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Stocks G / Genentech, Inc.


Subject:  Re: Need Advice on DNA Date:  4/14/2001  11:44 PM
Author:  jrbill94 Number:  418 of 768

1.-Roche has a big controlling hand in this company, owning more than 50% of DNA. This may affect the price if they decide to dump the shares all at once and it may also affect the cash position of DNA as they are required to maintain Roche % of ownership by repurchasing stock in the face on any dilution....Scary thing.

I don't think that it would be in Roche's interest to do anything that would harm DNA as they currently have a mutually beneficially relationship (see the terms of the licensing arrangements.)

2.-It also troubles me the fact that the revenue dirvers for the company Herceptin, Rituxan, Activase, and Gorwth Hormone most of them are under attack by the competition:

Rituxan=========> Corixa(Bexar), IDEC(Zevalin) have recent BLA for competing drugs in parenthesis)! Note this is the main revenue driver with almost $500M/year!

Growth Hormone ($200+M/year)====>they pint out 4 main competitor and some of them with new applications for their drugs! with a potential sudden decline on this area forecasted.


This part does not look good.

I don't think this is as bleak as you think. As far as Rituxan goes, it is demonstrating tremendous growth and is entrenched in the market. Great clinical data came out supporting use of Rituxan in combination with CHOP therapy and Q1 2001 sales jumped to $171 million; Rituxan could drive in $800 million in sales this year. IDEC stated in a webcast earlier this year that they will not cannibalize the royalties they receive from Rituxan w/ Zevalin. Instead, they will position Zevalin as a combination or supplemental therapy to Rituxan. Corixa is having issues w/ the FDA regarding Bexxar and this will be the third product to enter the market, not an enviable position from which to launch a drug. There are concerns about side effects due to the radioisotope on the antibody, not a good sign for Bexxar.

Herceptin could see slowing sales growth but Q1 2001 picked up over Q4 2000 so we'll see how this plays out during the remainder of 2001.

Activase approval for use in catheter clearance is expected this year. It will be the only pharmacological agent for use in catheters occluded by a blood clot, which is a market of 700,000 patients in the U.S. each year.

Growth hormone sales have been flat for a while, though they are important. Sure it wouldn't be great to see this decrease, but its by no means a catastrophe.

As far as the pipeline and sharing revenues, in most cases Genentech is partnering on drugs developed by other companies. As such, they are taking a cut of someone else's pie and aren't giving away something they developed themselves. These agreements allow them to receive revenues off of someone else's product at very little risk. For pharma and big biotech, 30-70% of pipeline products are in-licensed in this manner and this is an important strategy to maintain pipeline productivity. If you take away the pipeline products which Genentech has in-licensed, their pipeline would be pretty poor.

In the near future, Genentech should launch Xolair, Tracleer, and have additional indications approved for Activase and others. Xolair could be a huge drug for the company, even bigger than Rituxan. As DNA is near a 2 year low, my opinion is to buy now before these approvals drive revenues higher.


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