Biotech Values

[DewDiligence]

Genentech Outlook Disappoints

[DNA’s quarterly CC’s don’t have the intrigue they once did because almost everyone assumes the company will soon be a wholly owned division of Roche.]

http://online.wsj.com/article/SB123204514524786481.html

›JANUARY 16, 2009, 1:02 A.M. ET
By THOMAS GRYTA

Genentech Inc. reported its fourth-quarter profit surged 47% on strong sales of its cancer drugs, but the company gave a disappointing earnings outlook as it faces uncertainties in key product developments and the difficult economy.

The South San Francisco, Calif., biotech giant said it expects 2009 earnings between $3.55 and $3.90 a share, below Wall Street expectations of $3.92 a share, noting there are a "large number of business uncertainties that make it a difficult year to forecast."

Those uncertainties include key data in the second quarter on its blockbuster cancer drug Avastin's use in early colorectal cancer; regulatory issues surrounding a rare brain infection possibly linked to its Raptiva psoriasis treatment; and any fallout from the economic slowdown.

Genentech shares fell 61 cents to $84.47 in after-hours trading.

Eric Schmidt, an analyst with Cowen & Co., said the earnings guidance could be an issue for investors and expressed surprise at the company's uncharacteristically broad range.

Genentech's earnings continue to be overshadowed by questions of whether majority shareholder Roche Holding AG will increase its already rejected takeover offer of $89 a share.

This week, Roche Chief Financial Officer Erich Hunziker said plans to acquire the 44% of Genentech the Swiss company doesn't already own are on track. In a conference call Thursday, Genentech declined to answer questions related to the Roche bid.

For the quarter ended Dec. 31, Genentech reported net income of $931 million, or 87 cents a share, up from $632 million, or 59 cents a share, a year earlier. Excluding items, earnings were 95 cents a share, just below a Thomson Reuters average analyst estimate of 96 cents.

Revenue rose 25% to $3.71 billion, above analysts' projection of $3.66 billion.

U.S. sales of Avastin rose 21% to $731 million in the quarter.‹