Genentech Got It Done

All of these positives to the income statement start at the top line with what was strong revenue, even with the soft Avastin sales.

Another way the company showed me it's able to execute was the shipment of $10 million worth of Lucentis on the day it was approved. On June 30, the Food and Drug Administration gave the green light to Genentech's treatment for wet age-related macular degeneration. Though it's not unheard of for a company to start shipping a product on the same day it is approved, it's not exactly the norm.

I certainly wouldn't have taken points away if Genentech took a little while to start moving the product out the door, but color me impressed on the execution.

I was fascinated that on the conference call only one question was asked of Chief Financial Officer David Ebersman. He even thanked the analyst for asking it because he "didn't want to go two calls in a row without a single question." No doubt that pipelines and trials are the lifeblood of biotech companies, but an impressive financial performance like Genentech's shouldn't be ignored.

Know the Horizon

A day after the quarterly report, shares of Genentech were down $2.82, or 3.4%, at $81.24, on trading volume that was nearly twice the daily average.

Why the selloff? It appears the reason the stock declined in after-hours trading was the revelation that the FDA may require additional data on Avastin before it's approved for treating breast cancer. Genentech has a Nov. 22 date with the FDA to review the findings of its trials. But because the company is studying a progression-free survival endpoint rather than simply survival, more documentation may be needed.

Avastin is already being administered to treat breast cancer in what is known as off-label usage, meaning the drug hasn't been approved for that disease. In fact, management stated that a large part of the growth of Avastin this quarter came from off-label uses. Even so, once the drug does is approved for breast cancer, "there will be significant upside" to it, according to Ian Clark, Genentech's executive vice president of commercial operations.