Wednesday, Jul 10, 2002
South San Francisco, Calif. -- July 10, 2002 --
Genentech, Inc. (NYSE: DNA) today announced second quarter pro forma financial results of 23 cents per share, a 21 percent increase from the second quarter of 2001 driven by a 28 percent increase in product sales. Genentech's actual financial results for the second quarter of 2002 were a loss of 41 cents per share due to litigation-related charges in the second quarter 2002 and certain charges related to the 1999 redemption of Genentech's stock, partially offset by the increase in revenues and the prior adoption of new accounting rules2 in the beginning of this year. Genentech's pro forma financial results exclude the 2002 litigation-related charges and certain charges related to the 1999 redemption of Genentech's stock.For the three months ended June 30, 2002:
"On balance, the second quarter of 2002 was a successful one for Genentech, despite the special litigation-related charges, with Rituxan and Herceptin continuing to generate increasing sales, FDA approval of Nutropin AQ Pen, further advancement of many of our pipeline projects and significant progress in our strategic alliances efforts," said Arthur D. Levinson, Ph.D., Genentech's chairman and chief executive officer. "Our quarterly results are directly in line with our corporate strategy for growth and we are on course towards our 5X5 goals including our goal of a 25 percent average annual increase in pro forma earnings per share."
"While we are taking a special litigation-related charge against our actual earnings this quarter primarily for the City of Hope verdict, no cash, if any, will be paid until the appeal process is completed. We continue to remain confident in our position," said Levinson.
Product Sales
Sales of marketed products increased 28 percent in the second quarter of 2002 to $523.5 million from $410.3 million in the second quarter of 2001, with biooncology sales consisting of 71 percent of total product revenues, up from 65 percent in the second quarter of 2001.
Rituxan sales in the second quarter of 2002 increased 46 percent to $274.9 million from $187.7 million in the second quarter of 2001. This sales increase is due primarily to increased market penetration for the treatment of non-Hodgkin's lymphoma.
Herceptin sales in the second quarter of 2002 increased 21 percent to $95.1 million compared to $78.8 million in the second quarter of 2001. Since launch, the company has seen consistent quarter-over-quarter growth for Herceptin in the United States.
Sales of Genentech's growth hormone products in the second quarter of 2002 increased 20 percent to $75.3 million compared to $62.5 million in the second quarter of 2001.
During the second quarter of 2002, sales of Genentech's two cardiovascular products, Activase? (Alteplase, recombinant) and TNKase™ (Tenecteplase), decreased 16 percent to $43.1 million compared to $51.6 million in the second quarter of 2001.
Pulmozyme® (dornase alfa) Inhalation Solution sales in the second quarter of 2002 increased 25 percent to $35.1 million compared to $28.1 million in the second quarter of 2001.
Costs and Expenses
Costs and expenses in the second quarter of 2002 were higher compared to costs and expenses in the second quarter of 2001 driven by costs related to higher product sales, primarily Rituxan, and related profit sharing expenses. Research and development expenses were higher in the second quarter of 2002 compared to the second quarter of 2001 due to late stage clinical development.
Genentech is a leading biotechnology company that discovers, develops, manufactures and commercializes biotherapeutics for significant unmet medical needs. Fifteen of the currently approved biotechnology products originated from or are based on Genentech science. Genentech manufactures and commercializes ten biotechnology products directly in the United States. The company has headquarters in South San Francisco, California, and is traded on the New York Stock Exchange under the symbol DNA.
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Genentech will be offering a live webcast of a discussion by Genentech management of the earnings and other business results on Wednesday, July 10, 2002 at 2:45pm PT. The live webcast may be accessed on Genentech's website at http://www.gene.com. This webcast will also be available after the call via the website until close of business July 17, 2002. An audio replay of the webcast will be available beginning at 5:45pm PT on July 10, 2002 until 5:45pm PT July 17, 2002. Access numbers for this replay are1-800-642-1687 (U.S./Canada) and 1-706-645-9291 (international); conference ID number is 4602278.
The statement made in this press release relating to the Xanelim BLA filing time frame is forward-looking and actual results could differ materially. Among other things, the BLA filing time frame could be affected by unexpected safety or efficacy issues, manufacturing issues, additional time requirements for data analysis, BLA preparation, discussions with the FDA, slow enrollment in clinical studies or additional clinical studies.
GENENTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
Three Months Ended June 30, | ||||||||
---|---|---|---|---|---|---|---|---|
| ||||||||
2002 | 2001 | |||||||
| ||||||||
Actual(2) | Pro Forma(1) | Actual | Pro Forma(1) | |||||
Revenues | ||||||||
Product sales | $ | 523,527 | $ | 523,527 | $ | 410,258 | $ | 410,258 |
Royalties | 85,535 | 85,535 | 52,446 | 52,446 | ||||
Contract and other | 13,286 | 13,286 | 20,935 | 20,935 | ||||
Interest Income | 29,964 | 29,964 | 32,235 | 32,235 | ||||
Total revenues | 652,312 | 652,312 | 515,874 | 515,874 | ||||
Costs and expenses | ||||||||
Cost of sales | 106,867 | 106,867 | 76,188 | 76,188 | ||||
Research and development | 147,922 | 147,922 | 123,448 | 123,448 | ||||
Marketing, general and administrative | 126,915 | 126,915 | 107,800 | 107,800 | ||||
Collaboration profit sharing | 84,090 | 84,090 | 57,908 | 57,908 | ||||
Recurring charges related to redemption | 38,928 | - | 81,490 | - | ||||
Special charges: Litigation-related | 518,000 | - | - | - | ||||
Interest expense | - | - | 1,345 | 1,345 | ||||
Total costs and expenses | 1,022,722 | 465,794 | 448,179 | 366,689 | ||||
Income (loss) before taxes | (370,410) | 186,518 | 67,695 | 149,185 | ||||
Income tax (benefit) provision | (156,762) | 66,009 | 29,047 | 47,739 | ||||
Net income (loss) | $ | (213,648) | $ | 120,509 | $ | 38,648 | $ | 101,446 |
Earnings (loss) per share: | ||||||||
Basic | $ | (0.41) | $ | 0.23 | $ | 0.07 | $ | 0.19 |
Diluted | $ | (0.41) | $ | 0.23 | $ | 0.07 | $ | 0.19 |
Weighted average shares used to compute earnings (loss) per share: |
||||||||
Basic | 520,001 | 520,001 | 526,998 | 526,998 | ||||
Diluted | 520,001 | 524,479 | 535,142 | 535,142 | ||||
(1) Pro Forma amounts exclude litigation-related special charges in Q2 2002 and recurring charges related to the 1999 redemption of Genentech's Special Common Stock. (2) Genentech adopted Statement of Financial Accounting Standards (or "FAS") No. 141 on Business Combinations and FAS 142 on Goodwill and Other Intangible Assets on January 1, 2002. As a result of our adoption, reported net loss decreased by approximately $39.4 million, net of tax, (or $0.08 per share) in Q2 2002 due to the cessation of goodwill amortization and the amortization of our trained and assembled workforce intangible asset. | ||||||||
Six Months Ended June 30, | ||||||||
| ||||||||
2002 | 2001 | |||||||
| ||||||||
Actual | Pro Forma(1) | Actual(3) | Pro Forma(1) | |||||
Revenues | ||||||||
Product sales | $ | 1,000,077 | $ | 1,000,077 | $ | 802,161 | $ | 802,161 |
Royalties | 167,378 | 167,378 | 127,077 | 127,077 | ||||
Contract and other | 40,051 | 40,051 | 59,419 | 49,415 | ||||
Interest Income | 58,258 | 58,258 | 67,299 | 67,299 | ||||
Total revenues | 1,265,764 | 1,265,764 | 1,055,956 | 1,045,952 | ||||
Costs and expenses | ||||||||
Cost of sales | 209,311 | 209,311 | 159,984 | 159,984 | ||||
Research and development | 294,613 | 294,613 | 259,788 | 259,788 | ||||
Marketing, general and administrative | 250,542 | 250,542 | 235,719 | 235,719 | ||||
Collaboration profit sharing | 156,168 | 156,168 | 104,281 | 104,281 | ||||
Recurring charges related to redemption | 77,856 | - | 163,007 | - | ||||
Special charges: Litigation-related | 518,000 | - | - | - | ||||
Interest expense | 753 | 753 | 2,836 | 2,836 | ||||
Total costs and expenses | 1,507,243 | 911,387 | 925,615 | 762,608 | ||||
Income (loss) before taxes and cumulative effect of accounting change | (241,479) | 354,377 | 130,341 | 283,344 | ||||
Income tax (benefit) provision | (123,134) | 115,209 | 59,305 | 90,670 | ||||
Income (loss) before cumulative effect of accounting change | (118,345) | 239,168 | 71,036 | 192,674 | ||||
Cumulative effect of accounting change, net of tax | - | - | (5,638) | - | ||||
Net income (loss) | $ | (118,345) | $ | 239,168 | $ | 65,398 | $ | 192,674 |
Earnings (loss) per share: | ||||||||
Basic: Earnings (loss) before cumulative effect of accounting change | $ | (0.23) | $ | 0.46 | $ | 0.13 | $ | 0.37 |
Cumulative effect of accounting change, net of tax | - | - | (0.01) | - | ||||
Net earnings (loss) per share | $ | (0.23) | $ | 0.46 | $ | 0.12 | $ | 0.37 |
Diluted: Earnings (loss) before cumulative effect of accounting change | $ | (0.23) | $ | 0.45 | $ | 0.13 | $ | 0.36 |
Cumulative effect of accounting change, net of tax | - | - | (0.01) | - | ||||
Net earnings (loss) per share | $ | (0.23) | $ | 0.45 | $ | 0.12 | $ | 0.36 |
Weighted average shares used to compute earnings (loss) per share: |
||||||||
Basic | 523,361 | 523,361 | 526,396 | 526,396 | ||||
Diluted | 523,361 | 529,279 | 535,181 | 535,181 | ||||
(1) Pro Forma amounts exclude litigation-related special charges in Q2 2002 and recurring charges related to the 1999 redemption of Genentech's Special Common Stock. In addition, pro forma excludes the impact of our adoption of Statement of Financial Accounting Standards (or "FAS") No. 133 on Accounting for Derivative Instruments and Hedging Activities in Q1 2001 (see also note 3 below). (2) Genentech adopted FAS 141 on Business Combinations and FAS 142 on Goodwill and Other Intangible Assets on January 1, 2002. As a result of our adoption, reported net loss decreased by approximately $78.8 million, net of tax, (or $0.15 per share) in the six months ended June 30, 2002 due to the cessation of goodwill amortization and the amortization of our trained and assembled workforce intangible asset. (3) As a result of our adoption of FAS 133 in Q1 2001, we recorded a cumulative effect of a change in accounting principle, net of tax, and the changes in fair value of certain derivatives ($10.0 million) in contract and other revenues. The net of tax impact of our adoption on Q1 2001 was not material. | ||||||||
June 30, | ||||||||
2002 | 2001 | |||||||
Selected balance sheet data | ||||||||
Cash and short-term investments | $ | 969,076 | $ | 1,392,806 | ||||
Accounts receivable | 327,505 | 272,680 | ||||||
Inventories | 380,197 | 316,319 | ||||||
Long-term marketable securities | 1,085,251 | 1,208,305 | ||||||
Property, plant and equipment, net | 969,277 | 790,504 | ||||||
Goodwill | 1,334,219 | 1,379,136 | ||||||
Other intangible assets | 1,004,805 | 1,194,020 | ||||||
Other long-term assets | 326,615 | 243,121 | ||||||
Total assets | 6,593,734 | 6,893,108 | ||||||
Total current liabilities | 522,614 | 561,448 | ||||||
Total liabilities | 1,298,821 | 1,073,103 | ||||||
Total stockholders' equity | 5,294,913 | 5,820,005 | ||||||
Year-to-date | ||||||||
Capital expenditures | 163,816 | 85,676 | ||||||
Pro forma depreciation and amortization expense | 58,388 | 53,503 |