Genentech Reports 1994 Fourth Quarter Results

Earnings more than double on strong revenue growth

South San Francisco, Calif. -- January 19, 1995 -- Genentech, Inc. (NYSE: GNE) announced today that earnings for 1994 increased 111 percent to $124.4 million, or $1.04 per share, from $58.9 million, or 50 cents per share, in 1993. Earnings for the fourth quarter of 1994 were $18.6 million, or 15 cents per share, compared to $18.7 million, or 16 cents per share in the fourth quarter of 1993.

Revenues for 1994 increased 22 percent to $795.4 million from $649.7 million in 1993. Revenues for the fourth quarter of 1994 increased 29 percent to $207.8 million from $161.5 million in the fourth quarter of 1993. While product sales increased in the fourth quarter, expenses also increased due to costs related to the agreement with Scios Nova announced on January 3 and the worldwide clinical trial of Pulmozyme for chronic obstructive pulmonary disease which began in the fourth quarter.

"Our revenues reflect the continued strength of our marketed products, sales of which increased 31 percent in 1994," said Genentech President and Chief Executive Officer G. Kirk Raab. "Combined with our disciplined management of expenses, these revenues translate into strong bottom line growth. The significant progress we made on important preclinical and clinical projects in 1994 will help us continue to provide growth to stockholders well into the future."

Research and development expenses for 1994 were $314.3 million compared to $299.4 million in 1993. While absolute R&D expenditures increased, R&D expenditures as a percentage of revenues decreased from 46 percent in 1993 to 40 percent in 1994 as revenues increased.

Marketed Products

Activase® (Alteplase, recombinant) sales increased 19 percent to $280.9 million from $236.3 million in 1993. During the year, Activase's market share increased from about 65 percent to more than 70 percent. Also during the year, an advisory committee of the U.S. Food and Drug Administration unanimously agreed that the rapid infusion of Activase has a clinically significant mortality benefit in the treatment of heart attacks and recommended that the new dosing regimen be incorporated into the product's labeling. Genentech anticipates approval of the new labeling in 1995. If approval is granted, the new labeling would allow the company to promote the rapid infusion regimen and the mortality benefits of Activase, which could lead to a further increase in market share.

Sales of the growth hormone products Protropin® (somatrem for injection) and Nutropin® (somatropin [rDNA origin] for injection) increased 4 percent to $225.4 million in 1994 from $216.8 million in 1993. This includes initial sales of Nutropin for the treatment of chronic renal insufficiency, for which U.S. regulatory approval was granted in December, 1993, and for growth hormone inadequacy in children, for which approval was granted in March, 1994. In the United States, Genentech is the only company that markets growth hormone for two indications.

Genentech did not face new competition in the growth hormone market in 1994, although it could at any time in 1995 following FDA approval of a competitive product. Genentech has and will continue to aggressively defend its patent position. In a suit involving Genentech's human growth hormone patents asserted against Eli Lilly and Company, Lilly agreed to pay Genentech approximately $145 million. Genentech has filed patent infringement suits with the U.S. District Court in Delaware against Novo-Nordisk and Bio-Technology General Corporation, who are seeking approval of human growth hormone products in the United States. If new competitors do enter the market, they could negatively impact future sales of Genentech's growth hormone, though the company has a plan in place to defend its position.

In 1994, initial worldwide sales of Pulmozyme® (dornase alfa inhalation solution) were $88.3 million, reflecting a growing acceptance by cystic fibrosis patients and their physicians as well as success in attaining approval for coverage from the vast majority of insurance and government providers. 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 presented in October at the North American Cystic Fibrosis Conference continue to suggest that Pulmozyme is safe and effective.

Sales of Actimmune® (Interferon gamma-1b) increased to $6.4 million in 1994 from $4.3 million in 1993. Sales of this product remain modest because the approved indication, chronic granulomatous disease, is very rare. Genentech's two Phase III trials of Actimmune in the area of renal cell carcinoma are progressing well.

Preclinical and Clinical Progress

Genentech made significant progress with important preclinical and clinical projects in 1994. Progress since 1993 to date includes:

Purified and cloned thrombopoietin, a long-sought blood factor that induces the production of platelets; Identified it as a priority clinical development project for treating patients with thrombocytopenia (a dangerous deficiency of platelets) resulting from cancer chemotherapy.
Chose as a clinical development project an oral IIb/IIIa antagonist, discovered in collaboration with Roche, as a treatment for certain cardiovascular conditions.
Began and completed Phase II clinical trials of a monoclonal antibody for treating allergic rhinitis and asthma.
Completed Phase I trials and began Phase II trials for nerve growth factor for treating peripheral neuropathies resulting from diabetes.
Completed Phase II clinical trials of HER2 humanized monoclonal antibody for treating metastatic breast cancer.
In collaboration with Roche, began an international Phase III clinical trial of Pulmozyme for treating acute exacerbations of chronic obstructive pulmonary disease.
Filed with the FDA for regulatory approval to market a liquid version of Nutropin that would simplify preparation and administration.
Discontinued development of gp120 as a therapeutic for HIV-1 infection and IGF-1 as a treatment for AIDS wasting because, in each case, Phase II clinical trials did not demonstrate efficacy.
Determined to seek development partners for TGF-? and a CD18 antibody because, though scientifically promising, they did not continue to meet Genentech's strict development criteria.
Remaining projects in Genentech's pipeline continued progress in clinical trials begun in 1993 or earlier.

In addition, Genentech entered into a collaboration with Scios Nova to co-develop its Auriculinreg. (anaritide), currently in a Phase III clinical trial for the treatment of acute renal failure.

"1994 results show Genentech is on the right path," said Raab. "Our clear focus, disciplined management, strong products and rich pipeline should lead to continued strong growth."

Genentech, Inc. is a leading biotechnology company that discovers, develops, manufactures and markets human pharmaceuticals for significant medical needs. Ten of the currently marketed biotechnology products stem from Genentech research, five of which Genentech markets directly. Genentech is headquartered in South San Francisco, California, and is traded on the New York and Pacific Stock Exchanges under the symbol GNE.

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

	Three Months Ended December 31,

	1994		1993
Revenues
Product sales	$	158,137	$	124,201
Royalties	33,126		26,164
Contract and other	4,000		566
Interest	12,497		10,598
Total revenues	207,760		161,529

Costs and expenses
Cost of sales	24,673		17,684
Research and development	93,730		68,928
Marketing, general and administrative	68,335		54,535
Interest	1,683		1,731
Total costs and expenses	188,421		142,878

Income before taxes	19,339		18,651
Income tax provision	773		-

Net income	$	18,566	$	18,651

Net income per share	$	0.15	$	0.16

Weighted average number of shares used in computing per share amounts:	120,193		118,323

	Year Ended December 31,

	1994		1993
Revenues
Product sales	$	601,064	$	457,360
Royalties	126,022		112,872
Contract and other	25,556		37,957
Interest	42,748		41,560
Total revenues	795,390		649,749

Costs and expenses
Cost of sales	95,829		70,514
Research and development	314,322		299,396
Marketing, general and administrative	248,604		214,410
Interest	7,058		6,527
Total costs and expenses	665,813		590,847

Income before taxes	129,577		58,902
Income tax provision	5,183		-

Net income	$	124,394	$	58,902

Net income per share	$	1.04	$	0.50

Weighted average number of shares used in computing per share amounts:	119,465		117,106

	December 31,
	1994		1993
Selected balance sheet data
Cash and short-term investments	$	719,174	$	657,111
Accounts receivable	146,267		130,469
Inventories	103,200		84,725
Long-term marketable securities	201,726		62,657
Property, plant and equipment, net	485,293		456,732
Other long-term assets	60,989		64,074
Total assets	1,745,124		1,468,800
Total current liabilities	220,499		190,748
Long-term debt	150,358		151,230
Total liabilities	396,340		351,995
Total stockholders' equity	1,348,784		1,116,805