Wednesday, Apr 12, 1995

Genentech Reports Strong 1995 First Quarter Results

Earnings and revenues make it the company's best quarter to date

FDA approved Activase accelerated infusion dosing for market

South San Francisco, Calif. -- April 12, 1995 --

Genentech, Inc. (NYSE: GNE) announced today that earnings for the first quarter of 1995 increased 11.6 percent to $43.4 million, or 36 cents per share, from $38.9 million, or 33 cents per share, in the first quarter of 1994. Revenues increased 20.2 percent to $239.0 million, from $198.9 million in the same quarter of 1994, reflecting increases in all revenue areas.

"Our results for the first quarter of 1995 are strong," said Genentech President and Chief Executive Officer G. Kirk Raab. "Even measured against the first quarter of 1994, which had been our best quarter ever."

During the quarter Genentech set the stage for continued growth, making key progress with its own pipeline products and announcing the acquisition of marketing rights to two late-stage development products. The company also announced the resolution of a long-standing dispute with Eli Lilly and Company regarding recombinant human growth hormone, which should result in payments from Lilly of $145 million (of which Genentech recorded an initial $7.5 million during the quarter). The approval this month of revised labeling for Activase® (Alteplase, recombinant) gives Genentech's leading marketed product new impetus for continued growth.

Marketed Products

Days after the close of quarter, the U.S. Food and Drug Administration cleared for marketing the accelerated infusion of Activase for the management of acute myocardial infarction (heart attack), allowing revised labeling for the product that incorporates data from the worldwide GUSTO* trial. This international trial showed that the new regimen was superior compared to another clot-dissolving agent in that significantly fewer patients died. Sales of Activase during the first quarter increased 11.4 percent to $78.2 million from $70.2 million in the first quarter of 1994 due to an increase in the number of patients receiving thrombolytic therapy.

"Because we are now able to actively promote the accelerated infusion of Activase and its mortality benefits, we have a goal of increasing market share beyond its current level of more than 70 percent, which would translate into not only increased sales, but also, more importantly, prevent more deaths from heart attack," said Raab.

Now marketed in 19 countries, Pulmozyme® (dornase alfa) sales increased 27.2 percent to $28.5 million from $22.4 million in the first quarter of 1994 when it was launched in the United States and Canada. The increase reflects market launches in additional countries and continued adoption of this new therapy by physicians to treat cystic fibrosis patients. Said Raab, "We anticipate that more growth will occur over time, because new therapies often take time to become part of a physician's treatment procedures, particularly in such a serious condition as cystic fibrosis."

Sales of Genentech's two growth hormone products Protropin® (somatrem for injection) and Nutropin® (somatropin [rDNA origin] for injection) increased to $54.4 million from $53.6 million in the first quarter of 1994.

Genentech did not face new competition in the growth hormone market during the quarter, although it could at any time following FDA approval of a competitive product. Genentech has and will continue to actively assert its patent position, the strength and value of which was reaffirmed by the agreement announced during the quarter with Eli Lilly. If new competitors do enter the market, they could negatively impact future sales of Genentech's growth hormone, though the company has a comprehensive plan in place to defend its position.

Research and Development

Research and development (R&D) expenses in the first quarter of 1995 were $94.9 million compared to $74.4 million in the first quarter of 1994. R&D expenses increased year-to-year due to the company's aggressive commitment to R&D to move its products into later stages of clinical trials. The increase in the first quarter was particularly related to production of product for clinical trials and increased in-licensing expenses. Genentech expects R&D expenses to be somewhat lower in the remaining quarters of this year due to the timing of clinical trial expenses.

Two projects in Genentech's pipeline reached important milestones in the quarter:

  • Genentech began Phase I clinical trials with its second-generation t-PA, called TNK. Based on preclinical studies, this new product has the potential to be administered by a single injection, and could dissolve blood clots even faster than Activase.

  • Genentech's gp120 vaccine against HIV-1 infection, in preparation for large-scale clinical trials in Thailand, has entered preliminary trials there under the auspices of the World Health Organization. (Genentech's U.S. Phase II trial of the vaccine is ongoing.)

Business Development Agreements

Genentech rounded out its late-stage development pipeline during the first quarter of 1995, announcing the acquisition of marketing rights for two products through two separate R&D collaborations:

  • In an agreement finalized at the end of 1994, Genentech acquired certain marketing rights to Scios Nova's Auriculin® (anaritide), currently in a Phase III clinical trial for the treatment of acute renal failure

  • Genentech acquired certain marketing rights to IDEC Pharmaceuticals' antibody to CD20, IDEC-C2B8, for the treatment of non-Hodgkin's lymphomas. The antibody is currently in Phase II clinical trials, and expected to enter Phase III trials mid-year.

In both cases, Genentech acquired marketing rights in several world markets, with some sharing of rights in North America.

Genentech, Inc. is a leading biotechnology company that discovers, develops, manufactures and markets human pharmaceuticals for significant medical needs. Ten of the currently marketed biotechnology products stem from Genentech research, five of which Genentech markets directly. Genentech is headquartered 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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GENENTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

Three Months
Ended March 30,

1995 1994
Revenues
   Product sales $ 162,067 $ 147,798
   Royalties 47,149 33,679
   Contract and other 16,222 7,527
   Interest 13,529 9,866
      Total revenues 238,967 198,870
     
Costs and expenses
   Cost of sales 26,750 22,131
   Research and development 94,959 74,376
   Marketing, general and administrative 64,323 60,111
   Interest 1,871 1,778
      Total costs and expenses 187,903 158,396
     
Income before taxes 51,064 40,474
Income tax provision 7,660 1,619
     
Net income $ 43,404 $ 38,855
     
Net income per share $ 0.36 $ 0.33
     
Weighted average number of shares used in
   computing per share amounts:
120,493 118,806
 
March 30,
1995 1994
Selected balance sheet data
   Cash and short-term investments $ 722,374 $ 688,575
   Accounts receivable 166,143 125,121
   Inventories 94,300 91,723
   Long-term marketable securities 219,975 92,108
   Property, plant and equipment, net 482,117 466,591
   Other long-term assets 88,551 50,444
   Total assets 1,806,846 1,525,279
   Total current liabilities 205,802 186,092
   Long-term debt 175,140 151,020
   Total liabilities 404,600 349,107
   Total stockholders' equity 1,402,246 1,176,172