Genentech 2nd Qtr Earnings - Now A Buy?

Genentech Announces Second Quarter 2008 Results
South San Francisco, Calif -- July 14, 2008 -- Genentech, Inc. (NYSE: DNA) today announced financial results for the second quarter of 2008. Key results for the second quarter of 2008 include:

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  U.S. product sales of $2,351 million, a 9 percent increase from U.S. product sales of $2,149 million in the second quarter of 2007.
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  Non-GAAP operating revenue of $3,232 million, an 8 percent increase from operating revenue of $3,004 million in the second quarter of 2007; GAAP operating revenue of $3,236 million, an 8 percent increase from operating revenue of $3,004 million in the second quarter of 2007.
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  Non-GAAP net income of $871 million, a 4 percent increase from $834 million in the second quarter of 20071; GAAP net income of $782 million, a 5 percent increase from $747 million in the second quarter of 2007.
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  Non-GAAP earnings per share of $0.82, a 5 percent increase from $0.78 in the second quarter of 2007; GAAP earnings per share of $0.73, a 4 percent increase from $0.70 in the second quarter of 2007. The consensus was for a $0.86 EPS but a one time IRS settlemnet reduced EPS by $0.06 (Tim)

The company is currently forecasting that full-year 2008 non-GAAP earnings are likely to be in the range of $3.40 to $3.50 per share, revised from $3.35 to $3.45 per share.

Other Financial Items

The non-GAAP and GAAP income tax rates of 40 percent for the second quarter of 2008 include a $33 million settlement with the Internal Revenue Service related to prior years that was resolved in the second quarter of 2008.

Clinical Development

Genentech announced that enrollment was completed in seven Phase II and Phase III studies during the second quarter of 2008. These studies included two combination Phase III studies for Avastin®(bevacizumab) and Tarceva®(erlotinib) in first-line and second-line metastatic non-squamous non-small cell lung cancer (NSCLC) and a Phase II study for Trastuzumab-DM1 in HER2-positive metastatic breast cancer patients who have progressed on HER2-directed therapy.Genentech also announced that, with its collaborator Abbott, it initiated a Phase II trial of ABT-869, a VEGFR targeted kinase inhibitor, in combination with chemotherapy for patients with advanced NSCLC. In addition, Genentech initiated a Phase III combination study (BETH) of Avastin and Herceptin®(Trastuzumab) for patients with adjuvant HER2-positive breast cancer.