One of the goals we strive toward every day is to find a cure for cancer. In 2007, more than half a million people are expected to die from cancer in the United States, according to the American Cancer Society (ACS). In addition, the ACS anticipates more than 1.4 million Americans will be diagnosed with new cancers this year.
Our cancer therapies are breakthroughs that change the standard of care and help patients with cancer live longer lives. We are making real headway towards the goal of shifting cancer from a death sentence to a chronic disease that can be managed and controlled — or defeated entirely.
We are focused on finding truly innovative scientific pathways and targets (e.g. our discovery of VEGF, HER2). In the past 10 years, we have launched four novel drugs that have proven to extend survival in various forms of cancer, and we are committed to continuing to develop better therapies for cancer patients.
The pricing of our therapies reflects the difficulties of trying to find cures for cancer. Our approach to drug development is expensive, risky and time-consuming. Most of our projects fail. It took approximately 25 years and hundreds of millions of dollars of investment in Herceptin® (Trastuzumab) before we generated data demonstrating that use in early-stage patients cut breast cancer recurrence by half. When trying to cure cancer, progress can take many years and is filled with false starts and dead-ends.
The investments we make to develop novel medicines are only viable if there is a reasonable return and if our business is sustainable. Our non-GAAP1 after-tax profit margin in 2006 was approximately 24 percent, in line with other companies in our industry. And our cancer medicines are generally priced competitively with other recently launched cancer products.
It is our hope that drugs like Genentech's Herceptin, Avastin® (bevacizumab), Rituxan® (Rituximab), and Tarceva® (erlotinib) are the first wave of an evolution towards safer and more effective therapies. We continue to invest billions of dollars to develop breakthrough therapies that have the potential to be revolutionary steps forward in cancer treatment. We believe that the investments we are making today will make cancer a disease we can one day all survive.
1 Our GAAP after-tax operating margin in 2006 was approximately 21 percent. For the year ended December 31, 2006, non-GAAP amounts exclude the effects of: (i) recurring amortization charges related to the 1999 redemption of Genentech's common stock by Roche Holdings, Inc., which was $105 million on a pre-tax basis, (ii) litigation-related special items for accrued interest and bond costs on the City of Hope judgment and net amounts paid related to other litigation settlements, which was $54 million on a pre-tax basis, (iii) employee stock-based compensation expense of $309 million on a pre-tax basis, and (iv) the related income tax benefit on these items of $191 million.
