Genentech Reports 1994 Third Quarter Results

Earnings More Than Double; Key Development Projects Advance

South San Francisco, Calif. -- October 18, 1994 -- Genentech, Inc. (NYSE: GNE) announced today that its earnings for the third quarter of 1994 more than doubled to $33.6 million, or 28 cents per share, from $15.5 million, or 13 cents per share, in the third quarter of 1993. Revenues for the quarter increased 17 percent to $193.8 million, from $165.4 million in the third quarter of 1993.

"Our continued earnings growth reflects strong product sales as Pulmozyme® gains increasing acceptance among physicians who treat cystic fibrosis patients and as our other products maintain their leading market share," said Genentech President and Chief Executive Officer G. Kirk Raab. "Important clinical development progress during the quarter should help us maintain our course of growth."

Marketed Products

In its third quarter on the market, Pulmozyme (dornase alfa) had sales of $21.0 million, compared with $18.7 million in the second quarter of 1994. The results of the Phase III trial in cystic fibrosis patients, on which Pulmozyme's approval was based, were reported in the September 8 issue of the New England Journal of Medicine. Data on the longer-term safety and efficacy of Pulmozyme in CF patients and on its safety and efficacy in seriously ill patients will be presented October 22, 1994 at the North American Cystic Fibrosis (CF) Conference. These data should reaffirm the drug's benefits to CF patients and may enhance Pulmozyme's growing acceptance among CF patients and their physicians. During the quarter, Pulmozyme was launched in Germany and France, bringing to 18 the number of countries worldwide where Pulmozyme is sold.

Activase® (Alteplase, recombinant) t-PA sales increased to $65.1 million from $63.5 million in the third quarter of 1993. Genentech awaits FDA approval of new Activase labeling, based on mortality and other benefits demonstrated in the GUSTO* clinical trial comparing thrombolytic therapy regimens in 40,000 heart attack patients. If granted, as an FDA advisory committee unanimously recommended in June, 1994, such approval will enable Genentech to promote the benefits demonstrated in the GUSTO trial and possibly further increase its market share from the current 70 percent plus range.Sales of Genentech's two human growth hormone products were $54.6 million compared with $55.4 million in the third quarter of 1993. This decrease is due to fluctuations in order patterns and competitive pressures in the managed care area from Genentech's existing competitor. New competitors did not enter the growth hormone market.

Evolving in a Changing Environment

During the quarter, in an industry-wide environment of increasing scrutiny of pharmaceutical promotional practices, Genentech's past sales and marketing efforts have been called into question by various government authorities. "In this process, we have cooperated fully with appropriate authorities," said Raab. "Though we feel our efforts have been in the best interest of public health and in compliance with the law, we are, where appropriate, modifying our practices to address concerns raised. We have and will continue to strive for high ethical standards in all areas of our business." Genentech does not expect that ongoing investigations will materially impact the company.

Research and Development Progress

Genentech continues to invest aggressively in research and development. R&D expenses in the third quarter of 1994 were $73.2 million compared to $72.3 million in the third quarter of 1993, representing about 38 percent of revenues.

Pulmozyme led Genentech's clinical development progress during the quarter with the start of the Phase III Chronic Obstructive pulmonary disease Mortality Endpoint Trial (COMET). Scheduled for completion in late 1996, the trial is comparing Pulmozyme to placebo in 5,600 hospitalized patients. The primary endpoint of the trial is reduced mortality. Raab said, "If this trial shows clinical benefits similar to those seen in our recently completed Phase II trial in hospitalized chronic bronchitis patients (where Pulmozyme showed a 61 percent reduction in mortality), it will serve as the basis for our filing for regulatory approval to market Pulmozyme for these seriously ill patients."Consistent with Genentech's goal of identifying one or two new development projects each year, the company decided to aggressively develop recombinant thrombopoietin as a potential treatment for thrombocytopenia, a dangerous reduction in blood platelets, one cause of which is cancer chemotherapies. In June, Genentech scientists reported in Nature that they had cloned and produced recombinant thrombopoietin, a blood protein that promotes the production of platelets. Genentech is currently progressing with efforts to file an Investigational New Drug (IND) application as soon as possible."With the progress of these and other products in our pipeline, we are in the fortunate position of having pharmaceuticals for significant medical needs on the market and in late, mid- and early stages of clinical trials, giving us growth prospects for today, the next several years and well into the next century," said Raab.

Genentech, Inc. is a leading biotechnology company that discovers, develops, manufactures and markets human pharmaceuticals for significant medical needs. The company has headquarters in South San Francisco, California and is traded on the New York and Pacific Stock exchanges under the symbol GNE.

*GUSTO stands for Global Utilization of t-PA and Streptokinase in Occluded coronary arteries.

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GENENTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)

	Three Months Ended September 30,

	1994		1993
Revenues
Product sales	$	142,555	$	119,733
Royalties	33,118		33,314
Contract and other	7,187		2,607
Interest	10,978		9,732
Total revenues	193,838		165,386

Costs and expenses
Cost of sales	24,460		18,551
Research and development	73,208		72,302
Marketing, general and administrative	59,341		57,181
Interest	1,843		1,836
Total costs and expenses	158,852		149,870

Income before taxes	34,986		15,516
Income tax provision	1,400		-

Net income	$	33,586	$	15,516

Net income per share	$	0.28	$	0.13

Weighted average number of shares used in computing per share amounts:	119,819		117,566

	Nine Months Ended September 30,

	1994		1993
Revenues
Product sales	$	442,927	$	333,159
Royalties	92,896		86,708
Contract and other	21,556		37,391
Interest	30,251		30,962
Total revenues	587,630		488,220

Costs and expenses
Cost of sales	71,156		52,830
Research and development	220,592		230,468
Marketing, general and administrative	180,269		159,875
Interest	5,375		4,796
Total costs and expenses	477,392		447,969

Income before taxes	110,238		40,251
Income tax provision	4,410		-

Net income	$	105,828	$	40,251

Net income per share	$	0.89	$	0.34

Weighted average number of shares used in computing per share amounts:	119,222		116,700

	September 30,
	1994		1993
Selected balance sheet data
Cash and short-term investments	$	655,264	$	566,649
Accounts receivable	126,023		126,178
Inventories	100,810		73,180
Long-term marketable securities	219,494		132,474
Property, plant and equipment, net	480,102		450,241
Other long-term assets	43,986		62,701
Total assets	1,634,590		1,419,601
Total current liabilities	194,086		166,578
Long-term debt	150,584		151,435
Total liabilities	355,185		334,325
Total stockholders' equity	1,279,405		1,085,276