By Bill Berkrot

U.S. sales of Avastin, widely considered the most important barometer of Genentech's growth, rose 18 percent to $704 million, helped by increased use in breast cancer. That exceeded analysts' estimates of $694 million and blew past the $650 million recorded in the previous quarter.

Genentech's other important cancer drugs also topped expectations, helping to fuel the share price gains in extended trading.

"The numbers look great," said Cowen & Co analyst Eric Schmidt. "Avastin has always been the marquee drug and that product did about $10 million or so above expectations, so that's very welcome news."

The world's second largest biotechnology company by sales said net profit rose to $731 million, or 68 cents per share, from $685 million, or 64 cents per share, a year ago.

Excluding items, Genentech earned 81 cents per share, which was about 7 cents short of Wall Street targets, the company noted.

But a 3 cents per share charge for an employee retention program and 10 cents per share in other expenses more than accounted for the shortfall.

The company lowered the top end of its full-year earnings forecast by 5 cents and now foresees $3.40 to $3.45 per share, excluding items.

The revised forecast is primarily due to the cost of the employee retention program, which is related to the bid by Roche Holding AG to purchase the portion of the company it does not already own, and is estimated at 8 cents per share for the year.

Genentech shares have fallen well below the $89 per share purchase price it rejected from Roche. They dipped as low as $70 last week amid concerns the global credit crisis would hamper Roche's ability to finance its $43.7 billion offer after rising as high as $99.05 in mid-August.

Genentech executives said on a conference call with analysts and investors that the board still believes the Roche offer "substantially undervalues the company" and fails to reflect the significant benefits the deal would bring to the Swiss drugmaker.

The company also said it has seen no increase in employee turnover since Roche's intentions become public.

Genentech shares rose to $82 in extended trading from their New York Stock Exchange close of $79.12.

"Earnings are good and that matters to a certain degree, but the $64,000 question is still how this Roche acquisition might end," Schmidt said.

Chief Financial Officer David Ebersman said the company has $8.6 billion in cash and investments and has not felt the impact of the global credit crunch.

"We're not dependent on the credit market for day-to-day business," he said in an interview, adding that there are no plans to curtail Genentech's extensive clinical development or research programs.

U.S. sales of Rituxan for non-Hodgkin's lymphoma and rheumatoid arthritis jumped 15 percent to $655 million, exceeding analysts' expectations of $648 million.

U.S. Sales of breast cancer drug Herceptin also rose 15 percent to $368 million, easily beating Wall Street estimates of $344 million.

The company said Herceptin sales benefited from an increase in inventory by one wholesaler and that as a result, fourth quarter sales will likely be a bit lower.

Roche, which holds a majority stake in Genentech, sells the company's drugs outside the United States.

Royalty revenue rose 31 percent to $687 million for the quarter.

Total operating revenue for the quarter rose 17 percent to $3.41 billion. That also topped expectations of $3.36 billion.

(Additional reporting by Lewis Krauskopf and Toni Clarke; Editing by Andre Grenon)