Tercica Announces Agreement with Genentech for Worldwide Growth Hormone and IGF-1 Combination Product Development and Commercialization

Business Wire, July 10, 2007

Combination Products for the Potential Treatment of Short Stature and Adult Growth Hormone Deficiency

Tercica May Receive up to $53 Million in Equity Payments, Opt-in Payments, R&D Reimbursement and Milestone Payments from Genentech

Pending FDA guidance, Tercica intends to initiate Phase II Clinical Trials in 2008

BRISBANE, Calif. -- Tercica, Inc. (Nasdaq:TRCA) today announced an agreement with Genentech, Inc. for the development, manufacture and worldwide commercialization of two products containing Genentech's recombinant human growth hormone Nutropin AQ[R] [somatropin (rDNA origin)] and Tercica's recombinant insulin-like growth factor-1 Increlex([R]) (mecasermin [rDNA origin] injection) for the treatment of short stature, adult growth hormone deficiency (AGHD), and potentially other metabolic disorders. Nutropin AQ[R] and Increlex([R]) were originally designed and formulated so that the therapies could be combined and potentially given as a single, daily injection.

Pending U.S. Food and Drug Administration guidance and timely IND acceptance, Tercica plans to initiate Phase II clinical development in 2008 of one combination product for patients with low IGF-1 levels and short stature not associated with growth hormone deficiency; and a second combination product for patients with AGHD.

"This collaboration allows us to embark on two new and exciting development programs that each have scientific merit," said John A. Scarlett, M.D., Tercica's President and Chief Executive Officer. "With demonstrated synergies in pre-clinical studies, the combination of rhGH and rhIGF-1 could have the potential for several important therapeutic benefits compared to either rhGH or rhIGF-1 monotherapy alone for the treatment of patients with short stature and AGHD and potentially other adult metabolic disorders. With our current cash position, equity sales associated with this agreement and possible collaboration for both programs through sublicensing of Tercica's ex-U.S. rights, Tercica continues to have profitability in 2010 as a goal without additional equity financing unless needed to support additional new initiatives or strategic opportunities."

Terms of Agreement

Under the terms of the collaboration, Tercica may be eligible to receive a total of up to $53 million in equity payments, opt-in payments, research and development cost reimbursement, and milestone payments. In connection with the transaction, Genentech will purchase 708,591 shares of Tercica's common stock for $4 million.

Tercica will fund and lead initial development efforts for both combination products. Genentech has certain rights to opt-in to the development programs for both products. The opt-in rights remain open until completion of a Phase II clinical study for each product that is sufficient to enable a pivotal trial.

Upon exercise of any opt-in by Genentech, Genentech shall reimburse certain incurred research and development costs. Following such exercise by Genentech, a cost and profit share structure will take effect for all future development and commercial activities of both combination products, and Genentech will have certain commercialization rights, including the right to co-promote both combination products upon regulatory approval. If Genentech does not exercise any of its opt-in rights, then Tercica will have full development and commercialization rights to the combination products, and will owe Genentech royalties on worldwide sales.

Development of GH/IGF-1 Combination Product

About Increlex([R])(mecasermin [rDNA origin] injection): The active ingredient of Increlex([R]) is recombinant human insulin-like growth factor-1 (IGF-1). IGF-1 is the direct mediator of growth hormone's (GH) effect on statural growth, and must be present for normal growth of bones and cartilage in children. In Primary IGFD, children's serum IGF-1 levels are low, despite the presence of a normal or elevated GH level. Without adequate IGF-1, children cannot achieve normal height. In children with this disorder, low IGF-1 levels are due to growth hormone resistance associated with mutations in GH receptors, post-GH receptor signaling pathways, or to defects in IGF-1 gene expression. Increlex([R]) has been marketed in the United States by Tercica since early 2006. Exclusive rights to develop and commercialize Increlex([R]) were licensed to Ipsen in October 2006 for all regions of the world except the United States, Japan, Canada, Taiwan and certain countries of the Middle East and North Africa.

About Nutropin AQ[R] [somatropin (rDNA origin)]: Nutropin AQ[R] [somatropin (rDNA origin) injection] is produced using recombinant DNA technology and has the same amino acid sequence as human growth hormone produced naturally in the human body. It is marketed as Nutropin AQ[R] in Austria, Denmark, Finland, France, Germany, Ireland, the Netherlands, Norway, Sweden, Portugal, Spain and the United Kingdom. Other regulatory reviews are underway in Europe and worldwide, excluding North America and Japan.