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Genentech (NYSE: DNA) is a biotech company focused on cancer treatments. Auto-immune drug Rituxan and cancer drugs Avastin and Herceptin are the company's best-selling drugs and account for more than half of revenue. The company has been number one in U.S. oncology sales since 2006.[1]
On July 21, 2008, Swiss pharmaceutical company Roche offered to buy Genentech completely for $43.7 billion, or $89 per share. Roche already owns a 55 percent stake in the company.[2] Genentech had rejected the first offer as too low, but on January 30, 2009, Roche submitted another bid, this time hostile. Roche offered shareholders $86.50 a share, down from the previous $89. [3]
[edit] Company Overview
Annual revenue has grown by 77 percent in two years, from $6.6 billion in 2005 to $11.7 billion in 2007. [4] FDA approval of new uses of the major drugs Avastin, Rituxan, and Herceptin has boosted sales -- in 2007, sales of Avastin increased by 31%, Rituxan by 10%, and Herceptin by 4%, compared to the previous year.[5] Net income and profit margins have steadily grown as the company's core products transitioned from development to the market.
82% of total revenue comes from product sales and the rest from licensing agreements.
| Product name | 2007 Product sales ($M)[5] | Medical application |
|---|---|---|
| Avastin | 2,296 | Colorectal and lung cancer |
| Rituxan | 2,285 | Lymphomas |
| Herceptin | 1,287 | Breast cancer |
| Lucentis | 815 | Age-related macular degeneration |
| Xolair | 472 | Second-line asthma treatment for patients who do not respond well to inhaled corticosteroids |
| Total sales | 9,442 |
[edit] Trends and Forces
[edit] Drug Development Costs and Risks
Developing a new biotherapeutic product is a time-consuming, costly, and inherently risky endeavor. Hundreds of thousands of candidate compounds must be screened to identify a handful of potential drugs. Even fewer of these candidate drugs are found to be effective at treating a disease. The drug must then pass strict safety standards in several series of clinical trials. According to the Pharmaceutical Research and Manufacturers of America's 2006 Pharmaceutical Industry Profile, developing a new drug and bringing it to the market takes up to 10 to 15 years and on average costs $800 million.
As of the end of 2007, Genentech's product pipeline included 20 new molecules in development.[6]
[edit] Off-Label and Newly-Approved Drug Prescriptions
Even after a drug has been approved and on the market for some time, physicans and pharmaceutical companies continue to observe and understand its properties. Physicians often discover new uses for the drug, and even though the drug may not be approved by the FDA to treat a certain disease, doctors may write off-label prescriptions. Pharmaceutical companies may follow up with clinical studies and seek formal FDA approval. Genentech has benefited greatly from this effect. For example, Avastin, originally a colorectal cancer drug, is also used by lung, breast, and ocular cancer patients. A recent study suggests that Avastin may also be effective in treating a common and aggressive form of brain cancer.
[edit] Incidence of Cancer
As vaccines and cures have eliminated many fatal diseases of the past, cancer has emerged as the second-largest cause of death in developed countries and the third-largest cause of death worldwide. As two of Genentech's most successful products are the cancer drugs Avastin and Herceptin, the company will benefit from this growing trend.
[edit] Competition
Competitors to Genentech's major drugs include:
- Avastin -- Erbitux by ImClone/Bristol-Myers Squibb, Nexavar by Bayer/Onyx, Sutent by Pfizer, Gleevec by Novartis, and Vectibix by Amgen
- Rituxan -- Bexxar by GlaxoSmithKline
- Herceptin -- Tykerb (currently in clinical trials) by GlaxoSmithKline
- Xolair -- numerous inhaled corticosteroids on the market
[edit] References
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