Biotech giant Genentech's growth story is impressive: Sales of its drugs soared 46% last year, to a whopping $5.5 billion. The company has a solid pipeline of new drugs, including a promising treatment for age-related macular degeneration. And it's testing additional uses for existing blockbusters, expanding their potential market. Analysts expect that the San Francisco-based firm's earnings will grow 30% annually over the next several years.
Genentech focuses on drugs that treat cancer and other serious illnesses, and it has been successful in getting some of its drugs approved for multiple uses. It now hopes that Avastin, which was originally approved in 2004 as a colorectal-cancer drug, will eventually be approved as a treatment for breast, lung and other types of cancer. And it is preparing to file an application with the Food and Drug Administration to expand the use of its breast cancer drug, Herceptin.
The company got two pieces of good news this week: The FDA said its lymphoma drug, Rituxan, could be used to treat certain cases of rheumatoid arthritis (Rituxan is Genentech's biggest seller). Regulators also granted priority review of its macular-degeneration drug, Lucentis, meaning the drug could win approval by the end of June.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The positive news on Rituxan and Lucentis impressed Standard Poor's analyst Frank DiLorenzo. On Wednesday he raised his Genentech earnings estimates for 2006 and 2007 to $1.83 per share and $2.40 per share, respectively. The stock trades at 47 times the $1.82 per share that analysts, on average, expect the company to earn in 2006, according to Thomson First Call. DiLorenzo thinks the stock, which has soared more than 90% since last March, to $85, is still attractive given the company's earnings potential.
But John Sonnier, an analyst at William Blair Co., thinks the stock (symbol DNA) is too rich. Although he likes Genentech's potential and sees it as "the best growth story in the biotechnology industry," he recommends waiting for a dip in the price before buying. He currently prefers Amgen (AMGN), Genzyme (GENZ) and MedImmune (MEDI). They, too, have strong pipelines, says Sonnier, and their stocks are cheaper. He rates Genentech "market perform."
--Lisa Dixon
-
Timeless Trips for Solo TravelersHow to find a getaway that suits your style.
-
A Top Vanguard ETF Pick Outperforms on International StrengthA weakening dollar and lower interest rates lifted international stocks, which was good news for one of our favorite exchange-traded funds.
-
Is There Such a Thing As a Safe Stock? 17 Safe-Enough IdeasNo stock is completely safe, but we can make educated guesses about which ones are likely to provide smooth sailing.
-
If You'd Put $1,000 Into Caterpillar Stock 20 Years Ago, Here's What You'd Have TodayCaterpillar stock has been a remarkably resilient market beater for a very long time.
-
I'm a 55-Year-Old Dad. Here’s How My 28-Year-Old Daughter Showed Me That AXP Is Still a Solid InvestmentAmerican Express stock is still a solid investment because management understands the value of its brand and is building a wide moat around it.
-
If You'd Put $1,000 Into AMD Stock 20 Years Ago, Here's What You'd Have TodayAdvanced Micro Devices stock is soaring thanks to AI, but as a buy-and-hold bet, it's been a market laggard.
-
If You'd Put $1,000 Into UPS Stock 20 Years Ago, Here's What You'd Have TodayUnited Parcel Service stock has been a massive long-term laggard.
-
How the Stock Market Performed in the First Year of Trump's Second TermSix months after President Donald Trump's inauguration, take a look at how the stock market has performed.
-
If You'd Put $1,000 Into Lowe's Stock 20 Years Ago, Here's What You'd Have TodayLowe's stock has delivered disappointing returns recently, but it's been a great holding for truly patient investors.
-
If You'd Put $1,000 Into 3M Stock 20 Years Ago, Here's What You'd Have TodayMMM stock has been a pit of despair for truly long-term shareholders.
-
If You'd Put $1,000 Into Coca-Cola Stock 20 Years Ago, Here's What You'd Have TodayEven with its reliable dividend growth and generous stock buybacks, Coca-Cola has underperformed the broad market in the long term.
