Pharma Marketletter
US biotechnology giant Genentech has reported net income of $706.0 million for the first quarter of the year, up 68% from the $421.0 million it earned in the comparable period in 2006. The company’s earnings per share also increased 68% to $0.67, on a generally-accepted account principals basis.
The Californian firm said that its total revenues for the period were up 43% to $2.84 billion. However, despite the earnings growth, the market was unimpressed. Analysts at Lehman Brothers said that a higher than expected contribution from the firm’s collaborative activities, which increased 50.3% to $514.0 million including royalties and contract revenue, had partially offset relatively disappointing product sales.
Anti-cancer drugs dominate US sales:
In its home territory, Genentech saw turnover of $2.04 billion, with sales of its anticancer agent Avastin (bevacizumab), co-marketed with Swiss majority owner Roche and licensed for the treatment of cancers of the lung, breast and colon, yielding $533.0 million, up 34% for the period. Analysts said that the increase had been primarily driven by growth in the number of lung cancer prescriptions.
The firm’s second best selling product in the USA was the therapeutic antibody Rituxan (rituximab), which is indicated for rheumatoid arthritis and non-Hodgkin’s lymphoma. Revenues from the agent, some of the science behind which is currently the subject of a re-examination by the US Patent Office (Marketletter February 27), grew 12% to $535.0 million.
Other key performers included: the breast cancer treatment Herceptin (trastuzumab), which contributed $311.0 million, up 7%; the asthma drug Xolair (omalizumab), sales of which increased 17% to $111.0 million; and the lung cancer therapy Tarceva (erlotinib), also co-marketed with Roche, which grew 10% to $102.0 million.
In addition, Genentech‘s most recently launched product, the wet age-related macular degeneration treatment Lucentis (ranibizumab), contributed revenues of $211.0 million for the first three months of the year. The drug, which was approved by the US Food and Drug Administration last summer (Marketletter July 10, 2006), was out-licensed to Swiss major Novartis in 2003.
Genentech remained confident of its performance, reiterating its 2007 forecast, predicting that its EPS would be between 25% and 30% higher than those recorded in 2006. This optimism was not shared by the markets which saw the firm’s share price fall $0.09 to $82.60 in after-hours trading on the day of the news, April 11.
Criticism on use of public funds for R&D:
Genentech‘s soaring income drew criticism from some quarters, including the Santa Monica-based Foundation for Taxpayer and Consumer rights, which argued that the “outrageous profits came thanks to public funding of Genentech‘s research.”
John Simpson, stem cell project director for the foundation, said that drugs like Avastin were key to the firm’s profits, adding that “they don’t tell you that $44.6 million of taxpayer dollars went to develop the drug.” The FTCR said that, even the recent reduction in the price of the agent, from $100,000 to $55,000, does not adequately reflect the public’s investment in the drug. Genentech has not yet issued a response to the FTCR press-release.
