Genentech Meeting: Conservative Guidance Under Casual Dress

I am at the Genentech analyst meeting at the Mandarin Oriental Hotel next to the new Time Warner Center in Columbus Circle in Manhattan. The room is packed with an estimated 300-plus analysts, investors, reporters and Genentech execs.

Unlike most of the big pharma analyst meetings where they corral reporters in a separate room, Genentech (DNA) lets the media sit in the back of the actual meeting room. And there's no small army of PR people either, just two (2!) on site.

All of the senior level folks on the dais are dressed in Genentech-casual. No jackets, no ties, open collar shirts. It's a stark contrast to big pharma meetings where most execs are conservatively dressed in suits and ties. But most of the crowd here is still in Wall Street "de rigueur" dark suits, prompting CEO Art Levinson to observe in his opening remarks, "Clearly the casual dresscode hasn't penetrated fully."

The execs may not dress conservatively, but they do give what many analysts say is conservative financial guidance.

The company hasn't made big news. It narrowed the range of this year's earnings guidance which was pretty much expected in the wake of the recent FDA conditional approval of Avastin for breast cancer. And it reaffirmed its forecast for at least a 25 percent compounded annual earnings growth rate through 2010 which many analysts think is very beatable at this late date.

Most of the presentation is a deep dive into the drug development pipeline. Genentech says it has six cancer drugs in mid-stage tests, will start a late-stage test of Avastin for previously untreated brain cancer and it plans to file for FDA approval of Avastin for brain cancer that's come back.

Two-and-a-half hours into the meeting Genentech's Exec VP of Commercial Operations, Ian Clark, began his remarks by saying the company had noticed in years past that the audience would start to nod off about now. So, he said they dropped the thermostat in the room this year to try to keep us awake.They're keeping the room so cold though, that after the late-morning break the execs on the dais all threw on jackets or sweaters. "So far, it appears to be working," Clark said.

As for Genentech's biotech rival Amgen (AMGN), there's a slew of analyst commentary out today in the wake of yesterday's mixed FDA panel outcome. Opinions vary about the potential impact of the recommendations on Amgen's revenue and profits. And coincidentally, a new SEC filing appeared on the web early Friday morning regarding some interesting changes in executive pay due to the anemia drug "challenges." If you can get past all of the compensation program abbreviations, I think it's an interesting read.

Comments

[beta delta]

mike, i have been an ardent follower on genentech for many years, love the company and their stock. but you are missing the next "big thing" in the genentech pipeline.

the next generation herceptin is on the horizon in the name of
trastuzumab-dm1. its herceptin + dm1. a maytansine derivative once thought to be too toxic for chemotherapy. but genentech, with the help of Immunogen,(IMGN) tamed the toxicity, tweaked the linker formulation, and now tras-dm1 is poised to eventually take over where herceptin left off, not just holding the cancer at bay, but once and for all, finally curing patients.

Everyone knows Herceptin is a great drug, abeit one with limitations. Most patients eventually fail herceptin. Response rates for Herceptin are but 20-25% in a naive patient population. With
TRASTUZUMAB-DM1 response rates are approximately 80% according to the first phase 1 trial dosed every 3 weeks. Subsequent phase 2 data dosed at 3.6mg/kg is not yet available, but anecdotal evidense from this heavily treated patient group is still showing a response rate 3x herceptin alone rate. In oncology we measure improvement in weeks, and months. With trastuzumab-dm1 we are seeing improvement in multiples of the original herceptin trials.

Sometime soon the mainstream media, yourself included, will take note of trastuzumab-dm1, and the patients whose life it's saving.