Monday, Jul 14, 2008
South San Francisco, Calif -- July 14, 2008 --Genentech, Inc. (NYSE: DNA) today announced financial results for the second quarter of 2008. Key results for the second quarter of 2008 include:
|Non-GAAP Diluted EPS||Employee Stock-Based Compensation Expense||Net Charges related to Redemption, Acquisition and Special Items||Reported GAAP Diluted EPS|
Note: Amounts may not sum due to rounding.
The company is currently forecasting that full-year 2008 non-GAAP earnings are likely to be in the range of $3.40 to $3.50 per share, revised from $3.35 to $3.45 per share.1
Product Sales and Royalty Revenue
Information on product sales for the three months ended June 30, 2008 and 2007, are provided in the following tables (dollars in millions):
Ended June 30,
+ Second 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. The net deferral related to the program in the second quarter of 2007 was not significant.
++ Amounts may not sum due to rounding.
Non-GAAP royalty revenue for the second quarter of 2008 was $625 million, a 29 percent increase over the second quarter of 2007.1 Excluding the impact of a collaboration agreement in the second quarter of 2007, which resulted in one-time royalty revenue of approximately $65 million in that quarter, non-GAAP royalty revenue in the second quarter of 2008 increased 49 percent. GAAP royalty revenue of $629 million in the second quarter of 2008 increased 30 percent over the second quarter of 2007. The increase was primarily due to growth in ex-U.S. sales of Genentech's products by collaborators and related foreign exchange 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 June 30, 2008 and 2007, are provided in the following tables (dollars in millions)2:
Ended June 30,
Reported non-GAAP and GAAP COS for the second quarter of 2008 both include a charge of approximately $50 million, related to failed lots from a manufacturing start-up campaign at one of Genentech's facilities.
Ended June 30,
|COS as a % of product sales||17%||17%|
|R&D as a % of operating revenue||19%||19%|
|MG&A as a % of operating revenue||16%||16%|
|COS as a % of product sales||17%||18%|
|R&D as a % of operating revenue||20%||20%|
|MG&A as a % of operating revenue||17%||18%|
Other Financial Items
The non-GAAP and GAAP income tax rates of 40 percent for the second quarter of 2008 include a $33 million settlement with the Internal Revenue Service related to prior years that was resolved in the second quarter of 2008.
Genentech announced that enrollment was completed in seven Phase II and Phase III studies during the second quarter of 2008. These studies included two combination Phase III studies for Avastin®(bevacizumab) and Tarceva®(erlotinib) in first-line and second-line metastatic non-squamous non-small cell lung cancer (NSCLC) and a Phase II study for Trastuzumab-DM1 in HER2-positive metastatic breast cancer patients who have progressed on HER2-directed therapy.Genentech also announced that, with its collaborator Abbott, it initiated a Phase II trial of ABT-869, a VEGFR targeted kinase inhibitor, in combination with chemotherapy for patients with advanced NSCLC. In addition, Genentech initiated a Phase III combination study (BETH) of Avastin and Herceptin®(Trastuzumab) for patients with adjuvant HER2-positive breast cancer.
Genentech will be offering a live webcast of a discussion by Genentech management of its financial and other business results on Monday, July 14, 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 August 4, 2008. A telephonic audio replay of the webcast will be available beginning at 4:45 p.m. PT on July 14, 2008 through 4:45 p.m. PT on July 21, 2008. Access numbers for this replay are: 1-800-642-1687 (U.S./Canada) and 1-706-645-9291 (international); conference ID number is 49949746.
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 a forward-looking statement regarding expected growth in non-GAAP earnings per share for 2008. Such a statement is a prediction and involves 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; Biologics License Application preparation and decision making; U.S. Food and Drug Administration (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 revenue 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.
2Genentech's second quarter 2008 non-GAAP reported COS, R&D and MG&A expenses exclude the effects of employee stock-based compensation expense of $18 million, $38 million, and $41 million, respectively. Second quarter 2007 non-GAAP reported COS, R&D and MG&A expenses exclude the effects of employee stock-based compensation expense of $16 million, $39 million, and $47 million, respectively. The differences in non-GAAP and GAAP amounts are reconciled in the accompanying tables and on http://www.gene.com.