Friday, Jul 13, 1990

Genentech Reports Second Quarter Results

South San Francisco, Calif. -- July 13, 1990 --

Genentech, Inc. (NYSE: GNE) announced today that second quarter profits were $5.3 million, or six cents per share, after consideration of merger-related expenses, down from $9.6 million, or 11 cents per share, for the same quarter in 1989. Revenues for the quarter rose 15 percent, to $112.5 million, up from $97.9 million.

During the quarter, merger-related expenses of $7.2 million, or about eight cents per share, were incurred. These expenses are related to the proposed merger of Genentech with Roche Holdings, Inc. After consideration of the total merger-related expenses which will be incurred, Genentech expects to incur a loss for the year. Genentech stockholders voted 97 percent in favor of the transaction on June 8, but before it can become effective, both companies must have supplied additional information to the Federal Trade Commission (FTC) and a subsequent waiting period of up to 20 days must have elapsed.

Sales of the company's heart attack drug, Activase®, were $48.3 million for the second quarter, compared with $48.0 million for the same quarter of 1989 and compared with $54.9 million for the first quarter of this year. The fluctuation in sales between first and second quarters appears to be related to variability between shipments for stocking assistance programs and customer inventory levels rather than product usage.

"Activase sales continue to be strong," said G. Kirk Raab, president and chief executive officer. "It is still too early to judge what any long-term effects of the GISSI-2 clinical trial and new competition may be on ongoing sales, although there has been a minimal decline in market share to date." Market share for Activase, tissue plasminogen activator (t-PA), was nearly two-thirds during the course of the second quarter of 1990.

This is the first full quarter of results reported since the outcome of the GISSI-2 study comparing t-PA and streptokinase was announced in March. The Italian-based study did not use the treatment regimen of concurrent heparin administration which is favored by 98 percent of U.S. cardiologists using thrombolytic therapy, and this may have compromised the relevance of the study to U.S. medical practice.

During the second quarter, the U.S. Food and Drug Administration licensed Activase for the treatment of pulmonary embolism. Also during the quarter, Genentech began human clinical trials for DNase, a potential treatment for the management of cystic fibrosis. Genentech now has six potential new products in clinical trials.

Protropin®, human growth hormone, sales were $41.2 million, up from $31.1 million for the same quarter a year ago and compared with $35.0 million for the first quarter of this year. The increased sales are due to more new growth hormone inadequate patients starting treatment, and higher revenues per existing patient, due to the increased average size of patients. There is a direct correlation between the amount of Protropin prescribed and the size of the patient. Protropin continues to hold an approximate three-quarters market share.

Marketing, general and administrative expenses increased to $39.7 million, up from $32.1 million a year ago. The additional expenses are primarily for marketing expenses related to increased competition in the thrombolytic market. Earlier this year, a second competing product for Activase was introduced.

Research and development expenses were $42.1 million, compared with $38.3 million last year. The increased expenses are largely due to additional products entering clinical trials.

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

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(in thousands, except per share amounts)

Three Months
Ended June 30,

1990 1989
   Product sales $ 89,509 $ 79,098
   Contract and other 17,929 14,851
   Interest 5,107 3,939
      Total revenues 112,545 97,888
Costs and expenses
   Cost of sales 16,894 14,642
   Special charge, primarily merger-related 7,171 -
   Research and development 42,122 38,293
   Marketing, general and administrative 39,734 32,120
   Interest 1,329 1,954
      Total costs and expenses 107,250 87,009
Income before taxes 5,295 10,879
Income tax provision - 1,283
Net income $ 5,295 $ 9,596
Net income per share $ 0.06 $ 0.11
Weighted average number of shares used in
   computing per share amounts:
89,154 85,259
Six Months
Ended June 30,

1990 1989
   Product sales $ 179,385 $ 152,071
   Contract and other 43,667 29,136
   Interest 9,740 7,783
      Total revenues 232,792 188,990
Costs and expenses
   Cost of sales 33,473 28,579
   Special charge, primarily merger-related 18,856 -
   Research and development 79,506 76,012
   Marketing, general and administrative 78,223 61,148
   Interest 2,693 3,929
      Total costs and expenses 212,751 169,668
Income before taxes 20,041 19,322
Income tax provision 1,475 2,296
Net income $ 18,566 $ 17,026
Net income per share $ 0.21 $ 0.20
Weighted average number of shares used in
   computing per share amounts:
88,791 85,207
June 30,
1990 1989
Selected balance sheet data
   Cash and short-term investments $ 262,754 $ 163,392
   Accounts receivable 67,654 72,766
   Inventories 41,470 56,360
   Total assets 748,919 683,264
   Total stockholders' equity 498,297 424,752