GENENTECH, INC. CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share amounts) (Unaudited)
		Three Months Ended June 30,				Six Months Ended June 30,
		2007		2006		2007		2006
Revenues:
	Product sales	$   2,443		$   1,810		$   4,773		$   3,454
	Royalties	484		316		903		602
	Contract revenue	77		73		171		129
Total operating revenues		3,004		2,199		5,847		4,185
Costs and expenses:
	Cost of sales (includes employee stock-based compensation expense: three months—2007—$16; 2006—$0; six months—2007—$33; 2006—$0)	429		284		821		546
	Research and development (includes employee stock-based compensation expense: three months—2007—$39; 2006—$34; six months—2007—$77; 2006—$67)	603		390		1,213		764
	Marketing, general and administrative (includes employee stock-based compensation expense: three months—2007—$47; 2006—$41; six months—2007—$93; 2006—$82)	532		471		1,023		912
	Collaboration profit sharing	277		259		529		485
	Recurring charges related to redemption	26		26		52		52
	Special items: litigation-related	13		14		26		27
Total costs and expenses		1,880		1,444		3,664		2,786
Operating income		1,124		755		2,183		1,399
Other income (expense):
	Interest and other income, net(1)	75		121		149		174
	Interest expense	(17)		(18)		(35)		(37)
Total other income, net		58		103		114		137
Income before taxes		1,182		858		2,297		1,536
Income tax provision		435		327		844		584
Net income		$     747		$     531		$     1,453		$     952
Earnings per share:
	Basic	$     0.71		$     0.50		$     1.38		$     0.90
	Diluted	$     0.70		$     0.49		$     1.36		$     0.89
Weighted average shares used to compute earnings per share:
	Basic	1,053		1,053		1,053		1,054
	Diluted	1,070		1,073		1,071		1,074

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(1) "Interest and other income, net" includes interest income, net realized gains from the sale of certain biotechnology equity securities and write-downs for other-than-temporary impairments in the fair value of certain biotechnology equity 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 June 30,				Six Months Ended June 30,
		2007		2006		2007		2006
GAAP net income		$     747		$     531		$     1,453		$     952
Employee stock-based compensation expense under FAS 123R(1) included in the following operating expenses:
	Cost of sales	16		-		33		-
	Research and development	39		34		77		67
	Marketing, general and administrative	47		41		93		82
Recurring charges related to redemption(2)		26		26		52		52
Special items: litigation-related(3)		13		14		26		27
Income tax effect(4)		(54)		(44)		(107)		(87)
Non-GAAP net income		$     834		$     602		$    1,627		$    1,093
Non-GAAP earnings per share:
	Diluted	$     0.78		$     0.56		$     1.52		$     1.02
Non-GAAP weighted average shares used to compute earnings per share(5):
	Diluted	1,068		1,074		1,070		1,075

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(1) Represents employee stock-based compensation expense associated with FAS 123R. No employee stock-based compensation expense was recognized in GAAP-reported cost of sales in any period ending prior to January 1, 2007.

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

(3) Includes accrued interest and bond costs in the second quarters and first six months of 2007 and 2006 related to the City of Hope trial judgment.

(4) 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, and litigation-related special items.

(5) 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 2007 GAAP and Non-GAAP EPS Estimates
Our 2007 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., which are estimated to be approximately $104 million on a pretax basis in 2007, (ii) litigation-related special items for accrued interest and associated bond costs on the City of Hope judgment which are currently estimated to be approximately $54 million on a pretax basis in 2007, (iii) income tax effect of $63 million on recurring charges related to the redemption of our common stock and litigation-related special items, (iv) employee stock-based compensation expense, which we expect the net of tax diluted EPS impact to be in the range of $0.23 to $0.25 per share for 2007, and (v) any in-process R&D charge and amortization of intangible assets that would result if we acquire Tanox, Inc. Our 2007 GAAP EPS would include the 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, litigation-related 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 a re-valuation of certain intangible assets, greater than expected litigation-related costs, the number of options granted to employees, 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.

GENENTECH, INC. SELECTED CONSOLIDATED FINANCIAL DATA (In millions) (Unaudited)
		June 30, 2007		December 31, 2006
Selected consolidated balance sheet data:
Cash, cash equivalents and short-term investments		$        3,195		$        2,493
Accounts receivable - product sales, net		1,067		965
Accounts receivable - royalties, net		514		453
Accounts receivable - other, net		178		248
Inventories		1,365		1,178
Long-term marketable debt and equity securities		1,883		1,832
Property, plant and equipment, net		4,563		4,173
Goodwill		1,315		1,315
Other intangible assets		427		476
Other long-term assets		1,472		1,342
Total assets		16,359		14,842
Total current liabilities(1)		1,989		2,010
Long-term debt(2)		2,307		2,204
Total liabilities		5,508		5,364
Total stockholders' equity		10,851		9,478
		Six Months Ended June 30,
		2007		2006
Selected consolidated cash flow data:
Capital expenditures(2)		$          475		$          538
Total GAAP(3) depreciation and amortization expense		215		199
	Less: redemption-related amortization expense(4)	(52)		(52)
Non-GAAP depreciation and amortization expense		$          163		$          147

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(1) Certain reclassifications have been made at December 31, 2006 to conform to the June 30, 2007 presentation.

(2) Capital expenditures exclude approximately $101 million at June 30, 2007 and $61 million at June 30, 2006 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 $322 million at June 30, 2007 and $216 million at December 31, 2006.

(3) Reflects operating results in accordance with U.S. generally accepted accounting principles (or "GAAP").

(4) Represents the amortization of intangible assets related to the 1999 redemption of our common stock by Roche Holdings, Inc.