Wednesday, Jul 14, 1993

Genentech Reports Second Quarter Results

Earnings Increased As Product Sales Grew

South San Francisco, Calif. -- July 14, 1993 --

Genentech, Inc. (NYSE: GNE) announced today that earnings for the second quarter of 1993 increased to $10.4 million, or 9 cents per share, from $3.4 million, or 3 cents per share, in the second quarter of 1992. Revenues for the quarter increased 25 percent to $169.8 million, from $136.0 million in the same quarter of 1992. This increase is due primarily to higher product sales and contract revenues, including $18.2 million in fixed license fees payable through 1996 from Schering Corporation and its Affiliates for a world-wide license to certain Genentech patented technology and processes used to produce Schering's recombinant alpha interferon. This amount was essentially offset by non-recurring expense charges.

"Our financial results for the quarter are excellent," said G. Kirk Raab, Genentech's president and chief executive officer. "They particularly reflect the increasing Activase® (Alteplase recombinant) t-PA sales following the April announcement of the GUSTO clinical trial results."

Marketed Products

The release of the GUSTO trial results on April 30 has had a positive impact on Activase sales in the second quarter of 1993. Activase sales increased 25 percent to $55.8 million from $44.6 million in the same quarter of 1992 and 14 percent from $49.2 million in the first quarter of 1993. The 40,000-patient GUSTO trial showed a significant life-saving advantage to using Activase over competitive thrombolytic regimens studied for treating heart attack.

"I expect Activase's growth to continue," said Raab, "as physicians recognize the significant impact on public health Activase offers by allowing more heart attack patients' lives to be saved each year."

Sales of Protropin® (somatrem for injection) human growth hormone increased 7 percent to $53.7 million from $50.4 million in the second quarter of 1992. This increase results from an increased number of patients diagnosed with growth hormone inadequacy.

Actimmune® (interferon gamma-1b) sales increased to $1.3 million from $0.8 million in the second quarter of 1992. This increase is due primarily to sales of interferon gamma to licensee Boehringer Ingelheim GmbH in Europe.

Expenses

Genentech's strong commitment to research and development (R&D) continues. R&D expenses in the second quarter of 1993 totaled $83.9 million, including a charge of $13.7 million to end an R&D arrangement with Boehringer Ingelheim GmbH concerning the Research Institute of Molecular Pathology in Vienna. This compares with total R&D expenses of $73.3 million in the second quarter of 1992.

Marketing, general and administrative expenses totaled $56.2 million in the second quarter of 1993 versus $41.9 million in the second quarter of 1992. The increase includes a non-recurring $5.0 million charge for certain corporate expenses, and in addition includes increases in marketing and litigation expenses.

Product Development Progress

During the quarter, two significant events marked Genentech's broad pipeline of products in development.

First, in line with its goal to select one new product to move from research into development each year, Genentech has identified a second-generation t-PA molecule to test in human clinical trials. Animal studies have shown this molecule to break down clots more specifically and to stay in the blood stream longer than natural t-PA. As a result, it may require a smaller dose that would be easier to administer, and it may be more effective and show fewer side effects.

"If this molecule performs as well in the clinic as it does in the laboratory, it could advance the treatment of heart attack even further than Activase already has," said Raab. "A large portion of the money we earn on Activase and our other products goes back into projects like this to significantly enhance care for serious medical conditions."

Second, the FDA told the company it plans to review Pulmozyme® (dornase alfa) DNase for treating cystic fibrosis at an August 9 meeting of its Pulmonary-Allergy Drugs Advisory Committee. "The FDA's decision to hold this meeting so soon after we filed for regulatory approval is a prime example of the leadership they are taking in bringing this important treatment to cystic fibrosis patients," said Raab. Approximately 53,000 people in the United States, Canada and Europe have cystic fibrosis, 30,000 of them in the United States, some portion of whom may be eligible for treatment. Genentech also has regulatory applications for Pulmozyme under review in Canada and Europe.

In addition, this week Genentech submitted to the FDA an application for regulatory approval to market its Nutropin® (somatropin for injection), a new form of human growth hormone, for treating short stature associated with chronic renal insufficiency in children. Chronic renal insufficiency is a kidney disorder that causes a variety of medical problems, including short stature. Approximately 2,000 children in the United States may be eligible for treatment with Nutropin for this condition.

Genentech, Inc. is a leading biotechnology company that discovers, develops, manufactures and markets human pharmaceuticals for significant medical needs. The company has headquarters in South San Francisco, California and is traded on the New York and Pacific Stock exchanges under the symbol GNE.

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GENENTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

Three Months
Ended June 30,

1993 1992
Revenues
   Product sales $ 110,768 $ 95,760
   Royalties 24,052 23,514
   Contract and other 24,255 5,320
   Interest 10,762 11,356
      Total revenues 169,837 135,950
     
Costs and expenses
   Cost of sales 17,680 16,199
   Research and development 83,944 73,296
   Marketing, general and administrative 56,191 41,899
   Interest 1,621 989
      Total costs and expenses 159,436 132,383
     
Income before taxes 10,401 3,567
Income tax provision - 168
     
Net income $ 10,401 $ 3,399
     
Net income per share $ 0.09 $ 0.03
     
Weighted average number of shares used in
   computing per share amounts:
116,707 113,190
 
Six Months
Ended June 30,

1993 1992
Revenues
   Product sales $ 213,426 $ 189,285
   Royalties 53,394 45,266
   Contract and other 34,784 7,168
   Interest 21,230 23,245
      Total revenues 322,834 264,964
     
Costs and expenses
   Cost of sales 34,279 32,565
   Research and development 158,166 139,283
   Marketing, general and administrative 102,694 83,558
   Interest 2,960 2,257
      Total costs and expenses 298,099 257,663
     
Income before taxes 24,735 7,301
Income tax provision - 365
     
Net income $ 24,735 $ 6,936
     
Net income per share $ 0.21 $ 0.06
     
Weighted average number of shares used in
   computing per share amounts:
116,267 113,076
 
June 30,
1993 1992
Selected balance sheet data
   Cash and short-term investments $ 514,258 $ 502,285
   Accounts receivable 113,978 82,108
   Inventories 70,899 53,412
   Long-term marketable securities 144,384 189,605
   Property, plant and equipment, net 456,975 382,057
   Other long-term assets 61,371 33,980
   Total assets 1,372,771 1,255,861
   Total current liabilities 149,023 124,585
   Long-term debt 151,636 152,392
   Total liabilities 313,467 288,901
   Total stockholders' equity 1,059,304 966,960