Genentech Inc. released year-end and quarterly earnings that beat consensus estimates, simultaneously disclosing its application for an expanded indication of one of its growth hormone products.
The South San Francisco-based company reported a 30 percent increase in non-GAAP (generally accepted accounting principles) earnings per share, posting a gain of $1.20 for 2003. Its quarterly earnings hit 27 cents per share, 2 cents higher than consensus estimates and 3 cents ahead of the year-earlier fourth quarter. Full-year GAAP EPS were $1.06 after the cumulative effect of an accounting change, compared to 12 cents per share for 2002. For the quarter, GAAP EPS increased 33 percent to 24 cents.
"We had strong top-line and bottom-line growth," Mark Krajnak, a Genentech spokesman, told BioWorld Today. "A lot of what we have done in the past is really coming to fruition now. It's really about bringing good science to the market."
For the full year, Genentech recorded a 28 percent increase in non-GAAP revenues to $3.3 billion, driven by improved product sales. Net GAAP income for 2003 was $562.5 million.
Sales of marketed products in 2003 increased 21 percent to about $2.6 billion, up from about $2.2 billion in 2002. The company's oncology offerings led the charge, accounting for about three-quarters of the total sales figure, as was the case a year earlier.
Among them, Rituxan (rituximab) sales jumped 28 percent to about $1.5 billion, while Herceptin (trastuzumab) sales increased 10 percent to about $425 million. A forthcoming regulatory decision on Avastin (bevacizumab) could further bolster Genentech's cancer drug franchise. The company said a sales force is fully trained and ready to launch the trial within three days of approval, which could come in the first week of February based on priority-review status.
"We believe the possibility of stronger-than-expected sales of cancer drug Avastin will lead to upward earnings revisions throughout 2004, driving further [Genentech] share appreciation," Michael King, an analyst with Banc of America Securities in New York, wrote in a research note. "In our opinion, with the recent approval and launches of Xolair and Raptiva, as well as the imminent approval of Avastin, [Genentech] remains the best new product story in biotech."
Xolair (omalizumab) generated sales of $25.3 million and Raptiva (efalizumab) had $1.4 million in sales. The former was launched in July, the latter in November. Xolair is partnered with Fremont, Calif.-based Protein Design Labs Inc., while Raptiva is partnered with Berkeley, Calif.-based XOMA Ltd.
Total operating expenses grew to $722 million in 2003, up from $623.5 million a year earlier. Research and development expenses totaled $215.6 million of the 2003 total.
The company ended the year with about $2.9 billion in unrestricted cash and marketable securities. Going forward, it expects at least 20 percent year-over-year growth of non-GAAP earnings per share.
"We believe compounded annual EPS growth over the next five years could exceed 25 percent, driven primarily by new product launches (Avastin) and growth of existing drugs," William Tanner, an analyst with Leerink Swann & Co. in Boston, wrote in a research note.
To that end, Genentech submitted late last month a supplemental new drug application to the FDA for Nutropin (somatropin [rDNA origin] for injection) to expand its label to include long-term treatment of idiopathic short stature (ISS), also called non-growth, hormone-deficient short stature. In various formulations, it currently is approved to treat differing growth hormone deficiencies in children and adults, as well as for Turner's syndrome and chronic renal insufficiency.
Genentech said the filing was based on data from a pivotal study of the product in 122 children. Eighty patients completed the study, data from which showed that treatment with growth hormone in those 80 children resulted in a significant increase in the mean growth rate over baseline, which was maintained for at least seven years. The submission also includes supportive data from a company-sponsored safety surveillance trial, the National Cooperative Growth Study, which evaluated pediatric use of growth hormone in about 8,000 ISS patients.
Shelley Schneiderman-Ducker, Genentech's manager of corporate relations, said about 1 million children in the U.S. suffer from ISS. She said the company has not publicly projected added revenue potential for the indication. She said a decision on approval should come within 10 months.
Genentech's entire growth hormone franchise includes four Nutropin products and Protropin (somatrem for injection), which was approved in 1985. For all of last year, Genentech recorded full growth hormone sales of $321.9 million, an 8 percent increase over 2002. Schneiderman-Ducker said the company does not break down the sales figures for each growth hormone product.
First approved in 1993, Nutropin is sold as a powdered form that requires a solution before injection, as an injectable formulation in solution called Nutropin AQ, as a long-lasting formulation called Nutropin Depot and as Nutropin AQ in a prefilled delivery pen.
On Thursday, Genentech's stock (NYSE:DNA) gained $1.31 to close at $91.98.