Shares of Genentech Inc. jumped Thursday following fourth-quarter results showing a 75-percent surge in profit and management forecasts of continued double-digit growth in 2007.
The stock gained $3.31, or 4 percent, to reach $87.12 on the New York Stock Exchange in midday trading. Shares have traded between $75.58 and $90.75 over the last 52 weeks.
The boost in fourth-quarter profit, reported late Wednesday, came off double-digit growth in sales of Rituxan, Avastin and Herceptin. Profit for the year jumped 65 percent and the company said it plans on using 18 percent of its revenue in 2007 to fund research and development.
Genentech's earnings results beat Wall Street expectations by 1 cent. What surprised analysts was the sharp rise in sales of the age-related macular degeneration drug Lucentis, reaching $217 million during the quarter and beating estimates.
Merrill Lynch analyst Eric Ende raised his price target to $104 from $96 while reaffirming a "Buy" recommendation, citing the likelihood the company will gain more market share in the lung cancer treatment market with Avastin in 2007 and possible approval of the drug for breast cancer next year. Lucentis is quickly becoming the dominant drug in its field, he wrote, taking a 55-percent share in new patients.
Despite the performance, the drug does have market risks, he said.
"Because the number of treated patients has not grown since Lucentis' launch and the average number of doses per patient is likely to decline, significant additional growth may be a challenge in 2007."
Lazard Capital Markets analyst Joel Sendek, who maintains a $110 price target with a "Buy" recommendation, sees the drug moving the other way.
"We anticipate that a reduction in use related to the one-year anniversary of treatment in some patients currently on Lucentis will be met with increased use in newly diagnosed patients," he wrote in a note to investors.
RBC Capital Markets analyst Jason Kantor raised his price target to $95 from $91 and reaffirmed a "Outperform" rating, citing the strong sales growth from the company's three key drugs.
"The earnings outperformance is a testament to the strong operating leverage in the model which allows Genentech significant ability to invest in the business as well as drive earnings upside," he wrote in a note to investors.
He and other analysts are pointing toward several upcoming catalysts for the company, including data from a late-stage study on Avastin as a kidney cancer treatment and a first-line breast cancer treatment, as well as another study on Lucentis.
Lehman Brothers analyst Craig C. Parker said he remains "Neutral" on the stock, citing market risks with Avastin and a possible slowdown in sales of Lucentis. Other factors include competition with drugs including Amgen Inc.'s Vectibix and GlaxoSmithKline's Tykerb.
The stock gained $3.31, or 4 percent, to reach $87.12 on the New York Stock Exchange in midday trading. Shares have traded between $75.58 and $90.75 over the last 52 weeks.
The boost in fourth-quarter profit, reported late Wednesday, came off double-digit growth in sales of Rituxan, Avastin and Herceptin. Profit for the year jumped 65 percent and the company said it plans on using 18 percent of its revenue in 2007 to fund research and development.
Genentech's earnings results beat Wall Street expectations by 1 cent. What surprised analysts was the sharp rise in sales of the age-related macular degeneration drug Lucentis, reaching $217 million during the quarter and beating estimates.
Merrill Lynch analyst Eric Ende raised his price target to $104 from $96 while reaffirming a "Buy" recommendation, citing the likelihood the company will gain more market share in the lung cancer treatment market with Avastin in 2007 and possible approval of the drug for breast cancer next year. Lucentis is quickly becoming the dominant drug in its field, he wrote, taking a 55-percent share in new patients.
Despite the performance, the drug does have market risks, he said.
"Because the number of treated patients has not grown since Lucentis' launch and the average number of doses per patient is likely to decline, significant additional growth may be a challenge in 2007."
Lazard Capital Markets analyst Joel Sendek, who maintains a $110 price target with a "Buy" recommendation, sees the drug moving the other way.
"We anticipate that a reduction in use related to the one-year anniversary of treatment in some patients currently on Lucentis will be met with increased use in newly diagnosed patients," he wrote in a note to investors.
RBC Capital Markets analyst Jason Kantor raised his price target to $95 from $91 and reaffirmed a "Outperform" rating, citing the strong sales growth from the company's three key drugs.
"The earnings outperformance is a testament to the strong operating leverage in the model which allows Genentech significant ability to invest in the business as well as drive earnings upside," he wrote in a note to investors.
He and other analysts are pointing toward several upcoming catalysts for the company, including data from a late-stage study on Avastin as a kidney cancer treatment and a first-line breast cancer treatment, as well as another study on Lucentis.
Lehman Brothers analyst Craig C. Parker said he remains "Neutral" on the stock, citing market risks with Avastin and a possible slowdown in sales of Lucentis. Other factors include competition with drugs including Amgen Inc.'s Vectibix and GlaxoSmithKline's Tykerb.
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