Genentech Gets the Cold Shoulder

The stock lost ground Wednesday after results appeared to come up short of Street expectations

Genentech's (DNA) stock price slipped on Oct. 11 after the San Francisco biotechnology outfit reported its third quarter results.

Genentech said late Oct. 10 that it had total product sales of $1.9 billion during the three months ended Sept. 30, 34% more than it had during the same period of 2005.

Its earnings per share (EPS) increased 69% to 59 cents per share during the quarter from 35 cents per share in the same period of 2005. Genentech now expects about 65-70% growth in earnings per share for the full year 2006, relative to 2005.

"We are encouraged by strong initial physician acceptance of Lucentis," said Arthur D. Levinson, Ph.D., Genentech's chairman and chief executive officer, in a press release. U.S. sales of the eye disease drug, which launched on June 30, amounted to $153 million. Sales in the second quarter of 2006 had been $10 million.

Investors were less encouraged. The stock shed 0.8% to $85.60 per share in early trading on the New York Stock Exchange.

RBC Capital analyst Jason Kantor noted that the company reported weaker than expected sales in some products, such as the drugs Herceptin, Rituxan and Avastin. "New risks including lower visibility on near term quarterly sales appear to be evolving," Kantor wrote in a research note.

Even so, Kantor maintained an outperform rating on the stock given the company's "generally consistent execution" and continued good odds for earnings improvement.