Thursday, Jan 18, 1996
South San Francisco, Calif. -- January 18, 1996 --Genentech, Inc. (NYSE: GNE) announced today that earnings for 1995 increased 18 percent to $146.4 million, or $1.21 per share ($1.38 without special charges described below), from $124.4 million, or $1.04 per share, in 1994. Earnings for the fourth quarter of 1995 were $25.6 million, or 21 cents per share, compared to $18.6 million, or 15 cents per share in the fourth quarter of 1994.
1995 earnings reflect special charges of $25.0 million ($8.0 million in the fourth quarter) -- which, after taxes, equals 17 cents per share (6 cents in the fourth quarter) -- in connection with expenses related to Genentech's 1995 new arrangement with Roche Holdings, Inc. and to severance costs associated with Genentech's previously announced leadership change.
Revenues for 1995 increased 15 percent to $917.8 million from $795.4 million in 1994. Revenues for the fourth quarter of 1995 increased 7 percent to $221.9 million from $207.8 million in the fourth quarter of 1994.
"Our strong 1995 earnings stem from growth in all revenue areas," said Genentech President and Chief Executive Officer Arthur D. Levinson. "Combined with our significant clinical progress in 1995, our cash available for product in-licensing, and the many promising clinical candidates coming out of our research, we are well poised to move forward with our efforts to build significant stockholder value."
Research and development expenses for 1995 were $363.0 million compared to $314.3 million in 1994. R&D as a percentage of revenues ran at a similar level to 1994, approximately 40 percent.
"While we intend to maintain aggressive R&D spending to move important products through our pipeline," said Levinson, "in coming years, as our revenues increase, we will increase the percentage of those revenues going to the bottom line."
On October 25, Genentech's non-Roche stockholders approved Genentech's transaction with Roche Holding, Ltd. The transaction extends for four years Roche's option to have Genentech redeem the outstanding common stock of the company, and it provides stockholders the right to sell ("put") their shares to Genentech at $60.00 per share for thirty business days following the close of the four-year extension if Roche has not exercised its option. As part of the arrangement, Roche has certain options for non-U.S. rights to Genentech clinical products in exchange for certain royalty payments and expense reimbursements to Genentech. The nature and timing of such product elections is expected to have an impact on future earnings.
Also as part of the new Roche arrangement, Roche now has exclusive rights and pays a royalty (in most cases 20 percent) on European sales of Pulmozyme® (dornase alfa) Inhalation Solution as well as on Canadian sales of all of Genentech's currently marketed products except Actimmune® (Interferon gamma-1b). As a result of the transfer of European and Canadian operations to Roche, product sales indicated below do not reflect European sales of Pulmozyme from November 1, 1995, or Canadian sales of each product from December 1, 1995. Because this change in Canadian product sales affected only one month of the fourth quarter of 1995, the impact for the quarter for each product is minimal. The impact of the change for European sales of Pulmozyme is more significant.
Sales of Pulmozyme increased 26 percent to $111.3 million in 1995 compared to $88.3 million in 1994, reflecting a growing acceptance by cystic fibrosis patients and their physicians as well as continued success in attaining approval for coverage from insurance and government payers. Since November 1, 1995, Genentech records royalties from Roche's European sales of Pulmozyme rather than sales. Principally due to this change, recorded sales of Pulmozyme in the fourth quarter of 1995 decreased to $22.4 million from $26.2 million in the fourth quarter of 1994. Royalties from all sources in the fourth quarter of 1995 were $48.6 million compared to $33.1 million in the fourth quarter of 1994.
Activase® (Alteplase, recombinant) sales increased 7 percent to $301.0 million from $280.9 million in 1994. Genentech's share of the thrombolytic market has increased from about 70 percent at the end of 1994 to 75 percent since the U.S. Food and Drug Administration (FDA) licensed the accelerated infusion of Activase for the management of acute myocardial infarction (heart attack) in April, 1995. While the percentage of heart attack patients who receive direct angioplasty rather than thrombolytic therapy has increased slightly -- from both thrombolytic-eligible and nonthrombolytic-eligible patients, the overall thrombolytic market continued to grow at approximately 6 percent.
Sales of the growth hormone products Protropin® (somatrem for injection) and Nutropin® [somatropin (rDNA origin) for injection] were $219.4 million in 1995 compared to $225.4 million in 1994. This decrease results from the impact of pricing programs for distribution channels.
For the past several quarters Genentech has faced the possibility of additional competition from four competitors in the growth hormone market. Three of these companies, Bio-Technology General (BTG), Novo Nordisk and Pharmacia, have received FDA approval to market their growth hormone products for the treatment of growth hormone inadequacy in children. However, as a result of the assertion of certain Genentech patents, a court has temporarily prohibited two of these products -- Novo Nordisk's and BTG's -- from entering the market pending a full trial. Future court decisions will determine whether these two products will be permanently enjoined from the market. Pharmacia initiated launch activities in January, 1996.
Genentech gained an important potential competitive advantage on December 29, 1995, when it received clearance from the FDA to market Nutropin AQ(TM) [somatropin (rDNA origin) injection], the first and only liquid (aqueous) recombinant human growth hormone product available. Nutropin AQ has the same indications as Nutropin. Genentech has a clear competitive strategy in place, but additional competition will have some impact on growth hormone sales.
Actimmune sales were $3.6 million in 1995 compared to $6.4 million in 1994. This decrease stems from timing of licensee purchases. Sales of this product remain modest because of the rarity of the approved indication, chronic granulomatous disease.
Genentech made significant progress with the products in its pipeline in the fourth quarter of 1995. This progress includes the following:
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 Francisco, California and is traded on the New York and Pacific Stock exchanges under the symbol GNE.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share amounts)
Three Months Year Ended December 31 Ended December 31 1995 1994 1995 1994 Revenues: Product sales $ 153,482 $ 158,137 $ 635,263 $ 601,064 Royalties 48,596 33,126 190,811 126,022 Contract and other 2,632 4,000 31,209 25,556 Interest 17,204 12,497 60,562 42,748 Total revenues 221,914 207,760 917,845 795,390 Costs and expenses: Cost of sales 22,499 24,673 97,930 95,829 Research and development 94,952 93,730 363,049 314,322 Marketing, general and administrative 64,267 68,335 251,653 248,604 Special charge (primarily merger 8,000 - 25,000 - related) Interest 2,036 1,683 7,940 7,058 Total costs and expenses 191,754 188,421 745,572 665,813 Income before taxes 30,160 19,339 172,273 129,577 Income tax provision 4,524 773 25,841 5,183 Net income $ 25,636 $ 18,566 $ 146,432 $ 124,394 Net income per share $ .21 $ .15 $ 1.21 $ 1.04 Weighted average number of shares used in computing per share amounts 122,153 120,193 121,220 119,465 Selected balance sheet data: Cash and short-term investments $ 740,339 $ 719,174 Accounts receivable 172,160 146,267 Inventories 93,648 103,200 Long-term marketable securities 356,475 201,726 Property, plant and equipment, net 503,654 485,293 Other long-term assets 105,452 60,989 Total assets 2,010,995 1,745,124 Total current liabilities 233,444 220,499 Long-term debt 150,000 150,358 Total liabilities 408,948 396,340 Total stockholders' equity 1,602,047 1,348,784
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