Genentech, Inc.1   Founded: 19761

1 DNA Way Mailstop 258A                                                                                                   IPO: 1980

South San Francisco, CA 94080                                                                              website: www.gene.com

Fax: (650) 225-4630

 

NASDAQ-GM: NYSE: DNA2

NAICS: 325412; Pharmaceutical preparation manufacturing 2

SIC: Pharmaceutical preparations 28342

Principal lines of business; Stem Cells treating in area of oncology and autoimmune pharmaceuticals2

Summary Financials3

Fiscal Period: Most recent quarter (Q4, 2008)

State Actual End Date: December 31st

State Reporting Unit: billions

Summary Income3               Summary Balance Sheet3

Total Revenues:     13.418                Total Current Assets: 10.1

Total Operating Expense: 6.75           Total Assets: 21.8

Net Income (after taxes): 3.43           Total Current Liabilities: 3.1

Basic/Diluted EPS: 3.25               Total Long Term Debt: 2.33

Quarterly Revenue Growth: 24%       Total Liabilities: 6.12

Total Equity: 15.7

Summary Cash Flow3               Total Liabilities & Shareholders’ Equity: 21.82

Cash from Operating Activities   3.96       Total Common Shares Outstanding: 21million

Cash from Investing Activities   (1.67)       Total Cash/Share: 3.25

Cash from Financing Activities   (0.269)       Total Debt/Equity: N/A

Net Change in Cash   2.02

P/E (intraday): 24.6

EPS: .289

Beta: N/A

Market Capitalization: $ 99.91billion

Most Recent Closing Price: $95 closing price for March 26 2009.

Principle Business5

Works in research and development of variety of pharmaceuticals and pharmaceutical components the company aims and interests are in treatment of life threatening illnesses and diseases. Its main focus has been greatly on cancer.

Oncology5

Rituxan (non-Hodgkin’s lymphoma)

Avastin (colorectal and lung cancers)

Herceptin (breast cancer)

Tarceva (lung cancer)

Xeloda (metastatic colorectal cancer)

Zelboraf (inoperable melanoma)

Age related diseases

Pulmozyme

Lucentis

Principle Markets5

• Perjeta (pertuzmab) (HER demerization inhibitor) is a drug that has been approved for use together with Herceptin (Trastuzumab) and docetaxel in management of metastatic breast cancer.13,776-22,096 in US (HER2 breast cancer. It can be used in combinations prior to surgery for patients without anti-HER2 therapy. The drug is as well approved for use in treatment of early stage cancer of the breast. The effectiveness of Perjeta in use prior to surgery has not been established. Its safety standards in combination use as well as use for more than 6 cycles of early stage breast cancer have not been established.5
• The drug was developed by Genentech pharmaceutical company and is currently marketed by Roche after Genentech takeover. The drug was approved making it a first in cancer treatment. 40 % of the patients treated using the combination therapy, showed shrinking of cancer tumors to undetectable levels. Perjeta is already in markets in USA with a projected 27,000-49,000 worth of therapy running for 9-18 weeks. This is with a sales projection of 8.5 billion dollars.5
• Principal markets for Genentech’s other major products, non small cell lung carcinoma, metastatic colorectal cancer, glioblastoma (Avastin), Asthma (xolair), 25 million 8% of the population in USA. Psoriasis, rheumatoid arthritis (RAPTIVA) 2.1 million in U.S. (1% population).5

 

Products Launched6

• Protropin (somatrem) – Growth hormone for children with deficiency
• Actimmune- interferon gama 1b
• Nutropin- Growth hormone
• Pulmozyme- Cystic fibrosis
• Rituxan- Non hodgkins lymphoma and arthritis
• Herceptin- Treatment of breast cancer
• Tarceva- Pancreatic cancer and non small cell lung cancer
• Activase- dissolving clots in myocardial infarction
• Lucentis- age related macular degeneration
• Actemra- Rheumatoid arthritis
• Kadcyla-Metastatic HER2 breast cancer

Genentech has other variety products that it has produced and continues to conduct research and trials for new products.

Earnings from specific product sales3

Tarceva: $457’000’000

Nutropin products: $ 358’000’000

Thrombolytics:$275’000’000; Sales per period ending 31st December 2008.

Competing Products6

The competing drugs are grouped according to their disease targets and the adverse effects       and effectiveness of the drugs as well as mechanism of action.

• Taxotere; Approved drug for treatment of lung cancer from Aventis
• Alimta: Chemotherapy drug for cancer from Eli Lilly & company
• Iressa: A chemotherapy drug from Astra Zeneca
• Tykerb: Breast cancer drug from Glaxo smith kline (GSK)

Competing companies1

• Aventis
• Eli Lilly & Company
• Astra Zeneca
• Glaxo Smith kline
• Pfizer

Earnings from Overall Product Sales3

• Genentech announced product sales revenues of $9.503 billion in the year ending 31st December 2008. The sales constituted an increase in revenue from the previous year of $963,000,000.
• The company reported royalties earning from its partners in2008 at $2.5 billion3

Principal Strategic Partners6

• OSI pharmaceuticals, New York Marketing of Tarceva an anti cancer drug.
• Xenon pharmaceuticals, Canada- To develop and produce analgesics to treat pain as well as coming up with new therapeutic approaches for pain management.7
• 23andme: Research on Parkinson’s diseases treatment
• Constellation pharmaceuticals: To develop cancer treatments6
• Newlink genetics: To partner on immune-oncology drug development and research

Most Recent Significant Company News4

February 6, 2015, The FDA provided the good news that Genentech’s Lucentis had been approved for treatment of diabetic retinopathy in patients with diabetic macular edema. This news marked another first in Genentech’s many firsts in development of drugs that assist in life threatening illnesses. Diabetic macular edema is a leading cause of blindness which can occur during diabetic retinopathy. Prior to the approval, there was no approved medication for the condition. This is good news to the patients and the health care fraternity as well as Genentech’s investors and share holders. The recent approval further strengthens Genentech’s market hold and expands its market share. This is an approval that comes at a time when the company is continuing research in better and more effective and therapeutic approaches and drugs in treatment of cancer. This success hence provides future hope in the company’s growth.

Analysts’ views2,8

Recent analysis has put a bright future in the research of a cancer treatment by the pharmaceutical company. Genentech had its ground breaking discovery by first developing a drug that targeted the cancer tumors while leaving the healthy cells to thrive. In their recent studies, Genentech has been working towards developing a drug which is able to stimulate the immune system to attack the tumors as it does to other infections such as viruses.

This is a great opportunity for Genentech to open a while new play ground and bring in a new way in the fight against cancer. The company has so far been able to attain good results with some patients showing shrinkage of their tumors. There however, have been a few setbacks with some showing delayed response to the said medications for yet to be established reasons.

Investment Opinion

My type of portfolio is based on strong companies that have had a strong reputation in certain various fields. Genentech presents a business opportunity that is tested and has managed to survive and remain profitable for many years. Genentech’s has made tremendous growth in the past years bringing in good profits and has working in progress that is very promising. Genentech is a company that is making what tomorrows’ patient will need today hence I would invest in its shares for the long term. The company’s financial statements are healthy and indicate expected growth.

The company as well expanded and has through partnerships diverged into other personalized medical manufacturing such as pain treatment among others. The future prospects in Genentech are good. If the research on new form for cancer treatment drug which has so far shown some degree of success goes through, the shares in the company will shoot to higher prices.

Business Model

Genentech is a pharmaceutical that is currently operating in a very competitive and demanding market. This is a market that is continuously changing as new inventions and approaches towards therapeutics are devised daily. Genentech business model from my point of view appears to be a model that is centered on research and innovation rather than capitalization. The company puts its resources in the development of new therapeutic approaches in treatment of life threatening diseases. Through research based innovation, the company ensures that it is a market leader by developing first brands of medicines with innovative mechanism of workings. Genentech model hence enables them to be a market leader in the development of cutting edge drugs, which has seen the company achieve many firsts in development of drugs.

The company as well employs a business model whereby it concentrates or has narrowed down its targeted production and research to a life threatening illnesses such as cancer while partnering with other companies to produce other medications such as analgesics. This allows the company to concentrate its research and development and specialize in one area and become a market leader in it.

Sources used

1. “Genentech.” Genentech. Web. 9 May 2015.http://www.gene.com/

2. “Xconomy | Business, Life Sciences, and Technology News.” Xconomy RSS. Web. 9 May 2015< http://www.xconomy.com/
3. Annual Report. Web. 9 May 2015 http://www.gene.com/download/pdf/2008_annual-report.pdf
4. “Genentech: Press Releases | Genentech Announces Long-Term Strategy and Financial Goals.” Web. 9 May 2015. http://www.gene.com/media/press-releases/
5. “Genentech: Product Information.” Web. 9 May 2015< http://www.gene.com/media/product-information
6. “Constellation Pharmaceuticals and Genentech Enter Broad Epigenetics Drug Discovery Collaboration.” Marketing Weekly News 4 Feb. 2012. Print.
7. “Genentech, Xenova In Potential $63M Deal For OX40 Program.” BIOWORLD Today 4 Nov. 2009. Print.

8.   Napodano, CFA. “Avastin Vastly Improves Genentech – Analyst Blog.” Zacks Investment Research – Analyst Blog 4 June 2008. Web. 9 May 2015.