Monday, Jan 5, 1987

Genentech Completes Early Buyout Or First Two R&D Partnerships

South San Francisco, Calif. -- January 5, 1987 --

Genentech, Inc. (NASDAQ:GENE) announced today that it finalized the purchase of its first two R&D partnerships, Genentech Clinical Partners, Ltd. (GCP) and Genentech Clinical Partners II (GCP II). The limited partners approved the purchase of the assets of each partnership by Genentech last week.

Genentech has issued approximately five million shares of common stock in exchange for the assets of GCP and GCP II. The company accounted for the transactions in the fourth quarter ended December 31, 1986.

With the purchase, Genentech now owns exclusive U.S. rights to Protropin® human growth hormone, gamma interferon and Activase® tissue plasminogen activator (t-PA), products which were developed by the partnerships.

Buying out the partnerships ahead of schedule benefits both Genentech and the partnerships and investors, said Robert A. Swanson, chief executive officer. Acquiring the rights to the products now will have a positive impact on Genentech's future earnings and will reduce future taxes. The limited partners receive early liquidity and a return greater than the returns projected in the original offerings.

Because most of the products, owned by the partnerships continue to be in the R&D phase, current accounting rules for the purchase of in-process R&D require Genentech to record a significant portion of the purchase price of the partnerships as a one-time, non-cash expense. The remainder of the purchase price, which relates principally to Protropin, and FDA-approved product, will be capitalized and amortized over the product's useful life. Accounting rules require that the company reflect the acquisition of the in-process R&D through its income statement, which will appear as a one-time non-cash expense of approximately $370 million. Partnership,Product Details
The partnerships provided primary funding of clinical testing and product development and three Genentech products. GCP raised $55 million in 1982 to fund development of Protropin and gamma interferon and GCP II raised $34 million in 1983 to fund development of Activase. Protropin was approved by the Food and Drug Administration (FDA) in October 1985 for the treatment of children with growth hormone inadequacies and is being manufactured and marketed by Genentech. Gamma interferon is in clinical testing as a treatment for various cancers and viral infections. Activase has been tested extensively in the treatment of life-threatening blood clots. Genentech filed a Product License Application with the FDA in April 1986 for approval to market the product for the treatment of heart attacks. Genentech is a leading biotechnology company focusing on the development, manufacture and marketing of pharmaceuticals produced by recombinant DNA technology.

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