watch list presentations april 17, 2008 david light, phil rosen, tim tyson
TRANSCRIPT
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Watch List Presentations
April 17, 2008
David Light, Phil Rosen, Tim Tyson
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Company Overview Leading Biotechnology firm Discover, develop, and manufacture
medicines for patients with unmet medical needs
3 Main Areas of Focus Oncology Immunology Tissue Growth and Repair
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http://www.gene.com/gene/ir/financials/annual-reports/2007/financials/marketedproducts.html, Accessed 15 Apr 08
2007 Product Sales
3 Blockbuster Drugs 38% Average Growth in
Product Sales past 5 years
Rituxan 27%
Avastin 27%
Herceptin 15%
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Q1 2008 RevenueRituxan® 605 535 13%
Avastin® 600 533 13
Herceptin® 339 311 9
Lucentis® 198 211 -6
Xolair® 117 111 5
Tarceva® 111 102 9
Nutropin® Products 84 91 -8
Thrombolytics 67 68 -1
Pulmozyme® 57 52 10
Raptiva® 26 24 8
Total U.S. product sales 2,205 2,037 8
Net product sales to collaborators 174 292 -40
Total product sales 2,379 2,329 2
2008 Q1 2007 Q1 % Change
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http://www.gene.com/gene/ir/financials/annual-reports/2007/financials/marketedproducts.html, Accessed 15 Apr 08
Avastin
Approved to treat Lung, Colon, and Breast Cancer Blocks blood vessels from forming
in tumors 31% sales growth from ’06 to ‘07
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Rituxan
http://www.gene.com/gene/ir/financials/annual-reports/2007/financials/marketedproducts.html, Accessed 15 Apr 08
Approved to treat non-Hodgkin’s Lymphoma, Leukemia, and some autoimmune diseases Depletes B cells in diseases characterized
by having too many B cells or dysfunctional B cells
10% sales growth from ‘06 to ‘07
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Herceptin
http://www.gene.com/gene/ir/financials/annual-reports/2007/financials/marketedproducts.html, Accessed 15 Apr 08
Approved to treat various forms of breast cancer Significant sales growth when new uses are
discovered, but otherwise steady growth
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Pipeline•Many extended uses of Avastin, Herceptin, and Rituxan
•Majority already undergoing Phase III clinical trials
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Management CEO/Chairman: Arthur Levinson, PH.D.
Started in the company as a senior scientist President Product Development: Susan Desmond-Hellmann, M.D.
Joined the company as a clinical scientist
Executive VP/CFO: David Ebersman Started as a business development analyst with the company
Executive VP of Research: Richard Scheller, PH.D. Prior to joining DNA he was a professor of Molecular and Cellular
Physiology and of Biological Sciences at Stanford
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Management’s 2010 Goals Bring at least 20 new molecules into clinical
development Bring at least 15 major new products or indications
onto the market Achieve a compund annual non-GAAP earnings per
share growth rate of 25% Achieve cumulative free cash flow of $12 billion Become the number one U.S. oncology company in
sales
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Roche Majority owner of Genentech Holding company that helps market
Genentech’s products internationally
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Recent News and Developments On February 22, 2008, the FDA granted
accelerated approval for Avastin in combination with paclitaxel chemotherapy for the first-line treatment of advanced HER2-negative breast cancer.
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Valuation
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Valuation Current Price: $74.18
DCF Valuation: $114.83
Intrinsic Value: 103.35 – 126.31
WACC: 8.25%
Beta: .75, L/T Growth: 4%
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Valuation Growth Rate
114.80 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0%
WACC 7.0%
111.22
120.87
132.95
148.47
169.17
198.15
241.61
314.05
458.94
7.5%
99.37
106.95
116.21
127.79
142.68
162.52
190.31
231.99
301.45
8.0%
89.55
95.61
102.87
111.76
122.86
137.14
156.17
182.82
222.80
8.25%
85.30
90.76
97.25
105.12
114.83
127.14
143.24
165.20
196.94
9.0%
74.22
78.26
82.98
88.56
95.24
103.42
113.64
126.78
144.30
9.5%
68.14
71.50
75.38
79.91
85.26
91.67
99.52
109.33
121.94
10.0%
62.84
65.67
68.89
72.62
76.96
82.10
88.26
95.79
105.20
11.0%
54.09
56.13
58.43
61.03
64.00
67.44
71.44
76.18
81.85
12.0%
47.16
48.68
50.37
52.25
54.37
56.77
59.51
62.68
66.38
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Recommendation Add Genentech to the RCMP Watch List
Increasing uses of big 3 drugs Strong Drug Pipeline (Many Phase III Trials) Strong earnings growth Strong balance sheet (minimal debt, surplus cash) Not greatly threatened by generic competition Warrants further review in Fall 2008