Wednesday, Jan 19, 1994

Genentech Reports 1993 Fourth Quarter And Year End Results

-- Two new products approved and earnings almost triple --

SOUTH SAN FRANCISCO, Calif., January 19,1994 -- Genentech, Inc. (NYSE: GNE) announced today that earnings for 1993 increased 183 percent to $58.9 million, or 50 cents per share, from $20.8 million, or 18 cents per share, in 1992. Earnings for the fourth quarter were $18.7 million, or 16 cents per share, up from $6.2 million, or 5 cents per share in the fourth quarter of 1992.

Revenues for 1993 were $649.7 million, up 19 percent from $544.3 million in 1992. Fourth quarter revenues were $161.5 million compared to $142.0 million in the fourth quarter of 1992.

"These excellent results for 1993 clearly show that Genentech's heavy investment in research and development over the past several years is beginning to pay off," said Genentech's President and Chief Executive Officer G. Kirk Raab. "With approvals in the fourth quarter of 1993 for our fourth and fifth marketed products, Nutropin® (somatropin for injection) human growth hormone and Pulmozyme® (dornase alfa) DNase, Genentech is entering 1994 with continued strong prospects for profit growth."

Genentech continued its strategy of investing aggressively in R&D. Research and development expenses for 1993 were $299.4 million compared to $278.6 million in 1992.

In 1993, Genentech began operations of its European-based subsidiary, Genentech Europe Limited, through which Genentech is launching Pulmozyme for treating cystic fibrosis in Europe. Genentech will share marketing responsibility and profits in Western Europe with development and marketing partner F. Hoffmann-La Roche Ltd.

In 1993, two licensed products resulting from Genentech technology received U.S. regulatory approval. Genentech began earning royalties on sales of Miles Inc.'s Kogenate® Factor VIII and became eligible to receive royalties on sales of Monsanto Corporation's Posilac®bovine growth hormone. Gene'ntech science has now led to ten of the currently approved products of biotechnology.

Marketed Products

Activase® (Alteplase, recombinant) t-PA has increased market share since the GUSTO clinical trial results were announced in April, 1993. 1993 sales of Activase increased 30 percent to $236.3 million, from $182.1 million in 1992. Activase's market share in North America is two-thirds, compared to about one-half prior to the GUSTO announcement.

"Activase still has strong growth potential,. said Raab. We expect both Activase's market share and the overall thrombolytic market size to continue to increase in 1994."

1993 sales of Protropin® (somatrem for injection) human growth hormone increased 5 percent to $216.8 million from $205.9 million in 1992. This increase results from an Tncreased number of patients diagnosed with growth hormone inadequacy.

Actimmune® (interferon gamma-1b) had modest sales of $4.3 million in 1993 compared to $2.9 million in 1992. The approved indication, chronic granulomatous disease, has a small market size.

Two New Products Approved

Genentech received approval for two new products in 1993 from which it will begin to earn revenues in 1994. Nutropin received U.S. regulatory approval November 17,1993 for treating growth failure resulting from chronic renal insufficiency before kidney transplantation. Genentech made commercial product available in early January, 1994. Approximately 3,000 children in the United States have chronic renal insufficiency, some portion of whom may be eligible for treatment.

Pulmozyme received U.S. and Canadian regulatory approval for treating cystic fibrosis December 30, 1993. It has also been approved for marketing in the United Kingdom, Austria, Sweden and New Zealand, and it has received a unanimous recommendation for approval from the European Committee for Propfietary Medicinal Products (CPMP) in Brussels. Additional approvals from individual European Union Member States are anticipated over the next several months. Genentech made commercial product available last week.

Approximately 30,000 people in the United States, 20,000 people in Europe and 3,000 people in Canada have cystic fibrosis.

Key Clinical Progress

A major clinical accomplishment in 1993 was the completion of the GUSTO clinical trial and publication of its results in September and November issues of The New England Journal of Medicine. The results showed a significant lifesaving advantage to using Activase t-PA over other thrombolytic regimens studied.

In addition, clinical progress to date for products in Genentech's development pipeline includes:

  • Completed Phase II clinical trial of Pulmozyme for treating acute exacerbations of chronic bronchitis.

  • Completed Phase III clinical trial of a liquid version of Nutropin that would simplify preparation and administration.

  • Began Phase III clinical trial of Actimmune for treating renal cell carcinoma.

  • Began Phase II clinical trial of HER2 humanized monoclonal antibody for treating metastatic breast cancer that is resistant to standard chemotherapy.

  • Began Phase II clinical trial of insulin-like growth factor-1 (IGF-1 ) for treatingType I and Type II diabetes.

  • Filed an Investigational New Drug application (IND) for IgE humanized monoclonal antibody for treating allergic rhinitis or asthma.

  • Filed an IND for transforming growth factor-ß (TGF-ß) for treating mucositis--an ulceration and blistering of the lining of the mouth that is often a side effect of cancer chemotherapy.

In addition, Genentech has filed for regulatory approval to market Nutropin to treat growth hormone inadequacy in children. Raab said, "Genentech's strategy is to leverage our market advantage of offering a combination of competitive products and top quality services to pediatric endocrinologists--if the U.S. growth hormone market becomes open to competition in March, 1994," when Eli Lilly's orphan drug protection for its Humatrope® human growth hormone expires. If competition enters the market, Genentech expects some decrease in future growth hormone sales revenues will occur.

Marketing, general and administrative expenses increased to $214.4 million in 1993 from $172.5 million in 1992. This increase is primarily due to increased marketing expenses, primarily comprising additional Activase marketing expenses, Pulmozyme marketing costs in preparation for the anticipated U.S. and European product launches in 1994 and increased growth hormone marketing expenses in anticipation of future competition. Aiso contributing were an increase in employee-related costs for sales force expansion to support Genentech's two new products Pulmozyme and Nutropin, and other corporate expenses, including litigation related expenses.

Raab concluded: "Our newly approved products and our entry into the European market, our strong positions in the growth hormone and thrombolytic markets, and our continued emphasis on bringing important new products for significant medical needs to market should bring continued profit growth for Genentech and its stockholders in 1994 and beyond..

Genentech, Inc. is a leading biotechnology company that discovers, develops, manufactures and markets human pharmaceuticals for significant unmet medical needs. The company has headquarters in South San Frandsco, Califomia 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 December 31,

1993 1992
Revenues
   Product sales $ 124,201 $ 100,539
   Royalties 26,164 23,115
   Contract and other 566 8,155
   Interest 10,598 10,191
      Total revenues 161,529 142,000
     
Costs and expenses
   Cost of sales 17,684 16,943
   Research and development 68,928 69,696
   Marketing, general and administrative 54,535 47,419
   Interest 1,731 1,410
      Total costs and expenses 142,878 135,468
     
Income before taxes 18,651 6,532
Income tax provision - 327
     
Net income $ 18,651 $ 6,205
     
Net income per share $ 0.16 $ 0.05
     
Weighted average number of shares used in
   computing per share amounts:
118,323 115,283
 
Year
Ended December 31,

1993 1992
Revenues
   Product sales $ 457,360 $ 390,975
   Royalties 112,872 91,682
   Contract and other 37,957 16,727
   Interest 41,560 44,881
      Total revenues 649,749 544,265
     
Costs and expenses
   Cost of sales 70,514 66,824
   Research and development 299,396 278,615
   Marketing, general and administrative 214,410 172,486
   Interest 6,527 4,406
      Total costs and expenses 590,847 522,331
     
Income before taxes 58,902 21,934
Income tax provision - 1,097
     
Net income $ 58,902 $ 20,837
     
Net income per share $ 0.50 $ 0.18
     
Weighted average number of shares used in
   computing per share amounts:
117,106 113,992
 
December 31,
1993 1992
Selected balance sheet data
   Cash and short-term investments $ 657,111 $ 391,895
   Accounts receivable 130,469 93,909
   Inventories 84,725 65,315
   Total current assets 885,337 580,499
   Long-term marketable securities 62,657 255,031
   Property, plant and equipment, net 456,732 432,525
   Other long-term assets 64,074 37,076
   Total assets 1,468,800 1,305,131
   Total current liabilities 190,748 133,543
   Long-term debt 151,230 152,023
   Total liabilities 351,995 297,810
   Total stockholders' equity 1,116,805 1,007,321