Avastin Drives Genentech
Genentech (DNA) kept climbing Tuesday, paced by a stellar second-quarter earnings report and the euphoria around its burgeoning wonder drug Avastin.
The stock, which has risen more than 50% this year alone, was recently trading at $84.75 on Instinet, up $1.25, or 1.5%, from its Monday close. The price is 75 times the 2005 earnings guidance that Genentech offered in its second-quarter release and 50 times the 2006 Thomson First Call consensus.
Genentech's second-quarter profit jumped 73% from a year ago to $296.2 million, or 27 cents a share, while earnings before special items came in at $328.6 million, or 30 cents a share. Analysts were looking for 26 cents a share on the latter basis.
Overall revenue was $1.53 billion, up from $1.13 billion a year ago and about $40 million above the Wall Street consensus. The upside was attributable to better-than-expected sales of Avastin, which did $245.7 million in revenue in the period, about $10 million better than expected.In a late conference call Monday, the company's chief financial officer, David Ebersman, chalked up Avastin's performance to growing acceptance among colorectal specialists and increasing use outside of that diagnosis. Ebersman estimated that about 10% of Avastin patients had other diseases. Sales of breast-cancer treatment Herceptin were $152.4 million, about $10 million better than expected, while sales of the lung-cancer drug Tarceva were $70.2 million, about $15 million ahead of forecasts. The main disappointment was Rituxan, which saw sales rise 15% from a year ago to $450.3 million, about $20 million below Wall Street estimates. The company noted on its conference call that Herceptin benefited from increasing use in so-called adjuvant therapy for breast cancer, in which the drug is used to kill cancer cells that might have spread from the breast. The use resulted in a so-called "Dear Doctor" letter in which the company alerted doctors to the possibility of unforeseen consequences of off-label use. The company forecast full-year EPS growth of more than 35% over 2004's 83 cents a share. That implies 2005 earnings of $1.13 a share, matching the Wall Street consensus estimate. Genentech has traditionally been conservative in its profit guidance. "We are actively working with the [Food and Drug Administration] to prioritize the nine potential filings relating to our significant Phase III trial results, while we continue to develop more than 30 projects in the pipeline primarily in our oncology and immunology focus areas," Susan D. Hellmann, president of Genentech's product development, said in a statement.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV