Tuesday, Oct 18, 1994

Genentech Reports 1994 Third Quarter Results

Earnings More Than Double; Key Development Projects Advance

South San Francisco, Calif. -- October 18, 1994 --

Genentech, Inc. (NYSE: GNE) announced today that its earnings for the third quarter of 1994 more than doubled to $33.6 million, or 28 cents per share, from $15.5 million, or 13 cents per share, in the third quarter of 1993. Revenues for the quarter increased 17 percent to $193.8 million, from $165.4 million in the third quarter of 1993.

"Our continued earnings growth reflects strong product sales as Pulmozyme® gains increasing acceptance among physicians who treat cystic fibrosis patients and as our other products maintain their leading market share," said Genentech President and Chief Executive Officer G. Kirk Raab. "Important clinical development progress during the quarter should help us maintain our course of growth."

Marketed Products

In its third quarter on the market, Pulmozyme (dornase alfa) had sales of $21.0 million, compared with $18.7 million in the second quarter of 1994. The results of the Phase III trial in cystic fibrosis patients, on which Pulmozyme's approval was based, were reported in the September 8 issue of the New England Journal of Medicine. Data on the longer-term safety and efficacy of Pulmozyme in CF patients and on its safety and efficacy in seriously ill patients will be presented October 22, 1994 at the North American Cystic Fibrosis (CF) Conference. These data should reaffirm the drug's benefits to CF patients and may enhance Pulmozyme's growing acceptance among CF patients and their physicians. During the quarter, Pulmozyme was launched in Germany and France, bringing to 18 the number of countries worldwide where Pulmozyme is sold.

Activase® (Alteplase, recombinant) t-PA sales increased to $65.1 million from $63.5 million in the third quarter of 1993. Genentech awaits FDA approval of new Activase labeling, based on mortality and other benefits demonstrated in the GUSTO* clinical trial comparing thrombolytic therapy regimens in 40,000 heart attack patients. If granted, as an FDA advisory committee unanimously recommended in June, 1994, such approval will enable Genentech to promote the benefits demonstrated in the GUSTO trial and possibly further increase its market share from the current 70 percent plus range.Sales of Genentech's two human growth hormone products were $54.6 million compared with $55.4 million in the third quarter of 1993. This decrease is due to fluctuations in order patterns and competitive pressures in the managed care area from Genentech's existing competitor. New competitors did not enter the growth hormone market.

Evolving in a Changing Environment

During the quarter, in an industry-wide environment of increasing scrutiny of pharmaceutical promotional practices, Genentech's past sales and marketing efforts have been called into question by various government authorities. "In this process, we have cooperated fully with appropriate authorities," said Raab. "Though we feel our efforts have been in the best interest of public health and in compliance with the law, we are, where appropriate, modifying our practices to address concerns raised. We have and will continue to strive for high ethical standards in all areas of our business." Genentech does not expect that ongoing investigations will materially impact the company.

Research and Development Progress

Genentech continues to invest aggressively in research and development. R&D expenses in the third quarter of 1994 were $73.2 million compared to $72.3 million in the third quarter of 1993, representing about 38 percent of revenues.

Pulmozyme led Genentech's clinical development progress during the quarter with the start of the Phase III Chronic Obstructive pulmonary disease Mortality Endpoint Trial (COMET). Scheduled for completion in late 1996, the trial is comparing Pulmozyme to placebo in 5,600 hospitalized patients. The primary endpoint of the trial is reduced mortality. Raab said, "If this trial shows clinical benefits similar to those seen in our recently completed Phase II trial in hospitalized chronic bronchitis patients (where Pulmozyme showed a 61 percent reduction in mortality), it will serve as the basis for our filing for regulatory approval to market Pulmozyme for these seriously ill patients."Consistent with Genentech's goal of identifying one or two new development projects each year, the company decided to aggressively develop recombinant thrombopoietin as a potential treatment for thrombocytopenia, a dangerous reduction in blood platelets, one cause of which is cancer chemotherapies. In June, Genentech scientists reported in Nature that they had cloned and produced recombinant thrombopoietin, a blood protein that promotes the production of platelets. Genentech is currently progressing with efforts to file an Investigational New Drug (IND) application as soon as possible."With the progress of these and other products in our pipeline, we are in the fortunate position of having pharmaceuticals for significant medical needs on the market and in late, mid- and early stages of clinical trials, giving us growth prospects for today, the next several years and well into the next century," said Raab.

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 September 30,

1994 1993
   Product sales $ 142,555 $ 119,733
   Royalties 33,118 33,314
   Contract and other 7,187 2,607
   Interest 10,978 9,732
      Total revenues 193,838 165,386
Costs and expenses
   Cost of sales 24,460 18,551
   Research and development 73,208 72,302
   Marketing, general and administrative 59,341 57,181
   Interest 1,843 1,836
      Total costs and expenses 158,852 149,870
Income before taxes 34,986 15,516
Income tax provision 1,400 -
Net income $ 33,586 $ 15,516
Net income per share $ 0.28 $ 0.13
Weighted average number of shares used in
   computing per share amounts:
119,819 117,566
Nine Months
Ended September 30,

1994 1993
   Product sales $ 442,927 $ 333,159
   Royalties 92,896 86,708
   Contract and other 21,556 37,391
   Interest 30,251 30,962
      Total revenues 587,630 488,220
Costs and expenses
   Cost of sales 71,156 52,830
   Research and development 220,592 230,468
   Marketing, general and administrative 180,269 159,875
   Interest 5,375 4,796
      Total costs and expenses 477,392 447,969
Income before taxes 110,238 40,251
Income tax provision 4,410 -
Net income $ 105,828 $ 40,251
Net income per share $ 0.89 $ 0.34
Weighted average number of shares used in
   computing per share amounts:
119,222 116,700
September 30,
1994 1993
Selected balance sheet data
   Cash and short-term investments $ 655,264 $ 566,649
   Accounts receivable 126,023 126,178
   Inventories 100,810 73,180
   Long-term marketable securities 219,494 132,474
   Property, plant and equipment, net 480,102 450,241
   Other long-term assets 43,986 62,701
   Total assets 1,634,590 1,419,601
   Total current liabilities 194,086 166,578
   Long-term debt 150,584 151,435
   Total liabilities 355,185 334,325
   Total stockholders' equity 1,279,405 1,085,276