Genentech's Numbers Meet Expectations

Earnings Scorecard
Actual	Estimated*	Year-Ago
$0.16	$0.16	$0.09
Figures in parentheses are losses. *Estimates by First Call/Thomson Financial

Genentech(DNA Quote) said Thursday that fourth-quarter profit rose 73%, matching analysts' forecasts, fueled by surging sales of cancer drugs Rituxan and Herceptin.

Genentech said net income in the quarter ended Dec. 31 rose to $83.4 million, or 16 cents a share, from $48.1 million, or 9 cents a share, in the quarter a year ago, before one-time items. Analysts forecast earnings of 16 cents a share, according to First Call/Thomson Financial. Revenue rose 35% to $485 million in the fourth quarter.

Genentech shares slipped $2.56, or 4%, to $60.69 in Thursday trading.

Genentech, one of the first and most successful biotech companies, said 2000 sales grew to $1.7 billion from $1.4 billion a year earlier, due primarily to sales of non-Hodgkin's lymphoma drug Rituxan and breast cancer drug Herceptin. It didn't break out fourth-quarter product sales.

"With 22 active projects in development, including six added in the past year, we are on course to continue to drive growth towards our five-year goals," said Arthur Levinson, chairman and CEO.

Because of its success in bringing new biotech drugs to market, Genentech is viewed as a core biotech holding by many portfolio managers. However, some analysts say the stock is "priced for perfection," meaning that any setback could cause its share price to suffer. The company has a market value of around $32 billion.

"Despite its impressive pipeline, we believe that the stock accurately reflects upside at present levels, and is vulnerable to the downside in the event of revenue shortfalls or pipeline disappointments," said Morgan Stanley Dean Witter in a recent note. The broker rates Genentech neutral because of valuation concerns and has done recent corporate finance work for it.