Tuesday, Oct 14, 1997
South San Francisco, Calif. -- October 14, 1997 --
Genentech, Inc. (NYSE: GNE) announced today that earnings for the third quarter of 1997 were $32.1 million, or 25 cents per share, compared to $50.9 million, or 41 cents per share, in the third quarter of 1996. These earnings reflect a $6.1 million tax provision in the third quarter of 1997 compared to a net $1.8 million tax benefit in the same quarter in 1996. Revenues were $248.9 million, down from $251.7 million in the same quarter of 1996. This revenue decrease results primarily from anticipated fluctuations in contract revenues, partly offset by an increase in royalties. Product sales in the third quarter of 1997 were $142.3 million compared to $142.5 million in the third quarter of 1996.During the quarter, Genentech announced to financial analysts that it has implemented a new Long Range Plan (LRP) directed toward driving the company's value in both the near and long term. Genentech's LRP sets quantitative goals to help the company achieve its objectives, aimed at giving it, as it moves into the 21st century, a strong bottom line, strong potential for future growth and a strong late-stage pipeline.
"Our financial results reflect anticipated fluctuations in contract revenue and are consistent with our ambitious plan for growth as we approach the next century," said Arthur D. Levinson, Ph.D., Genentech's president and chief executive officer. "As we continue to invest judiciously in our future, we are beginning to see positive results from our efforts - particularly in the significant progress made with our late-stage product development pipeline during the quarter. Our results also reflect steady product sales revenues in the face of increased competition."
R&D expenses in the third quarter of 1997 were $118.1 million compared to $114.8 million in the third quarter of 1996. For the third quarter of 1997, Genentech invested 47 percent of revenues into R&D. Genentech reached important milestones with two late-stage development projects during the quarter:
In addition, as part of its continued efforts to focus on those projects with the highest chances for medical and financial success, Genentech decided to discontinue two development projects:
Sales of Activase® (Alteplase, recombinant) were $60.7 million compared to $65.4 million in the third quarter of 1996. These results stem from a new competitive thrombolytic agent and a decline in the overall size of the thrombolytic therapy market as some heart attack patients receive mechanical reperfusion rather than thrombolytic therapy. During the quarter, Activase's market share as a thrombolytic therapy for the treatment of acute myocardial infarction (heart attack) was approximately 76 percent compared to 79 percent in the second quarter of 1997. As part of Genentech's overall managed care strategy, during the quarter Genentech announced a new study with Kaiser Permanente aimed at assessing the impact of improved patient management on clinical outcomes for victims of stroke. Designed to monitor and improve the quality, as well as reduce the costs, of stroke care, the study will be implemented at four Kaiser Permanente facilities throughout Northern California.
Sales of Genentech's three growth hormone products, Protropin® (somatrem for injection), Nutropin® (somatropin [rDNA origin] for injection) and Nutropin AQ® (somatropin [rDNA origin] injection) were $57.0 million compared to $57.6 million in the third quarter of 1996. Genentech now has four competitors in the U.S. growth hormone market. Though some market share loss is expected, Genentech has a comprehensive plan to defend its market position.
Pulmozyme® (dornase alfa, recombinant) Inhalation Solution sales were $23.8 million compared to $18.0 million in the third quarter of 1996. This increase primarily reflects quarter-to-quarter fluctuations in ordering patterns by wholesalers.
Contract and other revenues in the third quarter of 1997 were $29.4 million compared to $38.9 million in the third quarter of 1996. The decrease was due primarily to the absence in the current quarter of Roche opt-in revenue. This was partly offset by an increase in ongoing development cost reimbursements from Roche. Contract and other revenues in the third quarter of 1996 included $28.4 million from Roche, primarily for the exercise of its option to develop nerve growth factor.
Genentech's effective tax rate was 16 percent for the third quarter of 1997 resulting in a year-to-date effective tax rate of 24 percent for 1997. This rate is less than the 28 percent effective tax rate for the first six months of 1997 due to the extension of R&D tax credits for the current quarter. Genentech's income tax provision in the third quarter of 1997 was $6.1 million compared to a net $1.8 million tax benefit for the third quarter of 1996. In connection with an operating plan review in 1996, Genentech decided not to implement a previously announced approach for research and development funding and manufacturing by international subsidiaries of certain of its development products. As a result, Genentech's third quarter results for 1996 included a reduction in the tax provision of $11.6 million to adjust the year-to-date effective rate from 33 percent to 20 percent.
Genentech, Inc. is a leading biotechnology company that discovers, develops, manufactures, and markets human pharmaceuticals for significant unmet medical needs. Eleven of the currently marketed biotechnology products stem from Genentech science, six of which Genentech markets directly in the United States. The company has headquarters in South San Francisco, California, and is traded on the New York Stock Exchange and Pacific Exchange 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 September 30, |
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1997 | 1996 | |||
Revenues | ||||
Product sales | $ | 142,306 | $ | 142,463 |
Royalties | 59,632 | 54,429 | ||
Contract and other | 29,385 | 38,859 | ||
Interest | 17,594 | 15,956 | ||
Total revenues | 248,917 | 251,707 | ||
Costs and expenses | ||||
Cost of sales | 26,565 | 24,836 | ||
Research and development | 118,146 | 114,772 | ||
Marketing, general and administrative | 65,450 | 61,864 | ||
Interest | 542 | 1,094 | ||
Total costs and expenses | 210,703 | 202,566 | ||
Income before taxes | 38,214 | 49,141 | ||
Income tax provision | 6,092 | (1,801) | ||
Net income | $ | 32,122 | $ | 50,942 |
Net income per share | $ | 0.25 | $ | 0.41 |
Weighted average number of shares used in computing per share amounts: |
126,776 | 123,589 | ||
Nine Months Ended September 30, |
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1997 | 1996 | |||
Revenues | ||||
Product sales | $ | 441,537 | $ | 443,105 |
Royalties | 180,323 | 160,546 | ||
Contract and other | 67,453 | 87,991 | ||
Interest | 50,382 | 46,711 | ||
Total revenues | 739,695 | 738,353 | ||
Costs and expenses | ||||
Cost of sales | 79,817 | 77,868 | ||
Research and development | 351,779 | 343,008 | ||
Marketing, general and administrative | 190,504 | 174,893 | ||
Interest | 2,446 | 3,986 | ||
Total costs and expenses | 624,546 | 599,755 | ||
Income before taxes | 115,149 | 138,598 | ||
Income tax provision | 27,634 | 27,720 | ||
Net income | $ | 87,515 | $ | 110,878 |
Net income per share | $ | 0.69 | $ | 0.90 |
Weighted average number of shares used in computing per share amounts: |
126,326 | 123,402 | ||
September 30, | ||||
1997 | 1996 | |||
Selected balance sheet data | ||||
Cash and short-term investments | $ | 812,912 | $ | 665,577 |
Accounts receivable | 207,805 | 196,413 | ||
Inventories | 98,893 | 92,045 | ||
Long-term marketable securities | 444,839 | 510,582 | ||
Property, plant and equipment, net | 663,779 | 549,059 | ||
Other long-term assets | 182,815 | 111,245 | ||
Total assets | 2,451,023 | 2,170,985 | ||
Total current liabilities | 269,745 | 216,490 | ||
Long-term debt | 150,000 | 150,000 | ||
Total liabilities | 465,294 | 391,561 | ||
Total stockholders' equity | 1,985,729 | 1,779,424 |