Genentech Inc. hit another earnings home run, reaching the $1 billion quarterly sales mark for the three-month period ended Sept. 30.
"We reached a significant milestone, with total net product sales for the first time exceeding $1 billion in a quarter," Myrtle Potter, the company's president of commercial operations, said during a conference call.
Non-GAAP net income increased 80 percent to $259.6 million from a year earlier, and non-GAAP earnings per share increased 71 percent to 24 cents. That latter figure beat consensus estimates by three cents. GAAP net income increased 52 percent to $230.9 million from a year earlier, and GAAP earnings per share increased by 50 percent to 21 cents.
The South San Francisco-based company's total product sales represented a 54 percent increase over the $654.9 million in last year's third-quarter sales. Operating revenues increased by 47 percent from a year ago to $1.2 billion.
Sales from the company's BioOncology franchise accounted for about three-quarters of total product revenues, consistent with past percentages. Sales of Avastin (bevacizumab), Genentech's colorectal cancer product, reached $183 million. The company said that total is up 38 percent on a quarter-to-quarter basis, and it expects the figure to continue to climb as the product's market penetration increases. Potter noted that use of the drug for first-line metastatic colorectal cancer, its approved indication, increased to more than 40 percent in the quarter.
Avastin recently was the subject of a "Dear Doctor" letter related to a possible link to increased blood clot risks. But Potter said the letter "has had a limited impact in recent weeks, and we don't expect a long-term impact on Avastin prescribing." (See BioWorld Today, Aug. 17, 2004.)
Rituxan (rituximab) sales increased by 18 percent to $437.7 million, and already have topped $1 billion for the year. Genentech said the non-Hodgkin's lymphoma product's price was increased in the U.S. this quarter; it is marketed with Biogen Idec Inc., of Cambridge, Mass. Earlier this week, Genentech said it received a subpoena related to a federal investigation regarding its promotion of Rituxan. (See BioWorld Today, Oct. 7, 2004.)
Sales of Herceptin (trastuzumab) for breast cancer increased 17 percent to $126 million. All three cancer products - Avastin, Rituxan and Herceptin - also are used in a variety of off-label indications.
Beyond oncology, Xolair (omalizumab) for asthma generated $53.9 million in sales, while sales of the injectable psoriasis drug Raptiva (efalizumab) totaled $18 million. The prices of both products were increased during the quarter. Sales of legacy products, including growth hormone, cardiovascular products and Pulmozyme (dornase alfa, recombinant) Inhalation Solution, increased 12 percent to $186.9 million.
Royalties grew to $153.9 million, compared to $116.5 million a year ago, an increase the company attributed primarily to increased sales by licensees. Contract revenues decreased slightly to $43.2 million, compared to $45.6 million.
Costs and expenses increased during the quarter. Research and development expenses were $234.1 million compared to $168.7 million a year earlier, though the company noted that such costs as a percentage of operating revenues were 19 percent, compared to 21 percent. Marketing, general and administrative expenses increased to $264.6 million compared to $209.8 million, due to the increase in launch and pre-launch expenses. Collaboration profit-sharing expenses increased to $151.9 million compared to $119.7 million, attributable to both Rituxan and Xolair sales growth.
Genentech conceded that expenses could increase next quarter, due in part to increased launch preparations for another cancer drug, Tarceva (erlotinib). The FDA recently accepted a new drug application for the product's use in treating lung cancer, and its Prescription Drug User Fee Act date is set for Jan. 30. It is partnered with OSI Pharmaceuticals Inc., of Melville, N.Y., and F. Hoffmann-La Roche Ltd., of Basel, Switzerland.
The company increased its full-year non-GAAP earnings per-share guidance to range between 80 cents and 83 cents, compared to a prior range of 75 cents to 80 cents.
Genentech ended the quarter with just less than 1.1 billion shares outstanding, as well as just less than $1.8 billion in cash, cash equivalents and short-term investments.
Its stock (NYSE:DNA) closed Thursday at $47.55, down $2.70.