Genentech's ( DNA) profit rose in the third quarter on increased sales of its lead drugs.

The company earned $731 million, or 68 cents a share, compared with $685 million, or 64 cents a share in the comparable 2007 period.

On an adjusted basis, Genentech posted a profit of $863 million, or 81 cents a share, compared with $778 million, or 73 cents a share, in the year-ago quarter.

Revenue rose to roughly $3.4 billion from $2.9 billion over 2007.

Analysts on average had expected an adjusted profit of 88 cents a share on revenue of $3.36 billion.

Shares of Genentech closed down $2.06, or 2.5%, at $79.12 in regular trading Tuesday; they were flat in recent post-market trading.

Genentech said a few charges -- an employee-retention plan, the GlyCart collaboration and expenses related to the impairment of certain assets in the company's investment portfolio -- affected GAAP and non-GAAP EPS by about 13 cents collectively. (Genentech entered a joint development and commercialization agreement for GlycArt's GA101 molecule, which will be developed for the potential treatment of hematological malignancies and other cancer-related B-cell disorders such as non-Hodgkin's lymphoma.)

"Overall, 3Q was solid, where key product performance looked strong and EPS ex-one time items was well ahead of expectations," wrote JP Morgan analyst Geoffrey Meacham, who has an overweight rating on the stock, in a note to investors.

Investors are expected to focus on a potential buyout by Roche. Genentech rejected a bid in July from the Swiss pharma company, which has yet to respond. Genentech's earnings release didn't include any new information on the matter and the company wouldn't discuss it on its earnings call. The next opportunity for new information will be on the Roche earnings call next week.

Genentech executives did say hey would continue business as usual, including its assessment of opportunities to acquire companies or products.

A bright spot in the recent quarter: Genentech's key product sales surpassed expectations.

The company reported revenue of $704 million from Avastin, vs. $597 million a year prior and well above the latest consensus target of $690. Avastin sales in the recent quarter benefited from a recognition of roughly $1 million in deferred revenue. Sales in the 2007 quarter benefitted from a recognition of $5 million in deferred revenue.

"We are encouraged that Avastin sales continue to see strong growth, where we think further growth can be expected over the next 12 months given the breast cancer approval in Feb 08 and potential label expansion into renal cell carcinoma and Glioblastoma multiforme (aggressive brain tumors)," Meacham wrote.

Genentech reported $655 million in Rituxan sales, also above the consensus of $649 million.

Herceptin and Lucentis generated $368 million and $225 million, respectively, vs. the consensus of $344 million and $214 million. Herceptin sales benefited from an increase in channel inventory levels of approximately $12 million in the recent quarter.

The company said it sees full-year 2008 adjusted earnings in the range of $3.40 to $3.45 a share, narrowed from $3.40 to $3.50 due to the cost of the employee-retention plan.

Analysts are looking for $3.45 a share on revenue of $13.14 billion for the year, according to Thomson Reuters.

Key interim data from a phase III trial on Avastin as an adjuvant therapy for colon cancer are expected in the fourth quarter. Depending on the strength of the results, the trial could be stopped early -- if it continues, final results are expected in mid-2009.

Data are also due out soon on Genentech's Ribbon1 study, which if successful will be submitted with other data to convert the company's accelerated FDA approval of Avastin for metastatic breast cancer to full approval.

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