Friday, Apr 15, 1994

Genentech Reports 1994 First Quarter Results

Earnings More Than Double

South San Francisco, Calif. -- April 15, 1994 --

Genentech, Inc. (NYSE: GNE) announced today that earnings for the first quarter of 1994 more than doubled to $38.9 million, or 33 cents per share, from $14.3 million, or 12 cents per share, in the first quarter of 1993. Revenues increased 30 percent to $198.9 million, from $153.0 million in the same quarter of 1993. This increase results primarily from higher product sales, due to both initial sales of two new products and an increase in sales of earlier products.

"The first quarter of 1994 was an excellent one for Genentech," said Genentech President and Chief Executive Officer G. Kirk Raab. "Besides our good financial results we launched two new products, Nutropin® human growth hormone for treating growth failure resulting from chronic renal insufficiency and Pulmozyme® DNase for treating cystic fibrosis. In addition we received approval to market Nutropin for a second indication, growth hormone inadequacy in children, and we completed with positive results an important Phase II trial of Pulmozyme in certain chronic bronchitis patients."

Marketed Products

Pulmozyme (dornase alfa) entered the cystic fibrosis market with sales for the first quarter of 1994 of $22.4 million, including initial stocking orders, reflecting acceptance by cystic fibrosis physicians and patients.

Genentech now markets Pulmozyme in the United States, Canada and, through Genentech Europe Limited, the United Kingdom and Ireland. Genentech Europe will also market Pulmozyme in the Netherlands and Germany as soon as it is approved for marketing there. Genentech's marketing partner for Pulmozyme, F. Hoffmann-La Roche, Ltd., markets the drug in other countries where it has been approved.

Due primarily to costs associated with the market launch of Pulmozyme, marketing, general and administrative expenses in the first quarter of 1994 rose to $60.1 million compared to $46.5 million in the first quarter of 1993.

Sales of Activase® (Alteplase, recombinant) t-PA increased 43 percent to $70.2 million from $49.2 million in the first quarter of 1993. This increase reflects Activase's growth in market share from one half to more than 70 percent since the results of the GUSTO* clinical trial were announced in April 1993 and published in the New England Journal of Medicine in September 1993. The results showed a significant life-saving advantage for heart attack patients to using Activase over the other thrombolytic regimens studied.

Sales of Genentech's two human growth hormone products Protropin® (somatrem for injection) and Nutropin (somatropin for injection) increased 3 percent to $53.6 million from $52.2 million in the first quarter of 1993. This increase is largely due to the introduction of Nutropin for treating growth failure resulting from chronic renal insufficiency.

Genentech did not face new competition in the growth hormone market in the quarter, though this possibility exists in the future. New competitors could enter the market any time upon receiving FDA approval. Genentech anticipates some decrease in sales if competitors enter the market.

During the quarter, Genentech entered an agreement with PCS Health Systems, Inc. to develop a new, computerized managed care distribution system for its growth hormone products.

"This system will give us an entree into the increasingly important managed care customer segment, which already works extensively with PCS," said Raab.

Actimmune® (interferon gamma-1b) sales increased to $1.6 million from $1.3 million in the first quarter of 1993. Sales for this product remain modest because the approved indication, chronic granulomatous disease, is rare.

Research and Development

Research and development (R&D) expenses in the first quarter of 1994 were $74.4 million compared to $74.2 million in the first quarter of 1993, reflecting a continued commitment to aggressive investment in R&D.

Two projects in Genentech's product pipeline reached important milestones in the quarter. Genentech completed a placebo-controlled Phase II clinical trial of Pulmozyme for treating hospitalized chronic bronchitis patients with acute exacerbations of the disease. To be reported at a medical meeting in May, the results showed no adverse effects of Pulmozyme therapy and a statistically significant mortality reduction in patients receiving Pulmozyme versus those receiving placebo. Though promising, these results are not considered conclusive. Genentech plans to begin international, approval directed Phase III clinical trials of Pulmozyme for this indication in the Fall of 1994.

In addition, during the first quarter Genentech began Phase I trials of its anti-lgE humanized monoclonal antibody for treating allergic rhinitis and asthma.

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.

*GUSTO stands for Global Utilization of t-PA and Streptokinase in Occluded coronary arteries.

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(in thousands, except per share amounts)

Three Months
Ended March 31,

1994 1993
Product sales $ 147,798 $ 102,658
Royalties 33,679 29,342
Contract and other 7,527 10,529
Interest 9,866 10,468
Total revenues 198,870 152,997
Costs and expenses
Cost of sales 22,131 16,599
Research and development 74,376 74,222
Marketing, general and administrative 60,111 46,503
Interest 1,778 1,339
Total costs and expenses 158,396 138,663
Income before taxes 40,474 14,334
Income tax provision 1,619 -
Net income $ 38,855 $ 14,334
Net income per share $ 0.33 $ 0.12
Weighted average number of shares used in
computing per share amounts:
118,806 115,827
March 31,
1994 1993
Selected balance sheet data
Cash and short-term investments $ 688,575 $ 431,767
Accounts receivable 125,121 103,013
Inventories 91,723 67,511
Long-term marketable securities 92,108 227,147
Property, plant and equipment, net 466,591 445,645
Other long-term assets 50,444 45,360
Total assets 1,525,279 1,344,854
Total current liabilities 186,092 144,934
Long-term debt 151,020 151,831
Total liabilities 349,107 309,684
Total stockholders' equity 1,176,172 1,035,170