Genentech Set For a Breakout?

Jan.12.07 | About: Roche Holding (RHHBY)

Genentech, Inc. (Private:DNA) is a biotechnology company that discovers, develops, manufactures and commercializes biotherapeutics for significant unmet medical needs. A number of the existing biotechnology products originated from or are based on Genentech science. Genentech manufactures and commercializes multiple biotechnology products, and receives royalties from companies that are licensed to market products based on its technology. On December 8, 2006, Lonza Group AG acquired Genentech's mid-scale mammalian biopharmaceutical production plant in Porrino, Spain.

FUNDAMENTALS: A company that has posted outstanding profit growth of around 60% in each of the past few years. Sales growth is equally impressive with growth in the 40 - 50% range. Growth is expected to moderate some over the next couple years but remain strong at 20 - 30%. Still very impressive for a company it's size. Margins and ROE (continuing to rise) are excellent.

TECHNICAL: With the stock going nowhere for the past year, the relative strength is poor. I expect that to change in the coming months as the stock starts a new uptrend. On both the daily and weekly charts, the stock has broken through key resistance levels while trading volume continues to rise. Institutions are beginning to put money to work in DNA once again. Next stop: $100

RATING: With a total score of 47/60 (26/30 for fundamentals, 21/30 for technical), DNA is just considered an average breakout stock. However, given the leader status in a growth industry and much of the low score due to the low RS rating which will improve quickly, it's a worthy mention!

DNA 1-yr chart:

DNA 1-yr chart