Thursday, Jan 15, 2009

Genentech Announces Full Year And Fourth Quarter 2008 Results

South San Francisco, Calif. -- January 15, 2009 --

Genentech, Inc. (NYSE: DNA) today announced financial results for the full year and fourth quarter of 2008. Key results for the full year 2008 include:
  • U.S. product sales of $9,503 million, an 11 percent increase from $8,540 million in 2007.
  • Non-GAAP operating revenue of $13,403 million, a 14 percent increase from $11,718 million in 20071; GAAP operating revenue of $13,418 million, a 14 percent increase from $11,724 million in 2007.
  • Non-GAAP net income of $3,643 million, a 16 percent increase from $3,142 million in 20071; GAAP net income of $3,427 million, a 24 percent increase from $2,769 million in 2007.
  • Non-GAAP earnings per share of $3.42, a 16 percent increase from $2.94 in 20071; GAAP earnings per share of $3.21, a 24 percent increase from $2.59 in 2007.

"We are pleased that 2008 was another year of solid financial growth for Genentech. In addition, our late-stage and early-stage development efforts progressed well across our focus areas with four sBLA filings submitted for serious diseases in oncology and immunology, and Phase I clinical trials initiated for eight new molecular entities, including in neuroscience," said Arthur D. Levinson, Ph.D., Genentech's chairman and chief executive officer. "In 2009, we have the potential to receive four FDA approvals and we anticipate filing more than ten regulatory applications for new indications."

The company announced it is currently forecasting full-year 2009 non-GAAP earnings to be in the range of $3.55 to $3.90 per share1, recognizing that there are a large number of business uncertainties that make it a difficult year to forecast.

Other Financial Results
Key results for the fourth quarter of 2008 include:

  • U.S. product sales of $2,495 million, a 13 percent increase from $2,199 million in the fourth quarter of 2007.
  • Non-GAAP operating revenue of $3,703 million, a 25 percent increase from $2,966 million in the fourth quarter of 20071; GAAP operating revenue of $3,707 million, a 25 percent increase from $2,970 million in the fourth quarter of 2007.
  • Non-GAAP net income of $1,014 million, a 38 percent increase from $737 million in the fourth quarter of 20071; GAAP net income of $931 million, a 47 percent increase from $632 million in the fourth quarter of 2007.
  • Non-GAAP earnings per share of $0.95, a 38 percent increase from $0.69 in the fourth quarter of 20071; GAAP earnings per share of $0.87, a 47 percent increase from $0.59 in the fourth quarter of 2007.

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

 

Non-GAAP Diluted EPS1

Employee Stock-Based Compensation? Expense

Net Charges related to Redemption, Tanox Acquisition and Special Items2

In-process Research and Development Expense Related to Tanox Acquisition

 

 

Non-Cash Gain on Tanox Acquisition

Reported GAAP Diluted EPS1

FY 2008

$3.42

($0.25)

$0.04

-

-

$3.21

FY 2007

$2.94

($0.24)

($0.10)

($0.07)

$0.07

$2.59

Q4 2008

$0.95

($0.05)

($0.03)

-

-

$0.87

Q4 2007

$0.69

($0.07)

($0.03)

-

-

$0.59

Note: Amounts may not sum due to rounding.

Product Sales and Total Operating Revenue
Information on product sales and total operating revenue for the three months and years ended December 31, 2008 and 2007, are provided in the following table (dollars in millions):

 

Three Months Ended
December 31,

 

 

Year
Ended
December 31,

 

 

2008

2007

% Change

 

2008

2007

% Change

Avastin®i

$731

$603

21%

 

$2,686

$2,296

17%

Rituxan®

677

596

14

 

2,587

2,285

13

Herceptin®

336

327

3

 

1,382

1,287

7

Lucentis®

236

197

20

 

875

815

7

Xolair®

135

120

13

 

517

472

10

Tarceva®

118

112

5

 

457

417

10

Nutropin® Products

90

93

(3)

 

358

371

(4)

Thrombolytics

74

66

12

 

275

268

3

Pulmozyme®

72

58

24

 

257

223

15

Raptiva®

25

28

(11)

 

108

107

1

 

Total U.S. product salesii

$2,495

$2,199

13%

 

$9,503

$8,540

11%

 

Net product
sales to collaborators

 

486

 

150

 

224

 

 

1,028

 

903

 

14

Total product salesii

$2,981

$2,349

27%

 

$10,531

$9,443

12%

 

 

 

 

 

 

 

 

Non-GAAP royalty revenueiii

603

554

9

 

2,524

1,978

28

Contract revenue

119

63

89

 

348

297

17

 

 

 

 

 

 

 

 

Non-GAAP total operating revenue1

$3,703

$2,966

25%

 

$13,403

$11,718

14%

i Fourth-quarter and full-year 2008 Avastin U.S. product sales results include net deferrals of approximately $2 million and $5 million, respectively, in conjunction with the company's Avastin Patient Assistance Program launched in February 2007.
ii Amounts may not sum due to rounding.
iiiGAAP royalty revenue of $607 million in the fourth quarter of 2008 increased 9 percent from $558 million in the fourth quarter of 2007; GAAP royalty revenue of $2,539 for the full year 2008 increased 28 percent from $1,984 million in 2007.

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 and years ended December 31, 2008 and 2007, are provided in the following tables (dollars in millions)3:

 

Three Months Ended
December 31,

 

 

Year
Ended
December 31,

 

 

2008

2007

% Change

 

2008

2007

% Change

non-GAAP3

COS

$483

$322

50%

 

$1,662

$1,500

11%

R&D

724

579

25

 

2,648

2,293

15

MG&A

675

650

4

 

2,211

2,077

6

GAAP

COS

503

344

46

 

1,744

1,571

11

R&D

757

618

22

 

2,800

2,446

14

MG&A

718

692

4

 

2,405

2,256

7



 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

2008

2007

 

2008

2007

non-GAAP 3

COS as a % of product sales

16%

14%

 

16%

16%

R&D as a % of operating revenues

20%

20%

 

20%

20%

MG&A as a % of operating revenues

18%

22%

 

16%

18%

GAAP

COS as a % of product sales

17%

15%

 

17%

17%

R&D as a % of operating revenues

20%

21%

 

21%

21%

MG&A as a % of operating revenues

19%

23%

 

18%

19%

Clinical Development
In the fourth quarter of 2008, Genentech completed enrollment in three Phase III Lucentis® (ranibizumab injection) trials, including for the treatment of retinal vein occlusion (BRAVO and CRUISE studies) and diabetic macular edema (RISE study).

In December of 2008, Genentech submitted a supplemental Biologics License Application (sBLA) to the U.S. Food and Drug Administration (FDA) for Xolair ® (Omalizumab) to extend its current asthma indication to the pediatric setting for children 6 and older.

The company also received dates for Prescription Drug User Fee Act (PDUFA) reviews of its two sBLA submissions for Avastin® (bevacizumab) in relapsed glioblastoma (May 5, 2009) and Avastin in combination with interferon alfa-2a therapy for patients with first-line metastatic renal cell carcinoma (August 1, 2009).

Webcast
Members of Genentech's management team will be participating in a conference call to discuss the company's financial and other business results on Thursday, January 15, 2009, at 1:45 p.m. Pacific Time (PT). Live audio of the conference call will be broadcast simultaneously over the internet and may be accessed on Genentech's web site at http://www.gene.com. The webcast and any corresponding materials will be archived and available for replay until 5:00 p.m. PT on February 5, 2009.

A telephonic audio replay of the webcast will be available beginning at 4:45 p.m. PT on January 15, 2009 through 4:45 p.m. PT on January 22, 2009. Access numbers for this replay are: 1-800-642-1687 (U.S./Canada) and 1-706-645-9291 (international); conference ID number is 75928763.

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 $1.3 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 approximately $250 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 submitting more than ten regulatory applications, the potential to receive four FDA approvals, and expected growth in non-GAAP earnings per share for 2009. 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, manufacturing or distribution issues for Genentech or its contract/collaborator manufacturers; product withdrawals; competition; efficacy data concerning any Genentech product which shows or is perceived to show similar or improved treatment benefit at a lower dose or shorter duration of therapy; pricing decisions by Genentech or its competitors; Genentech's ability to protect its proprietary rights; the outcome of, and expenses associated with, litigation or legal settlements; 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 the interests of Genentech; the outcome of, or developments concerning, Roche's proposal to acquire Genentech's outstanding shares; decreases in third party reimbursement rates; the ability of wholesalers to effectively distribute Genentech's products; and changes in accounting or tax laws or the application or interpretation of such laws. Please also refer to the risk factors identified in 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.

1Genentech's non-GAAP operating revenue and royalty revenue exclude recognition of deferred royalty revenue associated with the acquisition of Tanox, Inc. of $4 million for both the fourth quarters of 2008 and 2007, $15 million for the full year 2008, and $6 million for the full year 2007. 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 (including recurring recognition of deferred royalty revenue, recurring amortization of intangible assets, in-process research and development expenses [Q3 2007 only], a gain pursuant to Emerging Issues Task Force Issue No. 04-1 [Q3 2007 only], and asset impairment charges [Q3 2008 only]); recurring charges related to the 1999 redemption of Genentech's stock by Roche Holdings, Inc.; litigation-related and similar special items (in 2008, amount includes the net settlement related to the City of Hope (COH) trial judgment and additional costs accrued based on the status of negotiations between the parties on amounts owed for periods subsequent to the original court judgment rendered in 2002); employee stock-based compensation expense; and certain expenses incurred by the company on behalf of the Special Committee in connection with its review of the Roche Proposal, as well as legal costs incurred in defense of the Special Committee and/or its individual members in shareholder lawsuits filed in connection with the Roche Proposal. The differences in non-GAAP and GAAP amounts are reconciled in the accompanying tables and on http://www.gene.com.

2 Full-year 2008 results include a net favorable adjustment of $0.16 per share related to the COH contract dispute and litigation settlement, offset by intangibles amortization related to the 1999 redemption of Genentech's stock by Roche and the 2007 acquisition of Tanox, Roche Proposal-related fees incurred on behalf of the Special Committee, and other items related to the acquisition of Tanox, including recognition of deferred royalty revenue and asset impairment charges, totaling $0.12 per share.? Full-year 2007 results include accrued interest and bond costs related to the COH trial judgment, intangibles amortization related to the 1999 redemption of Genentech's stock by Roche and the 2007 acquisition of Tanox, partially offset by recognition of deferred royalty revenue related to the acquisition of Tanox.

3 Genentech's full-year 2008 non-GAAP reported COS, R&D and MG&A expenses exclude the effects of employee stock-based compensation expense of $82 million, $152 million, and $165 million, respectively, and MG&A expense also excludes asset impairment charges of $15 million related to the acquisition of Tanox and charges of $14 million associated with supporting the Special Committee in connection with the Roche Proposal. Full-year 2007 non-GAAP reported COS, R&D and MG&A expenses exclude the effects of employee stock-based compensation expense of $71 million, $153 million, and $179 million, respectively. Genentech's fourth quarter 2008 non-GAAP reported COS, R&D and MG&A expenses exclude the effects of employee stock-based compensation expense of $20 million, $33 million, and $35 million, respectively, and MG&A expense also excludes charges of $8 million associated with supporting the Special Committee in connection with the Roche Proposal. Fourth quarter 2007 non-GAAP reported COS, R&D and MG&A expenses exclude the effects of employee stock-based compensation expense of $22 million, $39 million, and $42 million, respectively. The differences in non-GAAP and GAAP amounts are reconciled in the accompanying tables and on http://www.gene.com.

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