Genentech Exceeds $2.7 Billion in Revenues with $1.5 Billion in Oncology Sales; 21 Percent Increase in Pro Forma Earnings Per Share

Business Wire, Jan 15, 2003

Business Editors

SOUTH SAN FRANCISCO, Calif.--(BUSINESS WIRE)--Jan. 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:

-- Pro forma earnings per share for 2002 increased 21 percent to 92 cents per share, compared to 76 cents per share for 2001. Pro forma earnings per share for the fourth quarter of 2002 also increased 20 percent to 24 cents per share, compared to 20 cents per share in the fourth quarter of 2001. Actual earnings per share for 2002 decreased 57 percent to 12 cents per share compared to 28 cents per share for 2001 due to certain litigation-related special charges. Actual earnings per share for the fourth quarter of 2002 increased 125 percent to 18 cents per share compared to 8 cents per share for the fourth quarter of 2001.

-- Pro forma net income for 2002 increased 20 percent to $483.6 million, compared to $404.5 million for 2001. Pro forma net income for the fourth quarter of 2002 also increased 17 percent to $124.2 million from $106.4 million in the fourth quarter of 2001. Actual net income for 2002 decreased 58 percent to $63.8 million compared to $150.3 million for 2001. Actual net income for the fourth quarter of 2002 increased 120 percent to $92.8 million compared to $42.1 million for the fourth quarter of 2001.

-- Actual revenues for 2002 increased 23 percent to $2,719.3 million from $2,212.3 million in 2001. This revenue growth was driven primarily by sales of Genentech's BioOncology products, Rituxan(R) (Rituximab) and Herceptin(R) (Trastuzumab). Total product sales increased 24 percent in 2002 to $2,163.6 million from $1,742.9 million in 2001.

"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(R) (Alteplase, recombinant), TNKase(TM) (Tenecteplase) and Cathflo(TM) Activase(R) (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(R) (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. 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.