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Earnings Preview: Genentech to report Thursday

Genentech Inc. on Thursday reports earnings for its fourth quarter and full fiscal year. The following is a summary of key developments and analyst opinion related to the period.
/ Source: The Associated Press

Genentech Inc. on Thursday reports earnings for its fourth quarter and full fiscal year. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Roche's failed $47.3 billion buyout offer hung over Genentech throughout the fourth quarter, with Wall Street still anticipating a higher bid, despite the tough economy and tight credit markets. Roche recently said its bid for Genentech is on track, though no details have been disclosed.

Speculation over a new Roche bid overshadowed the company's operations during the quarter. Meanwhile, Wall Street viewed any positive product and research developments through the prism of their ability to drive a new Roche bid higher.

The blockbuster cancer drug Avastin remained the key product in focus, as measures seen as possible sales boosters were also viewed as way to elevate the value of Genentech.

In November, the company said Avastin improved survival time for breast cancer patients in a late-stage study. It is already provisionally approved for that use, and the prospect of full FDA approval is seen as another positive for future sales. The drug is already approved for lung and colon cancer.

Meanwhile, the company has asked the FDA to approve the drug as a secondary treatment for glioblastoma, the most common type of brain tumor in the U.S.

While Avastin is the lead revenue driver, Genentech's Rituxan, which treats non-Hodgkin's lymphoma and rheumatoid arthritis, along with breast cancer drug Herceptin will also play key roles in the company's sales growth. Biogen Idec Inc. is the company's partner on Rituxan.

Genentech projected confidence early in the quarter on dealing with the credit crisis, saying it had $8.6 billion in cash and investment.

BY THE NUMBERS: Analysts polled by Thomson Reuters expect Genentech to report fourth-quarter profit of 96 cents per share on revenue of $3.66 billion. For the full year, analysts expect profit of $3.43 per share on revenue of $13.37 billion.

Genentech expects full-year profit between $3.40 and $3.45 per share, excluding charges.

ANALYST TAKE: Deutsche Bank-North America analyst Mark Schoenebaum said industry sales data indicate that Avastin sales are in line with expectations and the company's profit will likely also meet Wall Street expectations. Meanwhile, shares will likely be little affected by the fourth-quarter results, given the anticipation of a Roche bid.

Lazard Capital Markets analyst Joel Sendek, meanwhile, does not expect any update from Genentech on a potential Roche deal during the fourth-quarter conference call. He expects product sales to meet expectations.

WHAT'S AHEAD: Aside from further FDA decisions on Avastin, Wall Street is awaiting more detail on a potential new Roche buyout bid.

STOCK PERFORMANCE: Shares of Genentech fell 6.5 percent during the quarter, closing at $82.91. Still, many analysts believe the stock is worth about $100 per share in a buyout.