Genentech's earnings jump 24 percent

NEW YORK (CNNMoney.com) -- Genentech reported a surge in third-quarter earnings that barely beat Wall Street projections, while its revenue increase fell just short of estimates.

The giant biotech Genentech (Charts) reported a 24 percent jump in earnings to 73 cents a share in the third quarter, compared to 59 cents during the same period last year.

Genentech said third quarter earnings jumped 24 percent and operating revenue by 22 percent.

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Genentech also reported a 22 percent increase in operating revenue to $2.905 billion, from $2.384 billion during the year-ago quarter. The biotech's net income jumped 22 percent to $778 million, from $637 million in the third quarter of 2006.

Analysts had projected earnings per share of 72 cents, a 22 percent jump from the same period last year, and $2.930 billion in quarterly revenue, a 23 percent increase, according to consensus estimates from Thomson.

After-hours trading slipped more than 1 percent on the news.

But Jason Zhang, analyst for BMO Capital Markets, said, "A lot of people were actually happy with this, because [Genentech] didn't miss big time. For them to miss [revenue projections] by this little margin will probably be viewed as a positive."

Genentech's fastest-growing product, Avastin, which is used to treat lung and colorectal cancer, surpassed the drug Rituxan as the company's top-seller. Avastin sales soared 37 percent to $597 million from the year-ago quarter, beating Zhang's estimate of $570 million. Sales for Rituxan, a treatment for non-Hodgkin's lymphoma and rheumatoid arthritis, increased 12 percent to $572 million.

Sales for the breast cancer drug Herceptin grew 6 percent to $320 million. Sales for Lucentis, a drug to curb age-related vision loss, surged 29 percent to $198 million.

Shiv Kapoor, analyst for Ferris, Baker Watts, said he expects Avastin to remain a fast-growing flagship product over the next five years, with double-digit sales growth. Kapoor said that panelists for the Food and Drug Administration will scrutinize Avastin's potential as a breast cancer drug at a panel in December.

Genentech's drug face competition from relatively new products that are still expanding. Avastin competes with the colorectal cancer drug Erbitux, considered an up-coming blockbuster from Bristol-Myers Squibb (Charts, Fortune 500) and ImClone (Charts). Herceptin competes with breast cancer drug Tykerb, which GlaxoSmithKline (Charts) launched early in 2007. Lucentis competes with the relatively new Macugen from Pfizer (Charts, Fortune 500) and Osi Pharmaceuticals.

Genentech, based in South San Francisco, Calif., has the biggest market cap of any biotech company. Amgen (Charts, Fortune 500), based in Thousand Oaks, Calif., is the world's biggest biotech in terms of annual sales, and is expected to report earnings on Oct. 24.

The biotech Genzyme (Charts) will also report earnings on Oct. 24, Gilead (Charts) is reporting on Oct. 18 and Cephalon (Charts) is reporting on Nov. 8.