Company Overview

Genentech, founded in 1976, is the oldest of all the biotech companies, and now rivals many large pharmaceutical firms in size. Genentech was the first one to successfully scale up protein manufacturing from small research quantities to the amounts needed for clinical trials and marketing. Because of its strong focus on R&D, it has achieved top honors in this category—Genentech’s scientists typically rank in the upper echelons for total worldwide citations received in scientific journals. Its research focuses on oncology, cardiovascular disease, and autoimmune disorders.

The company is majority-owned by the Big Pharma giant Roche and indirectly by Novartis, which has a 33 percent stake in Roche.
Genentech’s dedication to R&D has resulted in a healthy product portfolio. In 2007, the company invested 21 percent of its operating income into this area, and as of 2008, it has about 40 products in the pipeline. In 2006, Genentech updated long-range plans to bring at least 20 new molecules into clinical development and at least 15 major new products or indications to market by 2010. The company’s first blockbuster drug was Rituxan, a non-Hodgkin’s lymphoma treatment developed with Idec Pharmaceuticals (now Biogen Idec). Other blockbusters, drugs that generate at least $1 billion in revenue, are Avastin and Herceptin. Avastin is a treatment for colorectal and non-small-cell lung cancers. Herceptin treats breast cancer.

The past two years have been busy for Genentech. In early 2008, it received accelerated approval for Avastin as part of treatment for advanced breast cancer.  In 2006, it received FDA approval for Lucentis, which treats macular degeneration and is another potential blockbuster, and two of its cancer therapies were approved for a broader range of treatments. The company also acquired Tanox for $1 billion. Tanox was Genentech partner in the development of the asthma drug Xolair.

To create new revenue streams faster, Genentech has been testing combinations of drugs that have not yet been approved for the public by the FDA. The potential upside of this tactic is rapidly rising revenue, but the risk is that Genentech could end up wasting money on testing a drug combination if any of its particular components fail to receive FDA approval.