Still upbeat for Genentech

Biotech giants Genentech has presented an overview of its strategy and financial goals for 2005 and beyond at its recent investment community meeting in New York.

In addition, the company provided investors with an overview of recent developments, including highlights from its research, product development, commercial and manufacturing efforts. Genentech's chairman and chief executive officer Dr Arthur Levinson commented: 'We have completed an outstanding year of growth in 2004 and are well positioned for growth in 2005 and beyond. Scientific research is our foundation and our future. We continue to build upon our strength in biology to find novel approaches to some of the most difficult medical challenges.'

Financial Goals and Targets

'We continue our focus on building both long- and short-term growth by investing in our research and development and product launches, while at the same time increasing our earnings,' said Louis Lavigne Jr, Genentech's executive vice president and chief financial officer (CFO). As previously announced, Lavigne retired after the meeting, and incoming CFO David Ebersman reaffirmed that for 2005, Genentech currently expects to deliver year-over-year non-GAAP EPS growth of greater than 25%. For the years 2006 through 2010, Genentech's target is for annual non-GAAP EPS growth to average 20% per year.

Commercial Strength

'We are proud to have successfully launched four products in a 16-month period, while also growing all of the products in our portfolio in 2004 compared with 2003,' said Ian T. Clark, senior vice president and general manager, BioOncology. 'In the next three years, Genentech could potentially introduce multiple new products or indications in significant growth markets.'

The company discussed its upcoming milestones for 2005. The commercial organisation has begun market preparation for potential product and line extension launches. Results from the Phase III Eastern Cooperative Oncology Group (ECOG) 4599 study of Avastin (bevacizumab) in first-line non-small cell lung cancer (NSCLC) are expected this year, and results from the Phase III ECOG 2100 study in first-line metastatic breast cancer are expected in 2005 or early 2006. Also within the BioOncology business, Genentech expects to file supplemental Biologics License Applications for Rituxan (Rituximab) in front-line aggressive non-Hodgkin's lymphoma (NHL) this year and for Rituxan in indolent NHL maintenance in the first half of 2006. Genentech's collaborator, OSI Pharmaceuticals, expects to file a supplemental New Drug Application for Tarceva (erlotinib) in pancreatic cancer in the second quarter of this year.

In the immunology business, Genentech expects results from its Phase III REFLEX study of Rituxan in rheumatoid arthritis in the first half of this year. The company expects results from its FOCUS and Phase III MARINA studies of Lucentis for wet age-related macular degeneration in the second quarter, and from its Phase III ANCHOR study in the fourth quarter of this year. The company also anticipates launching a liquid formulation of Xolair (Omalizumab) in 2007.

Product Portfolio

'Our understanding of the biology underlying various disease states is more sophisticated than ever before,' said Dr Susan Hellmann, MPH, president, product development. 'We are advancing new molecules and new approaches that leverage this expertise.'

The next steps for Avastin development include additional studies in a variety of indications, as well as an early-stage program in combination with other targeted therapies. In addition to Phase III studies in NSCLC and metastatic breast cancer, extensive studies are also ongoing with Avastin plus chemotherapy in renal cell, pancreatic and ovarian cancers.

Genentech continues to build on Tarceva's potential to be a leading oncology product. The company indicated that it would work to improve its understanding of the biology of epidermal growth factor receptor (EGFR) in various forms of human cancer. It also announced that it added Tarceva for NSCLC in the adjuvant setting to its development pipeline.

A broad anti-CD20 programme is an important component of Genentech's immunology strategy. The company will present Phase III data in the first half of this year for Rituxan in rheumatoid arthritis patients who previously failed or did not respond to anti-TNF alpha therapies. Rituxan is also being studied in multiple sclerosis, lupus, ulcerative colitis, and ANCA-associated vasculitis. The company is also moving forward with a Phase II study of a humanised anti-CD20 antibody in development for rheumatoid arthritis.

Research

'Basic science discoveries of the last few decades provide unparalleled opportunities in the life sciences. As one of the world's top biomedical research organisations, we are excited to explore the implications for drug discovery and development,' said Dr Richard Scheller, executive vice president, research. 'There is great potential to translate the important advances in basic science into breakthrough medicines for unmet medical needs.'

Genentech believes that diagnostics are one key to efficient and effective drug development. Diagnostics can help guide clinical development by accelerating and increasing the probability of success for drug candidates. More importantly, diagnostics have the potential to help ensure that only those patients who could benefit from a particular drug will receive that drug.

Company researchers are working on a broad range of cancer therapeutics. They are looking at ways to augment Avastin by using other biologics to target tumour vasculature. In addition, Genentech researchers are targeting tumour life and death pathways to activate apoptosis pathways and block cell survival and cell proliferation pathways. The company's systematic targeting of key cancer pathways includes extensive research into protein and antibody therapeutics for targets outside cells as well as the expansion of small molecule drug discovery efforts for targets inside cells.

Researchers are also making great strides in the understanding of immunological disorders. Unprecedented attention is now focused on the cellular components of human diseases, with research efforts built on broad B-cell and T-cell therapeutic platforms.

The company exceeded its research and development goals in 2004 by moving six molecules into developmental research and six molecules into clinical development. For 2005, Genentech has set a goal of moving six molecules into developmental research and has already moved two so far this year. The company has set a goal of moving three molecules into clinical development this year and has already moved one oncology molecule which will be discussed upon finalisation of development plans.

Product operations

Genentech continues to make progress in its four strategies to increase bulk production: increasing output from existing facilities, adding new facilities, working with contract manufacturers and collaborators, and improving process yields. It has begun using material from its facility in Porrino, Spain for clinical trials and is currently working towards licensure of commercial material from that facility. The company anticipates receiving that authorisation by 2006.

Progress on 5x5 Plan

Genentech has already exceeded its 5x5 goal of five new products or indications approved, with nine products or indications approved since 1999: Nutropin Depot [somatropin (rDNA origin) for injectable suspension] (1999), TNKase (Tenecteplase) (2000), Cathflo Activase (Alteplase) (2001), Nutropin AQ Pen (2002), Xolair (2003), Raptva (efalizumab) (2003), Avastin (2004), Tarceva (2004), and Cathflo Activase for catheter clearance in pediatric patients (2005).

The company expects to have substantive revenue progress but achieving the goal of $500m in new revenues from strategic alliances or acquisitions is uncertain since the company has changed its strategic focus to pursue earlier stage opportunities. Importantly, due to its focus on earlier-stage opportunities, Genentech has entered into more than 50 significant agreements and in-licensing agreements since 1999 which positions it well for future growth prospects.