(Unaudited)
(In millions, except per share, stock price and employee data)

2006-2003

Years Ended December 31, 2006 2005 2004 2003 TOTAL OPERATING REVENUES $9,284 $6,633 $4,621 $3,300   Product sales 7,640 5,488 3,749 2,621   Royalties 1,354 935 641 501   Contract revenue 290 210 231 178 TOTAL COSTS AND EXPENSES $6,132 $4,712 $3,485 $2,495   Cost of sales  1,181  1,011  673  480   Research and development  1,773  1,262  948  722   Marketing, general and administrative  2,014  1,435  1,088  795   Collaboration profit sharing  1,005  823  594  457   Recurring charges related to redemption(11)  105  123  145  154   Special items 54(12)  58(12)  37(12)  (113)(12) Other income, net $   251 $   92 $   84 $   92 INCOME (LOSS) DATA           Income (loss) before taxes and cumulative effect of accounting change  $3,403  $2,013  $1,220  $ 897   Income tax (benefit) provision 1,290  734  435  287   Income (loss) before cumulative effect of accounting change 2,113 1,279 785 610   Cumulative effect of accounting change, net of tax  -  -  -  (47)(1)   Net income (loss) 2,113 1,279 785 563 EARNINGS (LOSS) PER SHARE:           Basic: Earnings before cumulative effect of accounting change $   2.01 $   1.21 $   0.74 $   0.59     Cumulative effect of accounting change, net of tax  -  -  -  (0.05)     Net earnings per share $   2.01 $   1.21 $   0.74 $   0.54   Diluted: Earnings before cumulative effect of accounting change $   1.97 $   1.18 $   0.73 $   0.58     Cumulative effect of accounting change, net of tax  -  -  -  (0.05)     Net earnings per share $   1.97 $   1.18 $   0.73 $   0.53 SELECTED BALANCE SHEET DATA           Cash, cash equivalents, short-term investments, and long-term marketable debt and equity securities  $4,325  $3,814  $2,780  $2,935   Accounts receivable 1,666 1,050  941  588   Inventories  1,178  703  590  470   Property, plant and equipment, net 4,173 3,349 2,091 1,618(1)   Goodwill   1,315   1,315   1,315   1,315   Other intangible assets  476  574   668   811   Other long-term assets 1,342(5) 1,074(5) 807(5) 822(5)   Total assets   14,842   12,147   9,403   8,759   Total current liabilities   2,157   1,660   1,238   893   Long-term debt 2,204 (6), (7) 2,083 (6), (7)   412   412(1)   Total liabilities   5,364   4,677   2,621   2,239   Total stockholders' equity   9,478   7,470   6,782   6,520 OTHER DATA           Depreciation and amortization expense $  407 $  370 $  353 $  295   Capital expenditures  1,214(7)  1,400(7)  650  322 SHARE INFORMATION           Shares used to compute basic EPS  1,053  1,055  1,055  1,035   Shares used to compute diluted EPS  1,073  1,081  1,079  1,058   Shares outstanding at year-end  1,053  1,054  1,047  1,049 PER SHARE DATA           Market price:      High $ 95.16 $ 100.20 $   68.25 $   47.68          Low $ 75.58 $   43.90 $   41.00 $   15.77   Book value $   9.00 $     7.09 $     6.48 $     6.21 NUMBER OF EMPLOYEES AT YEAR-END  10,533   9,563 7,646  6,226

(Table Continued below)

2002-1999

Years Ended December 31, 2002 2001 2000 1999(4) TOTAL OPERATING REVENUES $2,584 $2,044 $1,514 $1,292   Product sales 2,164 1,743 1,278 1,039   Royalties 366 264 207 189   Contract revenue 54 37 29(3) 64 TOTAL COSTS AND EXPENSES $2,662 $1,896 $1,726 $2,730   Cost of sales  442  354  365(15)  286(15)   Research and development  623  526  490  367   Marketing, general and administrative  546  447  367  367   Collaboration profit sharing  351  247  129  74   Recurring charges related to redemption(11)  156(2)  322  375   198   Special items 544(16)   -   -  1,438(13) Other income, net  $  108  $135(14)  $  216 $   78 INCOME (LOSS) DATA           Income (loss) before taxes and cumulative effect of accounting change  $   30  $  283  $     4  $(1,360)   Income tax (benefit) provision  (34)  127  20  (203)   Income (loss) before cumulative effect of accounting change 64 156 (16) (1,157)   Cumulative effect of accounting change, net of tax  -  (6)(14)  (58)(3)  -   Net income (loss) 64(2) 150 (74) (1,157) EARNINGS (LOSS) PER SHARE:           Basic: Earnings before cumulative effect of accounting change  $   0.06  $    0.15  $ (0.02)  $ (1.13)     Cumulative effect of accounting change, net of tax  -  (0.01)  (0.05)  -     Net earnings per share $   0.06 $    0.14 $ (0.07) $ (1.13)   Diluted: Earnings before cumulative effect of accounting change $   0.06 $    0.15 $ (0.02) $ (1.13)     Cumulative effect of accounting change, net of tax  -  (0.01)  (0.05)  -     Net earnings per share $   0.06 $    0.14 $ (0.07) $ (1.13) SELECTED BALANCE SHEET DATA           Cash, cash equivalents, short-term investments, and long-term marketable debt and equity securities  $1,602  $2,865  $2,459  $1,957   Accounts receivable  432  321  278  233   Inventories  394  357  266  275   Property, plant and equipment, net  1,069  866  753  730   Goodwill  1,315  1,303  1,456  1,609   Other intangible assets  928  1,113  1,280  1,453   Other long-term assets  801(5)  136  175  206   Total assets  6,776  7,162  6,739  6,561   Total current liabilities  661  677(8)  475  503   Long-term debt  -  -  150  150   Total liabilities  1,437  1,242  1,065   1,291   Total stockholders' equity  5,339  5,920   5,674 5,270(9) OTHER DATA           Depreciation and amortization expense $275(2)  $  428  $   463  $   281   Capital expenditures  323  213  113  95 SHARE INFORMATION           Shares used to compute basic EPS  1,038  1,054  1,044  1,026   Shares used to compute diluted EPS  1,049  1,071  1,044  1,026   Shares outstanding at year-end  1,026  1,057  1,051  1,032 PER SHARE DATA           Market price:      High  $  27.58  $  42.00  $  61.25  $  11.25             $35.75*          Low  $  12.55  $  19.00  $  21.13  $  9.32                 $12.13*   Book value  $    5.21  $    5.60  $    5.40  $    5.10 NUMBER OF EMPLOYEES AT YEAR-END   5,252  4,950  4,459  3,883

(Table Continued below)

1998-1996

Years Ended December 31,   1998 1997 1996 TOTAL OPERATING REVENUES   $1,053 $936 $904   Product sales   718 585 583   Royalties   230 241 215   Contract revenue   105 110 106 TOTAL COSTS AND EXPENSES   $  874 $  840 $  816   Cost of sales   139 103 105   Research and development   396 471 471   Marketing, general and administrative   299 266 240   Collaboration profit sharing   40 - -   Recurring charges related to redemption(11)   - - -   Special items   - - - Other income, net   $   74 $   74 $   60 INCOME (LOSS) DATA           Income (loss) before taxes and cumulative effect of accounting change   $  253 $  170 $  148   Income tax (benefit) provision   71 41 30   Income (loss) before cumulative effect of accounting change   182 129 118   Cumulative effect of accounting change, net of tax   - - -   Net income (loss)   182 129 118 EARNINGS (LOSS) PER SHARE:           Basic: Earnings before cumulative effect of accounting change   $   0.18 $   0.13 $   0.12     Cumulative effect of accounting change, net of tax   - - -     Net earnings per share   $   0.18 $   0.13 $   0.12   Diluted: Earnings before cumulative effect of accounting change   $   0.18 $   0.13 $   0.12     Cumulative effect of accounting change, net of tax   - - -     Net earnings per share   $   0.18 $   0.13 $   0.12 SELECTED BALANCE SHEET DATA           Cash, cash equivalents, short-term investments, and long-term marketable debt and equity securities   $1,605 $1,287 $1,159   Accounts receivable   158 184 194   Inventories   149 116 92   Property, plant and equipment, net   700 683 586   Goodwill   - - -   Other intangible assets   65 55 40   Other long-term assets   135 128 113   Total assets   2,868 2,507 2,226   Total current liabilities   303 289 250   Long-term debt   150 150 150   Total liabilities   524 476 425   Total stockholders' equity   2,344 2,031 1,801 OTHER DATA           Depreciation and amortization expense   $   78 $   66 $   62   Capital expenditures   88 155 142 SHARE INFORMATION           Shares used to compute basic EPS   1,007 984 965   Shares used to compute diluted EPS   1,039 1,011 992   Shares outstanding at year-end   1,017 994 971 PER SHARE DATA           Market price:      High   $   9.97 $   7.58 $   6.92          Low   $   7.41 $   6.66 $   6.42   Book value   $   2.30 $   2.04 $   1.85 NUMBER OF EMPLOYEES AT YEAR-END   3,389 3,242 3,071

Reconciliation of GAAP to Non-GAAP Net Income (Unaudited)
(In millions, except per share amounts)

(Table Continued below)

11-Year Financial Summary Footnotes We have paid no dividends. We currently intend to retain all future income for use in the operation of our business and for future stock repurchases and, therefore, do not anticipate paying any cash dividends in the foreseeable future.

Certain reclassifications of prior year amounts have been made to conform to the current year presentation.

All share and per share amounts reflect two-for-one stock splits of our Common Stock that were effected in 2004, 2000 and 1999.

(1) Reflects the impact of the adoption of FIN 46, "Consolidation of Variable Interest Entities." For more information, see the "Results of Operations" section of Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of Part II of our 2003 Form 10-K on file with the SEC.

(2) We adopted FAS 141 on Business Combinations and FAS 142 on Goodwill and other Intangible Assets on January 1, 2002. In accordance with FAS 141 and 142, we discontinued the amortization of goodwill and our trained and assembled workforce intangible asset, which resulted in an increase in reported net income by approximately $158 million (or $0.15 per share) in 2002, as compared to the accounting prior to the adoption of FAS 141 and 142.

(3) Reflects the impact of the adoption of SAB 101 on revenue recognition effective January 1, 2000.

(4) GAAP 1999 results reflect the June 30, 1999 redemption and push-down accounting and include the combined New Basis and Old Basis periods presented in the 1999 Consolidated Statements of Operations and Consolidated Statements of Cash Flows. Refer to our 2001 Form 10-K (Part II, Item 8) on file with the SEC.

(5) Includes approximately $788 million at December 31, 2006, $735 million at December 31, 2005, $682 million at December 31, 2004 and $630 million at December 31, 2003 and 2002 of restricted cash pledged to secure a bond for the City of Hope (COH) judgment. For further information on the COH judgment, see Note 8, "Leases, Commitments and Contingencies" in Part II, Item 8 of our 2006 Form 10-K on file with the SEC.

(6) Long-term debt in 2006 and 2005 includes approximately $2 billion related to our debt issuance in July 2005. Long-term debt in 2005 also reflects the repayment of $425 million to extinguish the consolidated debt and noncontrolling interest related to a synthetic lease obligation. For further information, see Note 7, "Leases, Commitments and Contingencies" in Part II, Item 8 of our 2005 10-K on file with the SEC.

(7) We capitalized costs in property, plant and equipment of approximately $104 million in 2006 and $94 million in 2005 related to our accounting for construction projects for which we are considered to be the owner of the buildings during the construction period. These costs have been excluded from 2006 and 2005 capital expenditures. We have also recognized $216 million and $94 million as construction financing obligations in long-term debt as of December 31, 2006 and 2005, respectively, related to these projects. For further information, see Note 8, "Leases, Commitments and Contingencies" in Part II, Item 8 of our 2006 10-K on file with the SEC.

(8) The $150 million long-term debt was reclassified to current liabilities to reflect the March 27, 2002 maturity.

(9) Reflects the effect of the Redemption and related push-down accounting of $5,202 million of excess purchase price over net book value, net of charges and accumulated amortization of goodwill and other intangible assets.

(10) Represents employee stock-based compensation expense associated with Genentech's adoption of FAS 123R on January 1, 2006. In 2006, the employee stock-based compensation expense was allocated to the research and development and marketing, general and administrative expense lines in the income statement.

(11) Primarily reflects amortization of other intangible assets in 2006, 2005, 2004, 2003, 2002, 2001, 2000, and 1999, and goodwill amortization in 2001, 2000 and 1999 related to the Redemption and push-down accounting.

(12) Litigation-related special items in 2006 was comprised of accrued interest and bond costs related to the COH judgment, in 2005 was comprised of accrued interest and bond costs related to the COH judgment and net amounts paid related to other litigation settlements, in 2004 it was comprised of accrued interest and bond costs related to the COH judgment (net of a released accrual on a separate litigation matter), and in 2003 it was comprised of Amgen and Bayer litigation settlements (net of accrued interest and bond costs related to the COH litigation).

(13) Charges related to Redemption and push-down accounting ($1,208 million) and legal settlements ($230 million).

(14) Reflects the effect of the adoption of FAS 133 on Accounting for Derivative Instruments and Hedging Activities.

(15) Includes costs related to the sale of inventory that was written up at the Redemption due to push-down accounting.

(16) Amount includes litigation-related special charges comprised of the City of Hope Medical Center litigation judgment in the second quarter of 2002, including accrued interest and costs related to obtaining a surety bond, and certain other litigation-related matters. For further information on these charges, see the "Results of Operations" section of Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of Part II of our 2002 Form 10-K on file with the SEC.

(17) Reflects the income tax benefit on employee stock-based compensation expense under FAS 123R, recurring charges related to Redemption, litigation-related special items, and other non-GAAP reconciling items.

(18) 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.

For further information on the non-GAAP reconciling items presented above, see the "Results of Operations" section of Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of Part II of our Form 10-K for the respective years on file with the SEC.