#2 Genentech

1 DNA Way, South San Francisco, CA 94080
Tel: (650) 225-1000 Fax: (650) 225-6000
www.gene.com

Headcount	11,000
Year Established	1976
Biopharma Revenues	$9,443	+24%
Royalty Revenues	$1,984	+26%
Total Revenues	$11,724	+47%
Net Income	$2,769	+31%
R&D Budget	$2,446	+38%

 

Top Selling Drugs
Drug	Indication	Sales	(+/-%)
Avastin	colorectal cancer	$2,296	+32%
Rituxan	lymphoma, rheumatoid arthritis	$2,285	+10%
Herceptin	breast cancer	$1,287	+4%
Lucentis	wet AMD	$815	+114%
Xolair	asthma	$472	+11%
Tarceva	lung cancer	$417	+4%
Nutropin/Protropin	HGH deficiency	$371	-2%

Account for 84% of total pharma sales, down from 87% in 2006.

PROFILE

With Amgen in the doldrums, is Genentech in position to close the gap? Not exactly. The perennial #2 on our list posted great numbers for 2007, but growth slowed in 1Q08 as a key product ran into some unique difficulties.

In last year’s profile, I explained how Lucentis, Genentech’s treatment for wet age-related macular degeneration (AMD), was facing competition from its own precursor, Avastin. It seems doctors were willing to use repackaged Avastin as a replacement for Lucentis, saving about $1,960 per $2,000 dose of Lucentis. Genentech blew a gasket when this practice came up, and tried to restrict Avastin sales from compounding pharmacies, which were doing the actual repackaging.

The Lowe Down: Genentech Genentech used to be “one of the” biggest and most powerful biotech companies — but Avastin’s success and Amgen’s recent problems are beginning to remove all the qualifying phrases. The company keeps throwing around numbers in the dozens for the drugs that they’re advancing to the clinic in the next few years, which makes you wonder where they’re going to find all the clinicians (and all the patients). But gather ye rosebuds while ye may: this is the time to do it, when the money is rolling in, and hope that the hit rate will be high enough to keep the party going. A strong development pipeline can only help them out when that biogeneric revolution does get around to occurring. Biotech companies will then have to live off their wits, like their small-molecule brethren, with patent expirations ticking away in the background the whole time. From the look of it, Genentech is doing a better job than some of preparing for that particular asteroid. —Derek Lowe

In December 2007, Genentech reached a compromise with two ophthalmologists’ societies; they were allowed to order Avastin themselves and  have it delivered to compounding pharmacies, but the pharmacies themselves could no longer order it. Lucentis sales were $815 million in its first full year, but 1Q08 numbers dipped from $211 million to $198 million, hurt by Avastin substitutions. If that $800 million range turns out to be the peak for Lucentis, Genentech’s going to be one unhappy company.

Glassy Eyed

There’s a side story about Genentech’s restrictions on switching Avastin for Lucentis. In that version, the FDA inspected Genentech’s Avastin manufacturing site and questioned the safety of the drug’s preparation in ocular use. According to the company, it increased its visual inspection standards and determined that four lots were not suitable for use in the eye (but were just fine for anticancer indications). Because of this failure to meet standards for an off-label use it doesn’t approve of, Genentech said it destroyed 350,000 vials of Avastin with a market price in excess of $200 million.

According to Jacob Goldstein at the Wall Street Journal’s Health Blog, FDA called shenanigans on that claim, and declared that the lots would not have been suitable in any indications, including oncology, because of microscopic levels of glass found in the vials. The implication is that those lots of Avastin were flat-out defective, and the company used the controversy over the Lucentis switch to justify destroying the lots. Genentech disagreed with that assessment.

Yarr! Avastin, Matey!

If there’s an upside to this, it’s that the switch contributed a little to Avastin revenues, were up 32% in 2007. That growth rate made Avastin Genentech’s top performer last year, squeaking past Rituxan.

April turned out to be the cruelest month for Rituxan trials. In April 2008, Genentech and partner Biogen Idec announced that Rituxan had failed trials in both primary progressive multiple sclerosis (PPMS) and Lupus. On Ed Silverman’s excellent blog Pharmalot (www.pharmalot.com), he ran the following assessment of Avastin’s two April failures, courtesy of Jim Reddoch, a biotech analyst with Friedman, Billings & Ramsey:


The Avastin news hasn’t been all bad. In February, the FDA approved Avastin with Paclitaxel chemotherapy for first-line treatment of breast cancer. The approval was a bit surprising, since a December 2007 advisory committee meeting recommended against the new indication, 5-4. Analysts believe that the new indication will lead to another bump in Avastin sales, but they also note that the drug will face greater competition from ImClone’s Erbitux, which will seek expansions into first-line head and neck cancer approval in mid-2008, lung cancer in 4Q08 and colon cancer in 1Q09.

Genentech’s runner-up status in our Top 10 list looks secure for another year, but any hope of climbing to #1 on our list are pipe(line) dreams.

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For the full profile, including pipeline and patent information, download the PDF.