By Mary Welch

Genentech Inc. said it posted its highest yearly earnings and product sales in the company's history as the company's net income increased 36 percent to $246.7 million for 1999, but that figure does not include special charges. When those are added in, the company recorded a net loss of $1.14 billion.

"There's nothing magical about that," said Eric Schmidt, vice president of SG Cowen Securities Corp., of New York. "Every biotech company is having record sales and earnings. Biogen could have said it in its report and Amgen could say it next week when they release their numbers. This is not one of their [Genentech's] strongest financial quarters. Their revenue line was light, about $17 million short of estimates."

With the special charges, Genentech recorded a net loss for 1999 of $1.14 billion, or $4.46 per share, compared to net income of $181.9 million, or 70 cents per share, in 1998. The company also recorded a fourth quarter net loss of $172.9 million, compared to net income of $37.1 million in the fourth quarter.

The earning numbers are exclusive of special charges, primarily redemption-related charges and legal settlements. The redemption-related charges are due to the redemption of Genentech's special common stock in June, resulting from F. Hoffmann-La Roche AG, of Basel, Switzerland, exercising its option and the subsequent reoffering of Genentech's shares. (See BioWorld Today, June 4, 1999, p. 1; and Oct. 22, 1999, p. 1.)

In addition, Genentech recorded a net special charge of $180 million related to the settlement of the patent infringement lawsuits brought by the University of California relating to its human growth hormone products. The company will pay the university $150 million and make a $50 million contribution toward the construction of a biological sciences research building on the school's campus. (See BioWorld Today, Nov. 22, 1999, p. 1.)

The South San Francisco-based company has cash of $742.7 million, down from $887.7 million for 1998. For the fourth quarter, the company reported an earnings per share loss of $4.46, compared to earnings of 72 cents per share for the previous year.

Research and development expenses decreased to $367.3 million, compared to $396.2 million in 1998.

Total revenues for the fourth quarter of 1999 were $358.4 million, up from $304.3 million over 1998's figures, while revenues for the year grew to $1.4 billion in 1999 vs. $1.1 billion in 1998.

"Generally, product sales were in line, but there's no real upside," Schmidt said. "The take home message, however, is that no one cares. None of this matters because people want to find a reason to own Genentech stock. They have the best pipeline in the industry and everyone wants to own a piece of it."

Product sales, led by Herceptin and Rituxan antibody sales, were up by 45 percent over 1998 product sales. For the fourth quarter of 1999, product sales were $268.7 million, up from $213.7 million from the same period in 1998. Total product sales for the year were $1.03 billion, up from $717.8 million in 1998.

For its first full year on the market, Herceptin (trastuzumab) anti-HER2 antibody for breast cancer recorded sales of $279.4 million in 1999, which meant that it surpassed Rituxan as having the highest first-year sales of any anticancer product in the U.S., the company said.

Rituxan (rituximab) antibody sales continued strong, growing from $162.6 million in 1998 to $279.4 million last year, due primarily to increased market penetration for the treatment of non-Hodgkin's lymphoma. Rituxan is partnered with Idec Pharmaceuticals Corp., of San Diego, and F. Hoffmann-LaRoche AG, of Basel, Switzerland.

Activase (alteplase, recombinant) sales increased to $236 million in 1999, up from $213 million in 1998, largely as a result of the drug's increased use in peripheral blood vessel occlusions. This increase was offset in a decline in the overall size of the acute myocardial infarction market due to mechanical reperfusion and continued competition.

Sales of Genentech's three growth hormone products, Protropin (somatrem for injection), Nutropin (somatropin (rDNA origin) for injection) and Nutropin AQ (somatropin (rDNA origin) for injection), increased to $221.2 million in 1999 from $214 million in 1998, primarily due to fluctuations in customer ordering patterns, the company said.

Sales of Pulmozyme increased to $111.4 million over 1998's figure of $93.8 million, largely due to increased market penetration in the early and mild patient populations for cystic fibrosis.

In the fourth quarter, the company received approval for Nutropin Depot, filed for FDA approval of TNKase to treat heart attack patients and received positive results from Phase III trials of anti-IgE. Nutropin Depot (somatropin (rDNA origin) for injectable suspension), the first long-acting dosage form of recombinant human growth hormone, received FDA approval for use in pediatric growth hormone deficiency. The drug was partnered with Alkermes Inc., of Cambridge, Mass. (See BioWorld Today, Dec. 27, 1999, p. 1.)

The company also had positive fourth quarter news on several Phase III trials under way.

Genentech and Xoma Ltd., of Berkeley, Calif., started a Phase III trial of their anti-CD11a (hu1134) product, a recombinant humanized monoclonal antibody for treating moderate to severe plaque psoriasis. Another Phase III trial is set for the first quarter of this year. (See BioWorld Today, Dec. 21, 1999, p. 1.)

The company also reported positive preliminary results from Phase III asthma efficacy trials for its anti-IgE (rhuMAb-E25) product. The product is partnered with Novartis Pharma AG, of Basel, Switzerland, and Tanox Inc., of Houston. Further information will be presented in March. (See BioWorld Today, Dec. 20, 1999, p .1.)

In December, the company also said that it will enter Phase III trials with its recombinant humanized monoclonal antibody to vascular endothelial growth factor (rhuMAb-VEGF) in combination with chemotherapy in metastatic colorectal cancer and metastatic non-small-cell lung cancer. (See BioWorld Today, Dec. 17, 1999, p. 1.)

Genentech's stock (NYSE:DNA) closed Thursday at $158, up 68.75 cents.