Genentech Earnings Win, But Drugs Miss (DNA)

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Genentech (NYSE: DNA) just announced its earnings were $0.69 EPS on $2.96 billion for the last quarter, and First Call had estimates pegged at $0.67 EPS on revenues of $2.97 Billion.  The company has also guided its fiscal 2008 Earnings Per Share in a range of $3.30 to $3.47 EPS versus $3.37 estimates from First Call.

We noted that Wall Street has focused on the individual drug disappointments here from drug to drug for too long, but today’s problem is one that is hard to overlook even if you are more of a big picture sort of investor.  It isn’t that it didn’t have any significant outperformance.  Genentech missed on Wall Street expectations on all four of its top four drugs.

The good news is that shares of Genentech are only down about 2% at $69.15 in after-hours trading, and $65.35 is the 52-week low from December.  We noted that options traders were pricing in only a move of up to about $2.50 in either direction, and the $1.49 drop is well within that range.

We’ll have to see if any downgrades come in based on all top four drugs showing disappointment win over the calls of "unbelievable valuation" and "incredible valuation" calls from Wall Street analysts.  Until then, this is just an unfinished biotech earnings and post-earnings story.   

Jon C. Ogg
January 14, 2008