Friday, Feb 2, 1990

Genentech and Roche Holding LTD Form Pioneering Relationship; Roche to Own 60 Percent of an Independent Genentech

South San Francisco, Calif. -- February 2, 1990 --

Genentech, Inc. (NYSE:GNE) and Roche Holding Ltd today agreed to a pioneering agreement in which Roche will invest approximately $492 million in capital into Genentech and purchase half of its stock for $36 per share. The $36 price is a 65 percent premium above the closing stock price yesterday. After the transaction, there will be approximately 112 million voting shares of Genentech stock outstanding, of which Roche will own 60 percent.

So as to maintain its unique science-driven culture for the benefit of all stockholders, Genentech will continue as an independent, publicly traded company. Under the agreement, Roche will have two members on the Genentech board of directors, which will be expanded from 11 to 13 members.

The transaction, which will be structured as a merger, will be submitted to Genentech stockholders for approval at a meeting planned for April.

"Genentech will have the resources and the independence to fully deliver the dream of biotechnology," said Robert A. Swanson, founder of Genentech. "I believe that by the turn of the century essentially every new drug will be touched in its development by biotechnology."

"Long-term commitment to medical research is often at odds with today's short-term investment focus. We now have the ability to build Genentech's revenues and profits by taking advantage of our abundant product pipeline," Swanson said.

Under the agreement, which the Genentech board of directors approved today, Genentech stockholders will receive $36 per share in cash for half their shares.

The other half of Genentech's outstanding shares will be converted into new Genentech redeemable common stock, which will be substantially identical to the existing Genentech common stock, except that it will be redeemable at the option of Roche. Roche will have the right to exercise its option, providing it does so for all of Genentech's outstanding shares, at $38 per share prior to December 31, 1990 and at $39 per share from January 1, 1991 to March 31, 1991. Thereafter, the redemption price becomes $40 per share and increases by $1.25 per share every quarter to $60 per share on April 1, 1995. The redemption right expires on June 30, 1995.

Genentech expects that it will incur a one-time charge of approximately $150 million in merger related expenses at the time of consummation of the merger.

Independent of the redemption right, Roche has the right to purchase, in the open stock market, up to a maximum of an additional 15 percent of Genentech stock, beyond the initial 60 percent holding.

"Roche's $2.1 billion total investment will be best served if Genentech continues to operate in the manner that led to its impressive success in such a short time," Fritz Gerber, chairman and chief executive officer of Roche said. "We are committed that Genentech proceed with its business and maintain its enterprising spirit with autonomy. Both companies will retain independent control of their research agendas and continue their existing business relationships with other pharmaceutical and biotechnology firms."

"We have high esteem for the scientists, employees and management of Genentech," Gerber said. "We are delighted that the discussions initiated by Genentech have proven so beneficial to all parties."

Genentech's board of directors also announced today that Robert A. Swanson, founder and chief executive officer of Genentech, has been elected chairman of the board of directors of Genentech. G. Kirk Raab, who had been president and chief operating officer, has been elected president and chief executive officer.

"Genentech has just completed the most successful year in its history with $400 million in revenues and having invested 40 percent of that in R&D while still earning 11 percent profit after tax," Swanson said. "This extraordinary agreement helps assure our future and the continuation of our unique culture and scientific traditions. It is now appropriate for me to change my role, but not my commitment to the next stage of Genentech's growth."

Genentech, Inc. is a leading biotechnology company with 1,770 employees and headquarters in South San Francisco, California. Genentech has one of the five largest hospital-based sales forces in the U.S. pharmaceutical industry and also directly markets its products in Canada. Its two marketed products are Activase, t-PA, for heart attack patients and Protropin, a treatment for growth hormone deficient children. Sales of those products last year were $196 million and $123 million, respectively.

Genentech offers a rare blend of academic and entrepreneurial creativity which puts it at the leading edge of scientific research. Genentech research produced four of the first six biotechnology drugs approved in the United States. Genentech has recorded a number of firsts in the biotechnology industry including producing the first human protein in a microorganism (somatostatin in 1977); the pioneering work on the first recombinant DNA technology product to reach the marketplace (human insulin in 1982); and Genentech was the first biotechnology company to manufacture and market a pharmaceutical product (human growth hormone in 1985).

Roche has conducted business in the United States since 1905 and currently has in excess of 15,000 U.S. employees as well as substantial research and manufacturing facilities in the United States. Group sales in the United States alone last year were more than $2 billion.

Roche is a leading research-oriented health care company which operates on a world-wide basis with sales of $6.5 billion and facilities in 52 countries. The company has major research centers in Basel, Switzerland; Nutley, New Jersey; Welwyn, England and Kakamura, Japan, as well as two basic research institutes located in Basel and Nutley.

The major focus of Roche's work lies in prescription medicines, with particular emphasis on anti-infectives, cardiovasculars, CNS-drugs, dermatologicals, anti-inflammatory drugs and biotechnology-derived products. Roche also is a major researcher and developer of diagnostic products. Furthermore, it provides clinical laboratory services for the health profession, as well as bulk ingredients and vitamins for the pharmaceutical, food and animal feed industries. Roche is a well-known producer of flavors and fragrances and operates a plant protection division.

Roche has received world-wide recognition for the important contributions of its scientists, in basic as well as applied research, which has resulted in a great number of important innovations in the health care field.

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