Dear Mr. Berko:

About four months ago, when you were addressing our group in Tampa, you really blasted the Food and Drug Administration for taking Vioxx off the market. My brother-in-law, who helped gather the research supporting the Vioxx recall, thinks you are all wet. As a recent retiree of the National Institutes of Health, I must agree with him. The potential negative consequences of long-term Vioxx use are very dangerous. If you have any “objective” information to the contrary, we’d be happy to receive it and discuss it with you.

Also, I’d like to know your opinion about Genentech. What do you think of its new drug called Lucentis? Do you think this will have a promising impact on Genentech’s revenues and net profits? Would you buy 200 shares?

G.H., Fort Walton Beach, Fla.

Dear G.H.:

Dr. David Graham, head of the FDA, concluded that based upon 98 million Vioxx prescriptions written in a four-year period between 1999 and 2003, “Vioxx may have contributed to 28,000 heart attacks and sudden cardiac deaths.” The operative words here are “may have.”

Because heart attacks and strokes occur so frequently in the general population, it’s impossible to say with any certainty that a person had an event because he or she was taking Vioxx. An average of 7,000 deaths a year for four years computes to less than 0.03 percent per year of those who used Vioxx.

Your former employer (NIH) tells us that transfats are responsible for 33,000 deaths a year. So why don’t they take transfats off the market? Did you know that 85,000 people die from alcohol-related deaths every year? Why doesn’t the FDA ban the sale of alcohol? Tobacco kills 435,000 smokers each year, yet your kids can buy those coffin nails 24/7.

These numbers are larger and more devastating by orders of magnitude than the 7,000 very “iffy” Vioxx-related deaths. The Vioxx recall hasn’t helped those who need the drug, but it has put hundreds of millions in the pockets of lawyers.

Now let’s get to the good stuff.

Lucentis is a new prescription drug for (wet) macular degeneration from Genentech Inc. (DNA-$80.28). This is an age-related disease that blurs the eye’s central vision and affects activities such as driving, reading, bowling, sewing, etc., and afflicts about 1.8 million Americans. The results from recent clinical trials were so superb (after three injections over three months, patients with 20/200 vision saw their vision improve to 20/25) that the FDA approved Lucentis in June after a priority review.

However, the cost per injection will be somewhere between $1,500 and $2,000, which is rather high, and I doubt the price will come down soon. The market is young and Lucentis’ only competition is Pfizer’s Macugen, which slows progression but does not reverse it. Meanwhile, DNA is discussing reimbursement plans with Medicare. Lucentis will contribute about $250 million a year to DNA’s revenues — not enough to affect the market value of the stock, which is still trading near its 12-month low.

Genentech is a leading biotech company known for its novel cancer treatments and impressively fecund research and development capabilities, with operating margins of 35 percent. This year, DNA should book $8.6 billion in revenues with a net profit margin of 19.5 percent. Within five years, the Street reckons that the company will take about a dozen new products through its pipeline, boost revenues to $18 billion, with operating margins at a fantastic 44 percent while net profit margins improve by one-third to 26.5 percent. Those conservative projections should advance per-share earnings from 2006’s $1.55 to more than $4 by 2011 and free cash flow from $2.25 per share to more than $5.

Now those uncommonly superb numbers are the best reason I can find to own Genentech at today’s price. I don’t think DNA will continue to trade at 60 times earnings and believe a 35 price-earnings ratio makes sense, so I think the stock could trade in the $140 to $150 range by 2011.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.

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