GENENTECH, INC. CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share amounts) (Unaudited)
		Three Months Ended December 31,				Year Ended December 31,
		2008		2007		2008		2007
Revenues:
	Product sales	$   2,981		$   2,349		$   10,531		$   9,443
	Royalties	607		558		2,539		1,984
	Contract revenue	119		63		348		297
Total operating revenues		3,707		2,970		13,418		11,724
Costs and expenses:
	Cost of sales	503		344		1,744		1,571
	Research and development	757		618		2,800		2,446
	Marketing, general and administrative	718		692		2,405		2,256
	Collaboration profit sharing	322		275		1,228		1,080
	Write-off of in-process research and development related to acquisition(1)	-		-		-		77
	Gain on acquisition(1)	-		-		-		(121)
	Recurring amortization charges related to redemption and acquisition(2)	43		43		172		132
	Special items: litigation-related	-		14		(260)		54
Total costs and expenses		2,343		1,986		8,089		7,495
Operating income		1,364		984		5,329		4,229
Other income (expense):
	Interest and other income, net(3)	51		40		184		273
	Interest expense	(25)		(22)		(82)		(76)
Total other income, net		26		18		102		197
Income before taxes		1,390		1,002		5,431		4,426
Income tax provision		459		370		2,004		1,657
Net income		$     931		$     632		$     3,427		$     2,769
Earnings per share:
	Basic	$     0.88		$     0.60		$     3.25		$     2.63
	Diluted	$     0.87		$     0.59		$     3.21		$     2.59
Weighted average shares used to compute earnings per share:
	Basic	1,052		1,053		1,053		1,053
	Diluted	1,065		1,068		1,067		1,069

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(1) Represents non-recurring items related to our 2007 acquisition of Tanox, Inc.

(2) Represents the amortization of intangible assets related to the 1999 redemption of our common stock by Roche Holdings, Inc. and our 2007 acquisition of Tanox, Inc.

(3) "Interest and other income, net" includes interest income, realized gains and losses from the sale of debt and equity securities, write-downs for other-than-temporary impairments in the fair value of certain debt and equity securities and mark-to-market valuation adjustments for various securities. For further detail, refer to our web site at www.gene.com.

GENENTECH, INC. RECONCILIATION OF GAAP TO NON-GAAP NET INCOME (In millions, except per share amounts) (Unaudited)
		Three Months Ended December 31,				Year Ended December 31,
		2008		2007		2008		2007
GAAP net income		$     931		$     632		$     3,427		$     2,769
Royalty revenue(1)		(4)		(4)		(15)		(6)
Employee stock-based compensation expense under FAS 123R included in the following operating expenses:
	Cost of sales	20		22		82		71
	Research and development	33		39		152		153
	Marketing, general and administrative	35		42		165		179
Asset impairment charges(2)		-		-		15		-
Roche proposal-related fees incurred on behalf of the Special Committee(3)		8		-		14		-
Write-off of in-process research and development related to acquisition(4)		-		-		-		77
Gain on acquisition(4)		-		-		-		(121)
Recurring amortization charges related to redemption and acquisition(5)		43		43		172		132
Special items: litigation-related(6)		-		14		(260)		54
Income tax effect(7)		(52)		(51)		(109)		(166)
Non-GAAP net income		$     1,014		$     737		$    3,643		$    3,142
Non-GAAP earnings per share:
	Diluted	$     0.95		$     0.69		$     3.42		$     2.94
Non-GAAP weighted average shares used to compute earnings per share(8):
	Diluted	1,063		1,066		1,065		1,068

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(1) Represents recognition of deferred royalty revenue related to our 2007 acquisition of Tanox, Inc.

(2) Represents asset impairment charges related to our 2007 acquisition of Tanox, Inc. recorded as marketing, general and administrative expense in the third quarter of 2008.

(3) Represents costs incurred by the company on behalf of the Special Committee in connection with its review of the Roche Proposal, as well as legal costs incurred in defense of the Special Committee and/or its individual members in shareholder lawsuits filed in connection with the Roche Proposal.

(4) Represents non-recurring items related to our 2007 acquisition of Tanox, Inc.

(5) Represents the amortization of intangible assets related to the 1999 redemption of our common stock by Roche Holdings, Inc. and our 2007 acquisition of Tanox, Inc.

(6) Includes accrued interest and bond costs in the fourth quarter and full year of 2007, and the net settlement in the full year of 2008 related to the City of Hope trial judgment. Amount for the full year of 2008 also includes additional costs accrued related to the City of Hope contract dispute based on the status of negotiations between the parties on amounts owed for periods subsequent to the original court judgment rendered in 2002.

(7) Reflects the income tax effects of excluding employee stock-based compensation expense under FAS 123R, recurring charges related to the redemption of our common stock, litigation-related special items, items related to our acquisition of Tanox, Inc. and items related to the Roche Proposal.

(8) Weighted average shares used to compute non-GAAP diluted earnings per share were computed exclusive of the methodology used to determine dilutive securities under FAS 123R.

Reconciliation of 2009 GAAP and Non-GAAP EPS Estimates
Our 2009 non-GAAP EPS estimate excludes the effects of: (i) recurring amortization charges related to the 1999 redemption of our common stock by Roche Holdings, Inc. and our 2007 acquisition of Tanox, Inc., which the company forecasts to be approximately $123 million on a pretax basis in 2009, (ii) items related to our acquisition of Tanox, Inc., including recognition of deferred royalty revenue which the company forecasts to be approximately $15 million on a pretax basis in 2009, (iii) income tax effect on recurring charges related to the redemption of our common stock and our acquisition of Tanox, Inc. and recognition of deferred royalty revenue which the company forecasts to be approximately $42 million in 2009, (iv) employee stock-based compensation expense, which the company forecasts to be in the range of $0.20 to $0.22 per share for 2009 on an after-tax basis, and (v) after tax costs incurred by the company on behalf of the Special Committee in connection with its review of the Roche Proposal, as well as legal costs incurred in defense of the Special Committee and/or its individual members in shareholder lawsuits filed in connection with the Roche Proposal, which the company cannot reasonably estimate for 2009 due to the uncertainty of the outcome of the Roche Proposal. Our 2009 GAAP EPS would include these items listed above as well as any other potential special charges related to existing or future litigation or its resolution, or changes in or adoption of accounting principles, all of which may be significant.

The statements regarding the amounts relating to the 1999 Roche redemption of our common stock, Tanox, Inc. acquisition, litigation-related and similar special items, and employee stock-based compensation expense, are forward-looking and such statements are predictions and involve risks and uncertainties such that actual results may differ materially. The amounts identified above could be affected by a number of factors, including greater than expected litigation-related and similar costs, changes in or adoption of accounting principles, changes in tax rates, the number of options granted to employees, and our stock price and certain valuation assumptions concerning our stock. We disclaim, and do not undertake, any obligation to update or revise any of these forward-looking statements. Please also refer to the risk factors identified in Genentech's periodic reports filed with the Securities and Exchange Commission.

GENENTECH, INC. SELECTED CONSOLIDATED FINANCIAL DATA (In millions) (Unaudited)
		December 31, 2008		December 31, 2007
Selected consolidated balance sheet data:
Cash, cash equivalents and short-term investments		$     6,198		$     3,975
Accounts receivable - product sales, net		1,039		847
Accounts receivable - royalties, net		680		620
Accounts receivable - other, net		222		299
Inventories		1,299		1,493
Long-term marketable debt and equity securities		3,347		2,090
Property, plant and equipment, net		5,404		4,986
Goodwill		1,590		1,577
Other intangible assets		1,008		1,168
Other long-term assets		365		366
Total assets		21,787		18,940
Commercial paper		500		599
Total current liabilities		3,095		3,918
Long-term debt(1)		2,329		2,402
Total liabilities		6,116		7,035
Total stockholders' equity		15,671		11,905
		Year Ended December 31,
		2008		2007
Selected consolidated cash flow data:
Capital expenditures(1)		$       751		$       977
Total GAAP depreciation and amortization expense		592		492
	Less: redemption and acquisition related amortization expense(2)	(172)		(132)
Non-GAAP depreciation and amortization expense		$       420		$       360

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(1) Capital expenditures exclude approximately $117 million at December 31, 2008 and $203 million at December 31, 2007 in capitalized costs related to our accounting for construction projects for which we are considered to be the owner during the construction period. We have recognized related amounts as a construction financing obligation in long-term debt. The balances in long-term debt related to the construction financing obligation are $306 million at December 31, 2008 and $399 million at December 31, 2007.

(2) Represents the amortization of intangible assets related to the 1999 redemption of our common stock by Roche Holdings, Inc. and our 2007 acquisition of Tanox, Inc.