By Bill Berkrot

U.S. sales of the cancer drug Avastin, widely considered the most important barometer of Genentech's fortunes, rose 21 percent to $731 million, falling short of analyst estimates of about $740 million.

Avastin, originally a colon cancer treatment, is now being used against breast and lung cancer as well. Sales could expand further should the company gain approvals in the United States and Europe for Avastin in brain cancer later this year.

Genentech forecast 2009 earnings of $3.55 to $3.90 per share, excluding items, while analysts are looking for $3.92 per share for the year.

The company said there are a large number of business uncertainties that make it a difficult year to forecast. It said an employee retention program related to the bid by Swiss drugmaker Roche Holding AG to acquire the company and other expenses could reduce 2009 earnings by more than 10 cents.

"For 2009, the non-GAAP earnings is a big range, and it's not that attractive a range," said Cowen & Co analyst Eric Schmidt. But he said that "with this company, there isn't a lot of quarter-to-quarter focus any more. It's more about what Roche might do."

Morningstar analyst Damien Conover suggested the company was being deliberately conservative with its forecast.

"They could be setting the range low to get over the hurdle relatively easily," Conover said.

Genentech projected that royalty revenue in 2009 would be flat to down 10 percent due to legal uncertainty involving a critical patent.

Despite the uncertain economic climate, Chief Executive Arthur Levinson said the company was in a strong financial position with $9.6 billion in cash and investments, limited debt and sound free cash flow.

The world's second-largest biotechnology company posted a net profit of $931 million, or 87 cents per share, compared with a profit of $632 million, or 59 cents per share, a year ago.

Excluding items, the company earned 95 cents per share, missing analysts' average expectations by 1 cent, according to Reuters Estimates.

Genentech said it expects four U.S. approvals this year with Food and Drug Administration decisions expected on Avastin in brain cancer in May and kidney cancer in August.

Revenue for the quarter rose to $3.71 billion from $2.97 billion a year ago, topping Wall Street estimates of $3.66 billion.

U.S. sales of Rituxan for non-Hodgkin's lymphoma and rheumatoid arthritis rose 14 percent to $677 million, in line with expectations. The drug recently showed promise as a leukemia treatment in a clinical trial, potentially paving the way for future expanded use.

U.S. sales of breast cancer treatment Herceptin edged up 3 percent to $336 million. Analysts were looking for $352 million, but the company had cautioned that third-quarter results had been helped by an increase in one wholesaler's inventory that was likely to hurt fourth-quarter sales.

Roche, which records sales of Genentech products outside the United States, is expected to soon make a sweetened offer for the 44 percent of Genentech it does not already own after the U.S. biotech giant rejected an initial offer of $89 per share in July.

Genentech shares fell 1.7 percent to $83.60 in after-hours trading from their New York Stock Exchange close at $85.08.

(Reporting by Bill Berkrot; Additional reporting by Lewis Krauskopf and Ransdell Pierson; Editing by Gary Hill)