice as great for patients receiving Avastin.

Warning Signs

Although Genentech sent a "Dear Doctor" letter in mid-August informing physicians of potential side effects, Porges said the warning "should not surprise well-informed physicians, but may alarm patients and less expert practitioners."