Genentech has started the reporting season by posting a 41% jump in second-quarter net income to $747 million and revenues of just over $3 billion (+37%) on the back of strong growth from its cancer agent Avastin.
US product sales climbed 25% to $2.15 billion in the quarter, with
Avastin (bevacizumab) shooting up 33% to $564 million, helped by the Food and Drug Administration's approval at the end of last year to expand use of the treatment to patients with non-small cell lung cancer. The results were particularly impressive given that fears had been voiced over a study which showed that both the standard dose and a lower dose of the drug, in combination with chemotherapy, improved progression-free survival in patients with NSCLC.
This had led analysts to believe that the success of the low dose arm of the study will see doctors using the lower, and therefore less expensive, dose in the majority of lung cancer patients but any impact on sales would appear to have been offset by increased use of Avastin overall.
As for Genentech's other key products, US sales of the breast cancer drug Herceptin (trastuzumab) edged up just 3% to $329 million, while Tarceva (erlotinib) for lung and pancreatic cancers was down 1% to $102 million. The arthritis and non-Hodgkin's lymphoma drug Rituxan (rituximab) was the firm’s top earner again, up 11% to $582 million, while Xolair (omalizumab) for severe asthma increased 14% to $120 million. Lucentis (ranibuzumab) for wet age-related macular degeneration brought in $209 million, down from $211 million in the first quarter.
The results beat analysts’ forecasts and they were impressed considering that Genentech’s R&D expenses increased 55% in the quarter to $603 million. Montgomery & Co analyst Shiv Kapoor described the results as "phenomenal", saying that "they had revenue of $3.3 billion in 2003 and they just broke $3 billion in one quarter". He added that “Avastin is something that lot of people were somewhat concerned about, so I'm relieved that the growth is not slowing down".
The results prompted Genentech to up its earnings per share forecast for 2007 to $2.85-$2.95 from $2.79-$2.90.
Growth hormone deal signed with Tercica
The results came just after Tercica announced an agreement with the US biotechnology major to develop two products containing Genentech's recombinant human growth hormone Nutropin AQ (somatropin) and Tercica's recombinant insulin-like growth factor-1 Increlex (mecasermin).
Under the terms of the deal, Tercica could receive up to $53 million in equity and opt-in payments, R&D cost reimbursement and milestones. In connection with the transaction, Genentech will purchase almost 709,000 shares of its partner’s common stock for $4 million.