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Wednesday, Jan 15, 2003
South San Francisco, Calif. -- January 15, 2003 --
Genentech, Inc. (NYSE: DNA) today announced pro forma financial results of a 21 percent increase in pro forma earnings per share and a 23 percent increase in pro forma revenues driven by a 24 percent increase in product sales for 2002. Genentech's pro forma financial results exclude certain charges related to the 1999 Roche redemption of Genentech's stock and certain litigation-related special charges. Actual results are indicated below as well.For 2002, including the three months ended December 31, 2002:
"Genentech continues to be a profitable growth company with solid financial performance and significant progress with our product pipeline in 2002, including submissions for approval for Raptiva for psoriasis and Xolair for allergic asthma. In addition, we're looking forward to the potential for multiple product launches over the next few years," said Arthur D. Levinson, Ph.D., Genentech's chairman and chief executive officer. "I'm pleased to report that four years into our seven-year strategy for growth, known as our 5X5, we've averaged 27 percent annual pro forma earnings-per-share growth. Our financial success and promising pipeline continue to lay the groundwork for future potential value for our stockholders and our patients."
Product Sales
Marketed products sales increased 24 percent in 2002 to $2,163.6 million from $1,742.9 million in 2001, with biooncology sales consisting of 72 percent of total product revenues, up from 67 percent in 2001.
Rituxan sales in 2002 increased 42 percent to $1,162.9 million from $818.7 million in 2001. This sales increase is due primarily to increased market penetration for the treatment of non-Hodgkin's lymphoma.
Herceptin sales in 2002 increased 11 percent to $385.2 million compared to $346.6 million in 2001.
During 2002, combined sales of Genentech's three cardiovascular products, Activase® (Alteplase, recombinant), TNKase™ (Tenecteplase) and Cathflo™ Activase® (Alteplase), decreased 9 percent to $180.2 million compared to $197.1 million in 2001.
Growth hormone sales during 2002 increased 19 percent to $297.2 million compared to $250.2 million in 2001.
Pulmozyme® (dornase alfa) Inhalation Solution sales increased 12 percent to $138.1 million in 2002 as compared to $122.9 million in 2001.
Total Costs and Expenses
Costs and expenses increased as anticipated in 2002 as compared to 2001.
Research and development (R&D) expenses increased in 2002 to $623.5 million compared to $526.2 million in 2001. R&D expenses as a percent of revenues in 2002 were 23 percent, compared to 24 percent in 2001. R&D expenses as a percent of revenues are expected to continue to vary over the next several quarters dependent on possible in-licensing agreements and as products progress through late-stage clinical trials.
Primarily due to the increase in product sales, cost of sales increased to $441.6 million in 2002 from $354.5 million in 2001. Cost of sales as a percentage of product sales was 20 percent in 2002 and 2001.
Marketing, general and administrative (MG&A) expenses increased during 2002 to $573.3 million compared to $474.4 million in 2001 primarily due to increased promotional programs, pre-launch commercial activities, investment write downs and higher royalty expenses.
Collaboration profit-sharing expenses increased to $350.7 million in 2002 from $246.7 million in 2001. The increase was due primarily to increased Rituxan profit-sharing expense due to higher Rituxan sales.
Genentech, Inc. 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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Webcast:
Genentech will be offering a live webcast of a discussion by Genentech management of the earnings and other business results on Wednesday, January 15, 2003 at 2:15pm 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 January 22, 2003. An audio replay of the webcast will be available beginning at 5:15pm PT on January 15, 2003 until 5:15pm PT January 22, 2003. Access numbers for this replay are: 1-800-642-1687 (domestic) and 1-706-645-9291 (international); passcode number is 6961386.
Genentech Business and Product Development Events in the Fourth Quarter, 2002 and early 2003
Marketed and Pipeline Product Events
Oncology
Immunological Disease
Cardiovascular Disease
Corporate Events
The statements made in this press release relating to the potential for multiple product launches over the next few years and future potential value for stockholders are forward-looking, and actual results could differ materially. Among other things, the number and timing of product launches could be affected by unexpected safety or manufacturing issues, poor efficacy results, slow enrollment in clinical studies or additional clinical studies, additional time requirements for data analysis, BLA preparation, or discussions with the FDA, FDA actions or delays, or failure to receive FDA approval; and Genentech's future potential value could be impacted by all of the foregoing as well as competition, pricing, costs of sales and R&D expenses.
GENENTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------------------ ------------------------
2002(1) 2001 2002(1) 2001(2)
---------- ---------- ---------- ----------
Revenues:
Product sales $ 611,765 $ 492,036 $2,163,665 $1,742,897
Royalties 113,090 71,346 365,550 264,475
Contract and other 31,184 6,002 88,652 74,361
Interest income 22,274 30,772 101,379 130,544
---------- ---------- ---------- ----------
Total revenues 778,313 600,156 2,719,246 2,212,277
Costs and expenses:
Cost of sales 119,838 98,428 441,630 354,442
Research and development 185,210 138,247 623,482 526,230
Marketing, general and administrative 177,332 129,325 573,289 474,410
Collaboration profit sharing 104,510 76,581 350,725 246,657
Recurring charges related to redemption 38,928 79,404 155,713 321,816
Special charges: Litigation-related 13,394 - 543,905 -
Interest expense - 1,182 753 5,736
---------- ---------- ---------- ----------
Total costs and expenses 639,212 523,167 2,689,497 1,929,291
Income before taxes and cumulative effect of
accounting change 139,101 76,989 29,749 282,986
Income tax provision (benefit) 46,274 34,892 (34,038) 127,112
---------- ---------- ---------- ----------
Income before cumulative effect of accounting change 92,827 42,097 63,787 155,874
Cumulative effect of accounting change, net of tax - - - (5,638)
---------- ---------- ---------- ----------
Net income $ 92,827 $ 42,097 $ 63,787 $ 150,236
========== ========== ========== ==========
Earnings per share:
Basic: Earnings before cumulative effect of
accounting change $ 0.18 $ 0.08 $ 0.12 $ 0.30
Cumulative effect of accounting change,
net of tax - - - (0.01)
---------- ---------- ---------- ----------
Net earnings per share $ 0.18 $ 0.08 $ 0.12 $ 0.29
========== ========== ========== ==========
Diluted: Earnings before cumulative effect of
accounting change $ 0.18 $ 0.08 $ 0.12 $ 0.29
Cumulative effect of accounting change,
net of tax - - - (0.01)
---------- ---------- ---------- ----------
Net earnings per share $ 0.18 $ 0.08 $ 0.12 $ 0.28
========== ========== ========== ==========
Weighted average shares used to compute earnings
per share:
Basic 514,156 527,955 519,192 527,022
========== ========== ========== ==========
Diluted 518,976 536,861 524,408 535,291
========== ========== ========== ==========
(1) 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 income increased by approximately $39.4 million, net of tax, (or $0.08 per share) in Q4 2002 and reported net income increased by approximately $157.6 million, net of tax, (or $0.30 per share) for the year ended December 31, 2002, due to the cessation of goodwill amortization and the amortization of our trained and assembled workforce intangible asset.
(2) 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 was not material.
GENENTECH, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Three Months Ended
December 31, 2002 December 31, 2001
---------------------------------- ---------------------------------
Pro Forma Pro Forma
Actual(1) Adjustments Pro Forma(2) Actual Adjustments Pro Forma(2)
-------- ----------- --------- -------- ----------- ---------
Revenues:
Product sales $611,765 $611,765 $492,036 $492,036
Royalties 113,090 113,090 71,346 71,346
Contract and other 31,184 31,184 6,002 6,002
Interest income 22,274 22,274 30,772 30,772
-------- ----------- --------- -------- ----------- ---------
Total revenues 778,313 778,313 600,156 600,156
Costs and expenses:
Cost of sales 119,838 119,838 98,428 98,428
Research and development 185,210 185,210 138,247 138,247
Marketing, general and administrative 177,332 177,332 129,325 129,325
Collaboration profit sharing 104,510 104,510 76,581 76,581
Recurring charges related to redemption 38,928 $ (38,928)(3) - 79,404 $ (79,404)(5) -
Special charges: Litigation-related 13,394 (13,394)(4) - - -
Interest expense - - 1,182 1,182
-------- ----------- --------- -------- ----------- ---------
Total costs and expenses 639,212 (52,322) 586,890 523,167 (79,404) 443,763
Income before taxes 139,101 52,322 191,423 76,989 79,404 156,393
Income tax provision 46,274 20,929 67,203 34,892 15,153 50,045
-------- ----------- --------- -------- ----------- ---------
Net income $ 92,827 $ 31,393 $124,220 $ 42,097 $ 64,251 $ 106,348
======== =========== ========= ======== =========== =========
Earnings per share:
Basic $ 0.18 $ 0.06 $ 0.24 $ 0.08 $ 0.12 $ 0.20
======== =========== ========= ======== =========== =========
Diluted $ 0.18 $ 0.06 $ 0.24 $ 0.08 $ 0.12 $ 0.20
======== =========== ========= ======== =========== =========
Weighted average shares used to compute
earnings per share:
Basic 514,156 514,156 514,156 527,955 527,955 527,955
======== =========== ========= ======== =========== =========
Diluted 518,976 518,976 518,976 536,861 536,861 536,861
======== =========== ========= ======== =========== =========
(1) 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 income increased by approximately $39.4 million, net of tax, (or $0.08 per share) in Q4 2002 due to the cessation of goodwill amortization and the amortization of our trained and assembled workforce intangible asset.
(2) Pro Forma amounts exclude litigation-related special charges in Q4 2002 and recurring charges related to the 1999 redemption of Genentech's Special Common Stock.
(3) Amount represents the amortization of other intangible assets related to the 1999 redemption of Genentech's Special Common Stock.
(4) Amount represents accrued interest expense on the City of Hope judgment recorded in Q2 2002 and amortization of service fees for posting the related bond.
(5) Amount represents the amortization of goodwill, trained and assembled workforce and other intangible assets related to the 1999 redemption of Genentech's Special Common Stock.
GENENTECH, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
Year Ended Year Ended
December 31, 2002 December 31, 2001
------------------------------------- --------------------------------------
Pro Forma Pro Forma
Actual(1) Adjustments Pro Forma(3) Actual(2) Adjustments Pro Forma(3)
---------- ----------- ---------- ---------- ------------ ----------
Revenues:
Product sales $2,163,665 $2,163,665 $1,742,897 $1,742,897
Royalties 365,550 365,550 264,475 264,475
Contract and other 88,652 88,652 74,361 $ (10,004)(2) 64,357
Interest income 101,379 101,379 130,544 130,544
---------- ----------- ---------- ---------- ------------ ----------
Total revenues 2,719,246 2,719,246 2,212,277 (10,004) 2,202,273
Costs and expenses:
Cost of sales 441,630 441,630 354,442 354,442
Research and development 623,482 623,482 526,230 526,230
Marketing, general and
administrative 573,289 573,289 474,410 474,410
Collaboration profit sharing 350,725 350,725 246,657 246,657
Recurring charges related to
redemption 155,713 $ (155,713)(4) - 321,816 (321,816)(6) -
Special charges: Litigation-related 543,905 (543,905)(5) - - -
Interest expense 753 753 5,736 5,736
---------- ----------- ---------- ---------- ------------ ----------
Total costs and expenses 2,689,497 (699,618) 1,989,879 1,929,291 (321,816) 1,607,475
Income before taxes and cumulative
effect of accounting change 29,749 699,618 729,367 282,986 311,812 594,798
Income tax (benefit) provision (34,038) 279,835 245,797 127,112 63,223 190,335
---------- ----------- ---------- ---------- ------------ ----------
Income before cumulative effect of
accounting change 63,787 419,783 483,570 155,874 248,589 404,463
Cumulative effect of accounting
change, net of tax - - (5,638) 5,638(2) -
---------- ----------- ---------- ---------- ------------ ----------
Net income $ 63,787 $ 419,783 $ 483,570 $ 150,236 $ 254,227 $ 404,463
========== =========== ========== ========== ============ ==========
Earnings per share:
Basic: Earnings before cumulative
effect of accounting
change $ 0.12 $ 0.81 $ 0.93 $ 0.30 $ 0.47 $ 0.77
Cumulative effect of
accounting change,
net of tax - - - (0.01) 0.01 -
---------- ----------- ---------- ---------- ------------ ----------
Net earnings per share $ 0.12 $ 0.81 $ 0.93 $ 0.29 $ 0.48 $ 0.77
========== =========== ========== ========== ============ ==========
Diluted: Earnings before cumulative
effect of accounting
change $ 0.12 $ 0.80 $ 0.92 $ 0.29 $ 0.47 $ 0.76
Cumulative effect of
accounting change,
net of tax - - - (0.01) 0.01 -
---------- ----------- ---------- ---------- ------------ ----------
Net earnings per share $ 0.12 $ 0.80 $ 0.92 $ 0.28 $ 0.48 $ 0.76
========== =========== ========== ========== ============ ==========
Weighted average shares used to
compute earnings per share:
Basic 519,192 519,192 519,192 527,022 527,022 527,022
========== =========== ========== ========== ============ ==========
Diluted 524,408 524,408 524,408 535,291 535,291 535,291
========== =========== ========== ========== ============ ==========
(1) 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 income increased by approximately $157.6 million, net of tax, (or $0.30 per share) for the year ended December 31, 2002, due to the cessation of goodwill amortization and the amortization of our trained and assembled workforce intangible asset.
(2) 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 was not material.
(3) Pro Forma amounts exclude litigation-related special charges in 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 FAS 133 on Accounting for Derivative Instruments and Hedging Activities in Q1 2001.
(4) Amount represents the amortization of other intangible assets related to the 1999 redemption of Genentech's Special Common Stock.
(5) Amount represents the City of Hope judgment, including accrued interest and amortization of service fees for posting the related bond, and other litigation-related matters.
(6) Amount represents the amortization of goodwill, trained and assembled workforce and other intangible assets related to the 1999 redemption of Genentech's Special Common Stock.
GENENTECH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
December 31,
--------------------------------
2002 2001
---------- ----------
Selected balance sheet data:
Cash, cash equivalents and short-term investments $1,034,572 $1,348,078
Accounts receivable 418,481 315,340
Inventories 393,542 356,946
Long-term marketable securities 524,014 1,468,450
Property, plant and equipment, net 1,068,734 865,668
Goodwill 1,334,219 1,302,493
Other intangible assets 927,538 1,113,299
Other long-term assets 840,030(1) 175,585
Total assets 6,777,319 7,146,890
Total current liabilities 646,660 663,798
Total liabilities 1,438,435 1,227,071
Total stockholders' equity 5,338,884 5,919,819
Year-ended:
Capital expenditures $ 322,832 $ 213,351
Pro forma depreciation and amortization expense 119,243 110,477
(1) Includes $630.0 million of restricted cash pledged to secure a bond for the City of Hope judgment.