Genentech Raises Profit Forecast (Update) - TheStreet

Genentech Raises Profit Forecast (Update)

Second-quarter earnigns rise but miss Wall Street targets by 4 cents a share. However, the company raises it full-year guidance.
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Updated from 4:40 p.m. EDT

Biotech bellwether

Genentech

(DNA)

posted its second-quarter results after the closing bell Monday, missing analyst consensus targets by 4 cents a share but beating on sales of its two lead products, Avastin and Rituxan. The company also raised its full-year profit outlook.

Genentech shares, which closed the regular session down $2.34, or 3%, at $75.41, rose 87 cents, or 1.2%, to $76.26 in recent post-market trading Monday.

On a GAAP basis, the company earned 73 cents a share on revenue of $3.2 billion, up from earnings of 70 cents a share on roughly $3 billion in the same quarter a year ago.

On an adjusted basis, factoring out certain items, Genentech earned 82 cents a share, vs. 78 cents a share in the year ago quarter. Analysts, on average, were looking for 86 cents a share on revenue of $3.23 billion, according to Thomson Reuters.

Sales by the Drug

Wall Street had heightened sales expectations for cancer drug Avastin, non Hodgkin's lymphoma (NHL) and rheumatoid arthritis (RA) drug Rituxan and breast cancer drug Herceptin based on IMS prescription data for recent months.

Genentech reported U.S. sales of $650 million for Avastin vs. the $645 million consensus. The Food and Drug Administration granted Genentech accelerated approval for Avastin for metastatic breast cancer earlier this year. Avastin's market share in breast cancer has increased to35%, vs. 25% at the time of approval, according to Genentech's Executive Vice President of Commercial Operations Ian Clark.

For Rituxan, the company reported $651 million in U.S. sales vs. $634 million consensus and $582 million in the prior year quarter. Clark cited Rituxan's growth in the maintenance and RA settings, noting that the drug's sales tend to grow in a "step-like fashion" -- with a few quarters of modest growth and then a larger step-up of sales.

More on Rituxan: Last week Genentech confirmed the report of a single, fatal case of PML, a type of severe brain infection, in a rheumatoid arthritis patient enrolled in the Rituxan study dubbed REFLEX. A direct link between PML and the drug has been neither established nor ruled out. Genentech added on Monday that the final dose of Rituxan was completed 18 months prior to the onset of PML and that the patient was sicker and atypical to most patients on the drug.

PML is listed on the drug's label as a possible side effect.

Elsewhere, Genentech reported $338 million in U.S. Herceptin sales vs. the $346 million consensus, and $216 million for macular degeneration drug Lucentis, vs. the $204 million consensus.

Forward Outlook

The company also upped its full-year 2008 non-GAAP earnings guidance to the range of $3.40 to $3.50 per share. Its previous full-year EPS outlook ranged from $3.35 to $3.45.

Analysts are predicting earnings of $3.43 a share on revenue of $13 billion for the year.

Looking ahead at the upcoming Avastin data in lung, breast and colon cancer: Genentech expects midstage data on Avastin as a first line treatment for squamous, non-small cell lung cancer from the BRIDGE study in the fourth quarter of this year, and data from the PASSPORT study on Avastin in non-squamous, non-small cell lung cancer in previously treated patients in late 2008 or early 2009.

In breast cancer, expect data from RIBBON II in 2009 and survival data from the AVADO trial (which already met its primary endpoint) in the first half of 2009.

Genentech expects the highly anticipated final data on Avastin in adjuvant colon cancer from the phase III NSABP trial in 2009 and from the phase III AVANT trial in 2010.

Refer to the

company-posted slide show

for more information on upcoming data on Avastin and other Genentech drugs.