Thursday, Apr 10, 2008

Genentech Announces First Quarter 2008 Results

South San Francisco, Calif. -- April 10, 2008 --

Genentech, Inc. (NYSE: DNA) today announced financial results for the first quarter of 2008. Key results for the first quarter of 2008 include:
  • U.S. product sales of $2,205 million, an 8 percent increase from U.S. product sales of $2,037 million in the first quarter of 2007.
  • Non-GAAP operating revenues of $3,059 million1, an 8 percent increase from operating revenues of $2,843 million in the first quarter of 2007; GAAP operating revenues of $3,063 million.
  • Non-GAAP net income of $895 million, a 13 percent increase from $792 million in the first quarter of 20071; GAAP net income of $790 million, a 12 percent increase from $706 million in the first quarter of 2007.
  • Non-GAAP earnings per share of $0.84, a 14 percent increase from $0.74 per share in the first quarter of 20071; GAAP earnings per share of $0.74, a 12 percent increase from $0.66 per share in the first quarter of 2007.

Reconciliations between non-GAAP and GAAP earnings per share for first quarters of 2008 and 2007 are provided in the following table:

  Non-GAAP Diluted EPS Employee Stock-Based Compensation Expense Net Charges related to Redemption, Acquisition and Special Items Reported GAAP Diluted EPS
Q1 2008 $0.84 ($0.07) ($0.03) $0.74
Q1 2007 $0.74 ($0.06) ($0.02) $0.66

The company continues to forecast full-year 2008 non-GAAP earnings to be in the range of $3.35 to $3.45 per share.1

Product Sales and Royalty Revenues
Information on product sales for the three months ended March 31, 2008 and 2007, are provided in the following tables (dollars in millions):

 

Three Months
Ended March 31,

 

 

2008

2007

% Change

Rituxan® $605 $535 13%
Avastin®+ 600 533 13
Herceptin® 339 311 9
Lucentis® 198 211 (6)
Xolair® 117 111 5
Tarceva® 111 102 9
Nutropin® Products 84 91 (8)
Thrombolytics 67 68 (1)
Pulmozyme® 57 52 10
Raptiva®
26
24
8
Total U.S. product sales ++ $2,205 $2,037 8
     
Net product sales to collaborators
174
292
(40)
Total product sales ++
$2,379
$2,329
2

+ First quarter 2008 Avastin U.S. product sales results include a net deferral of approximately $1 million in conjunction with the company's Avastin Patient Assistance Program. First quarter 2007 Avastin U.S. product sales results included a net deferral of approximately $3 million.
++ Amounts may not sum due to rounding.

The company also reported that non-GAAP royalty revenues were $612 million1 in the first quarter of 2008, a 46 percent increase from the first quarter of 2007. The increase was primarily due to growth in ex-U.S. sales of products by collaborators Roche and Novartis, in addition to foreign exchange related benefits of the weak dollar.

Total Costs and Expenses
Information on costs and expenses including cost of sales (COS), research and development (R&D) and marketing, general and administrative (MG&A) expenses for the three months ended March 31, 2008 and 2007, are provided in the following tables (dollars in millions)2:

 

Three Months
Ended March 31,

 

 

2008

2007

% Change

non-GAAP2       COS $367 $376 (2)% R&D 575 572 1  MG&A 471 445 6  GAAP       COS 389 392 (1)  R&D 617 610 1 MG&A 517 491 5

Note: Genentech's first quarter 2008 non-GAAP reported COS, R&D and MG&A expenses exclude the effects of employee stock-based compensation expense of $22 million, $42 million, and $46 million, respectively. First quarter 2007 non-GAAP reported COS, R&D and MG&A expenses exclude the effects of employee stock-based compensation expense of $16 million, $38 million, and $46 million, respectively.2

 

Three Months Ended
March 31,

 

2008

2007

non-GAAP2    
COS as a % of product sales 15% 16%
R&D as a % of operating revenues 19% 20%
MG&A as a % of operating revenues 15% 16%
GAAP    
COS as a % of product sales 16% 17%
R&D as a % of operating revenues 20% 21%
MG&A as a % of operating revenues 17% 17%

Clinical Development
Genentech expects to submit the supplemental Biologics License Application (sBLA) to the U.S. Food and Drug Administration (FDA) for accelerated approval of Avastin® (bevacizumab) for the treatment of relapsed glioblastoma multiforme in the second half of 2008. Data will be presented at the 2008 annual meeting of the American Society of Clinical Oncology (ASCO).

Genentech announced that the Phase III study sponsored by its collaborator Novartis evaluating Xolair® (Omalizumab) for subcutaneous use in patients 6 to 11 years of age with moderate-to-severe, persistent, inadequately controlled allergic asthma met its primary endpoint, demonstrating a statistically significant reduction in exacerbations in Xolair-treated patients compared with placebo-treated patients with no new safety signals reported. The companies will evaluate the complete study results and feedback from the FDA to determine appropriate next steps. The data will be presented at a medical conference later this year.

Webcast
Genentech will be offering a live webcast of a discussion by Genentech management of its financial and other business results on Thursday, April 10, 2008, at 1:45 p.m. Pacific Time (PT). The live webcast may be accessed on Genentech's website at http://www.gene.com. This webcast will be available via the website until 5:00 p.m. PT on May 1, 2008. A telephonic audio replay of the webcast will be available beginning at 4:45 p.m. PT on April 10, 2008 through 4:45 p.m. PT on April 17, 2008. Access numbers for this replay are: 1-800-642-1687 (U.S./Canada) and 1-706-645-9291 (international); conference ID number is 39992140.

About Genentech
Founded more than 30 years ago, Genentech is a leading biotechnology company that discovers, develops, manufactures and commercializes medicines to treat patients with significant unmet medical needs. The company has headquarters in South San Francisco, California and is listed on the New York Stock Exchange under the symbol DNA. For additional information about the company, please visit http://www.gene.com.

About Genentech's Commitment to Patient Access
Genentech is committed to patients having access to our therapies. Through its Genentech Access Solutions program, the company provides patients and healthcare providers with coverage and reimbursement support, patient assistance and informational resources. Patient assistance support is for those eligible patients in the United States who do not have insurance coverage or who cannot afford their out-of-pocket co-pay costs. Since 1985, when its first product was approved, Genentech has donated approximately $1 billion in free medicine to uninsured patients through the Genentech® Access to Care Foundation (GATCF) and other product donation programs. Since 2005, Genentech has also donated more than $140 million to various independent, non-profit organizations that provide financial assistance to eligible patients who cannot access needed medical treatment due to co-pay costs.

For information on Genentech's latest business and product development events please refer to http://www.gene.com/gene/news/press-releases/index.jsp.

This press release contains forward-looking statements regarding the presentation of data from clinical studies of Xolair and Avastin, the submission of an sBLA to the FDA for Avastin, and expected growth in non-GAAP earnings per share for 2008. Such statements are predictions and involve risks and uncertainties such that actual results may differ materially. Such risks and uncertainties include, but are not limited to, the need for additional data, data analysis or clinical studies; the results of clinical trials; BLA preparation and decision making; FDA actions or delays; failure to obtain or maintain FDA approval; difficulty in obtaining materials from suppliers; unexpected safety, efficacy or manufacturing issues for us or our contract/collaborator manufacturers; product withdrawals; competition; efficacy data concerning any of our products which shows or is perceived to show similar or improved treatment benefit at a lower dose or shorter duration of therapy; pricing decisions by us or our competitors; our ability to protect our proprietary rights; the outcome of, and expenses associated with, litigation or legal settlements; our cost of sales, other expenses and indebtedness; variations in collaborator sales and expenses; fluctuations in contract revenues and royalties; actions by Roche that are adverse to our interests; decreases in third party reimbursement rates; and changes in accounting or tax laws or the application or interpretation of such laws. Please also refer to Genentech's periodic reports filed with the Securities and Exchange Commission. Genentech disclaims, and does not undertake, any obligation to update or revise forward-looking statements in this press release.

###

1 Genentech's non-GAAP royalty revenues and operating revenues exclude recognition of deferred royalty revenue associated with the acquisition of Tanox, Inc. of $4 million. In the first quarter of 2008, GAAP royalty revenues and GAAP operating revenues were $616 million and $3,063 million, respectively. Genentech's non-GAAP net income and non-GAAP earnings per share exclude the after-tax impact of certain items associated with the acquisition of Tanox, Inc., (including recurring recognition of deferred royalty revenue and recurring amortization of intangible assets); recurring charges related to the 1999 redemption of Genentech's stock by Roche Holdings, Inc.; litigation-related and similar special items; and employee stock-based compensation expense. The differences in non-GAAP and GAAP amounts are reconciled in the accompanying tables and on http://www.gene.com.

2 Genentech's non-GAAP reported COS, R&D and MG&A expenses exclude the effects of employee stock-based compensation expense associated with Genentech's adoption of FAS 123R on January 1, 2006. The differences in non-GAAP and GAAP amounts are reconciled in the accompanying tables and on http://www.gene.com.

View financial information online
Download financial information in PDF format (14K)

View revised financial information reflecting the City of Hope litigation settlement on April 24, 2008.
Download revised financial information in PDF format (April 24, 2008)