Company Analysis - Genentech
What are the odds?
Genentech has an enviable track record that very few would have predicted. At one stage, 15 vast clinical trials were conducted without encountering any failures, an unprecedented occurrence given that one third of all drugs fail in development due to toxicity. It takes 12-20 years for a drug to reach the market, and the Boston Consulting Group estimates R&D costs of US $810 million to bring a drug to the marketplace successfully, a figure that speaks for itself. The high risks and costs in the industry have led to speculation as to whether the bubble will burst for Genentech. Prospecting for biotech gold is a risky business, and so far Genentech has beaten extraordinary odds time and time again. This success is not down to good fortune alone - Genentech has a long-held sterling reputation for oncology expertise, and has expanded from this familiar territory into immunology. Genentech has already made progress with psoriasis and asthma therapeutics, but it still has some way to go to match its track record in oncology. Given its reputation as an employer, Genentech should have no difficulties in attracting the best and brightest minds to maintain the required standards it has set in the past for solid scientific research. By maintaining its strong emphasis on R&D, and not following the pharmaceutical industry trend of primarily acquiring numerous companies, Genentech will support the growth of its pipeline, assisted by strategic alliances, a strategy to which it will soon add the acquisition of a small competitor.
The continued emphasis on R&D is evident from our data [Graph 2], as the number of preclinical and Phase I candidates has risen dramatically since 2003, with the number of launched drugs steadily increasing since 1997, although over this time there has been a decline in Phase II and III candidates as these have progressed through to the market. In the wake of Genentech's continued success, and based on the pipeline as it currently stands, the majority shareholder Roche is considering further increasing its stake. Based on past experience, this confidence in Genentech's ability to bring blockbusters to the market is unlikely to be misplaced.
Alix Biancardi
Pharmaprojects Analyst
