Genentech profit soars 75% on sales of eye, cancer drugs

Genentech Inc. said Wednesday that its fourth-quarter profit jumped 75% on surging sales of Lucentis, its new treatment for the leading cause of blindness in the elderly, and rising demand for its cancer drugs. Its shares rose 1.6% after hours.

Lucentis, which was almost immediately adopted as the first treatment option for age-related macular degeneration, has been vanquishing the competition since its June approval. It had sales of $217 million in its second full quarter on the market, easily topping Wall Street estimates of $150 million to $173 million and even beating the most aggressively raised estimates of more than $200 million.

Lucentis sales of $153 million in the previous quarter had crushed analyst expectations of $32 million to $40 million.

South San Francisco-based Genentech, which is majority owned by Swiss drug maker Roche Holding, said in October that it expected 2006 growth in earnings per share of 65% to 70%, excluding one-time items. It delivered a 74% increase for the year.

The company expects earnings per share to grow 25% to 30% in 2007, excluding items.

“It was a totally solid quarter,” RBC Capital Markets analyst Jason Kantor said. “The highlight here is the guidance on top of the fourth-quarter beat.”

But Geoffrey Porges, an analyst for Sanford Bernstein, expects the 2007 earnings forecast to be raised considerably.

Genentech Chief Financial Officer David Ebersman said the forecast would indeed be revisited.

“There are a lot of unknowns, a lot of new products and new indications. We will update the outlook as we move deeper into the year,” Ebersman said.

The world’s second-largest biotechnology company posted a fourth-quarter profit of $594 million, or 55 cents a share, compared with $339 million, or 31 cents, a year earlier.

Excluding one-time items, Genentech earned 61 cents a share. Analysts on average had expected 55 cents, excluding the 4-cent-per-share cost of accounting for stock compensation, according to Reuters Estimates.

Total revenue for the quarter of $2.71 billion exceeded analysts’ average estimate of $2.54 billion as sales of the company’s key drugs all grew by double digits over 2005 levels.

U.S. sales of Avastin, the colon cancer drug that in October was approved to also treat lung cancer, surged 36% to $490 million for the quarter, also edging Wall Street expectations of about $485 million.

Breast cancer treatment Herceptin saw U.S. sales jump 29% to $322 million for the quarter, and U.S. sales of Rituxan for rheumatoid arthritis and the skin condition psoriasis rose 16% to $550 million.

“This fully demonstrates the strength of this company’s business model,” Bernstein’s Porges said of Genentech’s quarterly results.

“You’ve got strong performance from Herceptin, pretty good performance from Avastin, a tremendous pickup in Lucentis and a nice lift in royalties,” he said. “Everything seems to be working, and they put up a huge revenue number.”

Ian Clark, head of Genentech’s commercial operations, said the most significant drivers of future growth were likely to be Avastin and Lucentis.

Genentech shares rose to $85.06 in extended electronic trading from their close of $83.73, down 95 cents.