Tuesday, Jul 18, 1989

Genentech Reports Second Quarter Earnings

South San Francisco, Calif. -- July 18, 1989 --

Genentech, Inc. reported earnings for the second quarter of $9.6 million or 11 cents per share, compared with $15.5 million or 18 cents per share for the same quarter last year. The biotechnology company said earnings were lower primarily because of continued higher levels of spending for new product development and marketing.

Net sales of Genentech's heart attack drug, Activase®, or tissue plasminogen activator (t-PA), were $48.0 million compared with $49.2 million for the same quarter in 1988. The 1989 figure primarily reflects actual usage. It does not include the substantial stocking assistance programs that were successfully implemented during the second quarter of 1988 to ensure that small community hospitals as well as large hospitals had Activase available for heart attack victims. Activase sales in the first quarter of this year were $48.1 million, which was up substantially from the third and fourth quarters of last year.

"We are encouraged that sales of Activase remain on target thus far for meeting our 1989 goal of increasing sales 20 to 25 percent," said Robert A. Swanson, chief executive officer. "We believe sales levels for the first half of this year indicate increased actual usages levels over the same period for last year."

Total revenues for the quarter were $97.9 million, up 9 percent from $89.3 million last year. Net product sales were $79.1 million, up from $75.1 million a year ago. Net sales of Protropin®, human growth hormone, were $31.1 million, compared with $25.9 million in the same quarter last year.

Genentech's research and development expenses increased from $32.8 million in the second quarter of 1988 to $38.3 million in the same period this year. Marketing, general and administrative expenses also were up, from $24.2 million to $32.1 million. In both areas, expenses continued at levels similar to those which began in the second half of 1988.

Genentech, Inc. is a biotechnology company focusing on the development, manufacture and marketing of pharmaceutical products produced by recombinant DNA technology.

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GENENTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)
(unaudited)

Three Months
Ended June 30,

1989 1988
Revenues
   Product sales $ 79,098 $ 75,085
   Contract 14,851 10,925
   Interest 3,939 3,276
      Total revenues 97,888 89,286
     
Costs and expenses
   Cost of sales 14,642 13,422
   Research and development 38,293 32,847
   Marketing, general and administrative 32,120 24,180
   Interest 1,954 1,864
      Total costs and expenses 87,009 72,313
     
Income before taxes 10,879 16,973
Income tax provision 1,283 1,499
     
Net income $ 9,596 $ 15,474
     
Net income per share $ 0.11 $ 0.18
     
Weighted average number of shares used in
   computing per share amounts:
85,259 84,732
 
Six Months
Ended June 30,

1989 1988
Revenues
   Product sales $ 152,071 $ 138,606
   Contract 29,136 18,847
   Interest 7,783 6,257
      Total revenues 188,990 163,710
     
Costs and expenses
   Cost of sales 28,579 22,726
   Research and development 76,012 59,228
   Marketing, general and administrative 61,148 42,930
   Interest 3,929 3,957
      Total costs and expenses 169,668 128,841
     
Income before taxes 19,322 34,869
Income tax provision 2,296 4,184
     
Net income $ 17,026 $ 30,685
     
Net income per share $ 0.20 $ 0.36
     
Weighted average number of shares used in
   computing per share amounts:
85,207 84,903
 
June 30,
1989 1988
Selected balance sheet data
   Cash and short-term investments $ 163,392 $ 166,836
   Accounts receivable 72,766 72,150
   Inventories 56,360 79,654
   Total assets 689,102 668,171
   Total stockholders' equity 424,752 401,880