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Merrill Tempers Genentech Targets

The firm expects the drugmaker will see lower sales in the short term.



shares skidded somewhat Friday after an analyst reined in sales expectations for metastatic breast cancer therapy Herceptin, non-Hodgkin's lymphoma treatment Rituxan and macular-degeneration treatment Lucentis.

Merrill Lynch analyst Eric Ende lowered his price target to $99 from $104, predicting weaker short-term sales. However, he remains positive on long-term fundamentals. The report, issued Friday, anticipates stagnant stock price ahead of a December panel and the potential February approval and sales of Avastin in breast cancer. Those, and the 2008 Avastin data in adjuvant colorectal cancer, could re-energize the stock thereafter.

Specifically, Ende lowered estimated Herceptin sales to $1.26 billion from $1.28 billion in 2007 and to $2.28 billion from $2.3 billion in 2008. He pulled in estimated Rituxan sales to $2.28 billion from $2.30 billion in 2007 and to $2.59 billion from $2.64 billion in 2008. Ende also adjusted estimated Lucentis sales from $872 million down to $828 million in 2007 and from $1.09 billion to $869 million in 2008.

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Genentech said in August that the Food and Drug Administration requested an Oncologic Drugs Advisory Committee

panel regarding Avastin for breast cancer. Merrill Lynch still anticipates a February approval for the indication and projects sales of $613 million in 2008, $1.2 billion in 2009 and $1.3 billion in 2010.

The analyst also expects positive data in adjuvant colorectal cancer by the end of 2008 -- though not positive enough for the study to halt early -- leading to sales of $42 million in 2009 and $378 million in 2010. The new price target of $99 is based on a 60% chance of positive data in the adjuvant indication.

Genentech will announce its third-quarter earnings after the close on Oct. 15. With second-quarter earnings, the company said it expected non-GAAP earnings in the range of $2.85 to $2.95 a share for the full year 2007, a 28% to 32% increase, in comparison to 2006.

Analysts surveyed by Thomson Financial are expecting 72 cents a share in the third and fourth quarters each, and $2.95 a share for the year.

Genentech was down $1.21, or 1.5%, to $77.86 in recent trading Friday.