Analyst Conference Summary


conference date: April 10, 2008 @ 1:45 PM Pacific Time
for quarter ending: March 31, 2008 (1st quarter 2008)

Forward-looking statements

Overview: Solid but not impressive growth.

Basic data:

Revenues were $3.06 billion, up 3% sequentially from $2.97 bllion, and up 8% from $2.84 billion year-earlier.

Net income was $790 million, up 25% sequentially from $632 million, and up 12% from $706 million in the year-earlier quarter.

EPS was $0.74, up 25% sequentially from $0.59 and up 12% from $0.66 year-earlier.


For full year 2008 sales to collaborators are expected to increase by 10% to 15%. 2008 royalties projected to grow 15% to 25%. Contract revenues up 5%. Capital expenses $900 million for full year. $3.35 to $3.45 non-GAAP EPS for full year.

Conference Highlights:

Non-GAAP numbers: net income $895 million, up 13% y/y. EPS $0.84, up 14% y/y. The difference with GAAP numbers was due to employee based stock compensation of $0.07 per share and charges related to redemption, acquisitions, and special items of net $0.03 per share.

Total product sales were $2.38 billion. $2.20 billion was from U.S. sales, up 8% y/y. Product sales to collaborators were $174 million. Royalty revenues were $612 million, up 46% y/y, primarily due to Roche and Novartis sales. Contract revenues were $68 million.

Product sales:

 Sales (millions of $) Q4 2007 Q1 2008 % change q/q

Rituxan sales were up 13% y/y; Avastin up 13% y/y; Herceptin 9% y/y.

"Genentech expects to submit the supplemental Biologics License Application to the U.S. Food and Drug Administration (FDA) for accelerated approval of Avastin(R) (bevacizumab) for the treatment of relapsed glioblastoma multiforme in the second half of 2008."

"The Phase III study sponsored by its collaborator Novartis evaluating Xolair(R) (Omalizumab) for subcutaneous use in patients 6 to 11 years of age with moderate-to-severe, persistent, inadequately controlled allergic asthma met its primary endpoint, demonstrating a statistically significant reduction in exacerbations in Xolair-treated patients compared with placebo-treated patients with no new safety signals reported."

Avastin sales efforts for HER-2 negative breast cancer began in quarter and appear to be going well. Xolair sales flattening believed due to new warning and guidelines. Lucentis reimbursement concerns continue. Rituxan label expanded. Several Phase III studies were started with various therapies. There was far more coverage of drug development than makes sense to summarize here, since it consisted of brief summaries of a large number of trials in progress or planned.

Cost of sales was $367 million. R&D (non-GAAP) $575 million. MG&A $471 million.

Cash from operations was $1 billion. $200 million capital expenses. $800 million free cash flow. No share repurchases in quarter. $7.1 billion cash and equivalents at end of quarter.


Marketing timeline for Avastin for breast cancer? Won't have full complement of marketing material until late May or early June. Right now just have the label to show.

Avastin market not growing, what is going on? Potential for growth is in lung cancer and breast cancer. In lung cancer we are seeing gradual progression, not exponential take off. There is some confusion about which lung patients are appropriate. Negative ODAC decision hurt us with breast cancer, looks better now that we have the label. It also is a fragmented market.

Rituxan oncology vs. RA and off-label use? Difficult to track on quarterly basis. Limited immunology off-label use, just occasional lupus patients.

More to come ...

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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2008 William P. Meyers