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Analyst Cuts Stock Rating on Genentech

June 10, 2004|Denise Gellene | Times Staff Writer

Capping a week of losses, shares of Genentech Inc. plunged again Wednesday after an analyst downgraded the stock because of concerns about sales of a key drug.

The company's stock fell $4.24, or 7.5%, to $52.30 on the New York Stock Exchange, after Sanford C. Bernstein analyst Geoffrey C. Porges lowered his rating on the shares to "market perform" from "out perform."

Porges cited slower-than-expected sales of colon cancer drug Avastin, the product widely seen as Genentech's crown jewel and the company's most important growth driver. Many on Wall Street believe it will become a $2-billion-a-year drug.

A Genentech spokeswoman said the company had no comment on the downgrade but added that the South San Francisco-based biotech was pleased with Avastin sales thus far.

Genentech's shares fell on Monday and Tuesday as investors responded unenthusiastically to research presented about its lung cancer drug Tarceva at a big medical meeting in New Orleans. The company said Tarceva added two months to the lives of patients who used it as a second treatment -- the same result seen in competing chemotherapy drugs.

The company's shares began slumping a week ago, losing 14.33% in value since June 2.

Although Porges predicted Avastin would be successful, he said the drug hadn't been tested with a popular chemotherapy regimen for colon cancer, and that was hurting sales.

Avastin went on sale in February amid high expectations. It is the first drug to slow the spread of tumors by pruning the blood vessels that feed them. In clinical trials it added five months to the lives of seriously ill colon cancer patients.

However, the drug doesn't work well on its own and must be taken with chemotherapy. Genentech tested Avastin with the chemotherapy drug irinotecan, but some doctors now prefer oxiliplatin, a newer chemotherapy drug that hasn't been fully studied with Avastin. Porges cut his Avastin sales estimate for 2004 to $455 million from $610 million and reduced his 2005 forecast to $946 million from $1.26 billion.

He said he also saw slowing sales of the company's mainstay drugs Rituxan for lymphoma and Herceptin for breast cancer and shaved 2004 estimates for those drugs slightly. He said sales of the two drugs would total $1.9 billion this year, $45 million less than he had expected.

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