Genentech: Good Medicine
A promising pipeline should mean continued success for the second-largest biotech firm, analysts say.
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
Be a smarter, better informed investor.

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
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
Claiming the Standard Deduction? Here Are Five Tax Breaks for Retirement in 2025
Tax Tips If you’re retired and filing taxes, these five tax credits and deductions could provide thousands in relief (if you qualify).
-
QUIZ: Test Your Retirement IQ
Quiz Are you smarter than…everyone else? Test your retirement smarts with this quiz.
-
If You'd Put $1,000 Into Bank of America Stock 20 Years Ago, Here's What You'd Have Today
Bank of America stock has been a massive buy-and-hold bust.
-
If You'd Put $1,000 Into Oracle Stock 20 Years Ago, Here's What You'd Have Today
ORCL Oracle stock has been an outstanding buy-and-hold bet for decades.
-
How to Invest for Rising Data Integrity Risk
Amid a broad assault on venerable institutions, President Trump has targeted agencies responsible for data critical to markets. How should investors respond?
-
If You'd Put $1,000 Into Sherwin-Williams Stock 20 Years Ago, Here's What You'd Have Today
Sherwin-Williams stock has clobbered the broader market by a wide margin for a long time.
-
If You'd Put $1,000 Into UnitedHealth Group Stock 20 Years Ago, Here's What You'd Have Today
UNH stock was a massive market beater for ages — until it wasn't.
-
What Tariffs Mean for Your Sector Exposure
New, higher and changing tariffs will ripple through the economy and into share prices for many quarters to come.
-
How to Invest for Fall Rate Cuts by the Fed
The probability the Fed cuts interest rates by 25 basis points in October is now greater than 90%.
-
Are Buffett and Berkshire About to Bail on Kraft Heinz Stock?
Warren Buffett and Berkshire Hathaway own a lot of Kraft Heinz stock, so what happens when they decide to sell KHC?