EXHIBIT 99.1
Genentech | NEWS RELEASE | ||
Media Contact: | Debra Charlesworth | (650) 225-2742 | |
Investor Contact: | Kathee Littrell | (650) 225-1034 | |
http://www.gene.com | |||
GENENTECH ANNOUNCES SECOND QUARTER 2004 RESULTS
- Product Sales Increase 42 Percent, Drive Record Quarterly Revenues of $1.1 Billion -
SOUTH SAN FRANCISCO, Calif. -- July 7, 2004 -- Genentech, Inc. (NYSE: DNA) today announced total product sales of $913.4 million for the second quarter of 2004, a 42 percent increase over product sales of $644.3 million in the second quarter of 2003. Operating revenues increased by 41 percent from the second quarter of 2003 to $1.1 billion. Avastin™ (bevacizumab), in its first full quarter of sales, realized sales of $133.0 million for the second quarter of 2004.
"Genentech topped $1 billion in quarterly revenues for the first time in our history, and we are exiting the first half of the year with revenues of more than $2 billion," said Arthur D. Levinson, Ph.D., Genentech's chairman and chief executive officer. "Our unrelenting focus on science has led us to launch three successful products, Avastin, Xolair and RAPTIVA, in a recent nine-month period. We remain committed to our 5x5 goals, and our recent product launches direct us toward our Horizon 2010 objectives."
"The success of new product launches and the continued strength of our existing product sales are driving our operating revenues growth of 41 percent over the same quarter last year," said Myrtle Potter, president of Commercial Operations. "Rituxan continued to exhibit healthy growth, with a 17 percent increase over the same period last year. Also, our new product launches are contributing to ongoing revenue growth. Our three new product launches contributed $190.1 million or 21 percent of total net product sales for the second quarter of 2004. Our teams are also gearing up for the potential upcoming launch of Tarceva."
"We continue to deliver on our earnings per share targets while making strong investments in our new product launches and research and development initiatives," said Louis J. Lavigne, Jr., Genentech's executive vice president and chief financial officer. "Based on our current view of the business, we have now raised our goal for 2004 non-GAAP EPS to be in the range of $0.75 to $0.80."
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For the three months ended June 30, 2004:
Note: Genentech's non-GAAP earnings per share and non-GAAP net income exclude recurring charges related to the 1999 Roche redemption of Genentech's stock, and litigation-related special items. The differences in non-GAAP and GAAP numbers are reconciled in the tables below and on www.gene.com. All share and per share amounts reflect the May 2004 two-for-one split of Genentech common stock.
Along with the discontinuation of Nutropin Depot® (somatropin [RDNA origin] for injectable suspension), Genentech took a charge of $37.4 million, of which $18.6 million was related to the Nutropin Depot license and $18.8 million was related to inventory. In addition, during the quarter, Genentech took a provision of $21.3 million related to filling failures for other products.
Product Sales
For the three months ended June 30, 2004:
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Royalties
Royalties grew to $151.9 million compared to $122.8 million in the second quarter of 2003. The increase is primarily due to higher royalties from Roche for Rituxan and Herceptin.
Contract Revenues
Contract revenues increased to $62.9 million compared to $32.6 million in the second quarter of 2003. The increase is primarily due to higher revenues from ongoing collaborations, including ongoing payments after opt-ins from Roche and other parties.
Total Costs and Expenses
Costs and expenses increased as anticipated in the second quarter of 2004 in comparison to costs and expenses in the second quarter of 2003.
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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, July 7, 2004, at 2:15 p.m. Pacific Time (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 5:00 p.m. PT on July 21, 2004. An audio replay of the webcast will be available beginning at 5:15 p.m. PT on July 7, 2004 through 5:15 p.m. PT on July 14, 2004. Access numbers for this replay are: 1-800-642-1687 (U.S./Canada) and 1-706-645-9291 (international); conference ID number is 8133116.
About Genentech:
Genentech is a leading biotechnology company that discovers, develops, manufactures and commercializes biotherapeutics for significant unmet medical needs. Eighteen of the currently approved biotechnology products originated from or are based on Genentech science. Genentech manufactures and commercializes 12 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. For press releases and additional information about the company, please visit http://www.gene.com.
Genentech Business and Product Development
Events in the Second Quarter 2004
MARKETED AND PIPELINE PRODUCT EVENTS
Oncology
Medical Meetings: Data from more than 150 abstracts were presented on Genentech oncology products at the 40th Annual Meeting of the American Society of Clinical Oncology (ASCO) on June 5-8.
Avastin: Genentech and Roche announced thatThe New England Journal of Medicine published Genentech's Phase III pivotal trial for Avastin in first-line (previously untreated) metastatic colorectal cancer. The study showed that the addition of Avastin to the IFL (5-FU/Leucovorin/CPT-11) chemotherapy regimen significantly extended survival in patients with first-line metastatic colorectal cancer. The median survival of patients treated with Avastin plus the IFL chemotherapy regimen was extended by approximately five months, compared to patients treated with the IFL chemotherapy regimen alone.
Genentech enrolled the first patient in the Avastin Phase III pancreatic cancer study in early June.
Tarceva: At ASCO, Genentech announced with OSI Pharmaceuticals, Inc. and Roche that a Phase III study of Tarceva in advanced non-small cell lung cancer (NSCLC) demonstrated a 42.5 percent improvement in median survival and a 41 percent improvement in one-year survival rates compared to placebo.
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In late June, OSI Pharmaceuticals announced that the New Drug Application for Tarceva was accepted into the U.S. Food and Drug Administration's Pilot 1 Program for Continuous Marketing Applications. The Pilot 1 Program is designed for products that have been designated Fast Track status and have demonstrated significant promise in clinical trials as a therapeutic advance over available therapy for the disease or condition.
On June 16, 2004,Genentech and OSI Pharmaceuticals announced agreements detailing the roles of the two companies with respect to promotion, marketing and manufacturing of Tarceva, if it is approved for distribution in the United States.
After the completion of the first stage of a Phase II study of Tarceva for glioblastoma multiforme (GBM) conducted in collaboration with ABC2, Genentech and OSI Pharmaceuticals decided not to proceed to the second stage based upon a lower-than-expected objective response with single-agent Tarceva in this setting. Research on the potential to use Tarceva in the treatment of GBM will be pursued through ongoing investigator-sponsored trials.
Combination Targeted Therapies: Genentech and OSI Pharmaceuticals announced at ASCO results from Phase I/II clinical studies examining the combination of Avastin and Tarceva in the treatment of metastatic renal cell carcinoma (kidney cancer) and relapsed non-small cell lung cancer (NSCLC). Other studies of this combination were presented, including metastatic breast cancer and head and neck cancer.
Genentech added to its development pipeline a randomized, multi-center Phase II study of the combination of Avastin and Tarceva in patients with first-line metastatic renal cell carcinoma, based on positive Phase II single-arm trial data.
Rituxan: Also at ASCO, Genentech, Biogen Idec Inc. and Roche announced positive data from a large, randomized Phase III cooperative group trial (E1496) evaluating Rituxan as maintenance therapy for newly diagnosed patients with indolent non-Hodgkin's lymphoma (NHL) following initial (induction) treatment with chemotherapy. The study authors concluded that there was a significant improvement in progression-free survival (PFS), the primary endpoint of the study. Also presented were data from the MabThera International Trial (MinT) study of R-CHOP (Rituxan, cyclophosphamide, doxorubicin, vincristine and prednisone) versus CHOP (cyclophosphamide, doxorubicin, vincristine and prednisone) in younger patients with newly diagnosed, aggressive NHL.
Earlier in the quarter, Roche announced the initial results of the European Organization for Research and Treatment of Cancer (EORTC) 20981 trial of Rituxan in patients with relapsed indolent NHL. The trial evaluated patients treated with Rituxan and CHOP or CHOP alone followed by Rituxan maintenance therapy for two years and was stopped early due to efficacy when initial results showed Rituxan to be the best therapeutic option in both arms of the trial.
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Herceptin: In June, Roche announced that the European Commission approved the use of Herceptin in combination with Taxotere® (docetaxel) in the European Union as a first-line therapy in HER2-positive metastatic breast cancer patients who have not yet received chemotherapy.
As presented at ASCO, a Phase II investigator-sponsored study of Herceptin plus anthracycline chemotherapy versus anthracycline chemotherapy alone in the neoadjuvant setting was stopped early when initial results demonstrated a significant increase in pathological complete response in patients with operable breast cancer. While there were no observed cases of congestive heart failure (CHF) in this small study, there has been an increased incidence of CHF reported with the use of Herceptin in patients previously treated with anthracyclines.
Omnitarg&trade (pertuzumab): In the Phase II open-label trial of Omnitarg, evidence was observed of anti-tumor activity, including objective responses and durable stable disease in patients with advanced, relapsed/refractory ovarian cancer. While there was evidence of clinical benefit in the trial, the objective response rate was not adequate for an accelerated approval or pursuit of a Phase III trial for single-agent therapy in ovarian cancer at this time. Moving forward, Omnitarg will be evaluated in combination with chemotherapy in a Phase II trial in ovarian cancer.
Immunology and Specialty Biotherapeutics
Xolair: Genentech, with Novartis Pharma AG and Tanox, Inc., enrolled the first patient in the Phase II Xolair peanut allergy study of 150 patients, also known as TOPS.
Novartis Pharma AG submitted its application for the European approval of Xolair to the European Agency for the Evaluation of Medicinal Products (EMEA) Committee for Medicinal Products for Human Use (CHMP).
Rituxan: Genentech, Biogen Idec and Roche announced in June thatThe New England Journal of Medicine published the results of a Phase IIa study showing that two doses of Rituxan, administered two weeks apart, improved symptoms in patients with moderate-to-severe rheumatoid arthritis (RA) for up to 48 weeks when combined with methotrexate (MTX), compared to MTX alone.
In June, Genentech enrolled the first patient in the OLYMPUS study, a Phase II/III study of Rituxan in patients with primary progressive multiple sclerosis (PPMS).
RAPTIVA: Serono S.A. announced that CHMP made a unanimous recommendation for approval of RAPTIVA in the European Union.
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BR3-Fc: A new molecular entity for rheumatoid arthritis, a BR3 fusion protein, which resulted from a collaboration with Biogen Idec, has been entered into the development pipeline.
Nutropin Depot: In June, Genentech and Alkermes Inc. announced their decision to discontinue commercialization of Nutropin Depot. The decision was based on the significant resources required by both companies to continue manufacturing and commercializing the product.
CORPORATE EVENTS
The Genentech board of directors approved a two-for-one split of common stock in the form of a stock dividend. The stock split's record date was April 28, 2004, and additional shares were distributed beginning May 12, 2004. Genentech also announced the election of William M. Burns, head of Pharmaceuticals of the Roche Group, and Erich Hunziker, Ph.D., chief financial officer of the Roche Group, to the board of directors. Franz B. Humer, chairman and chief executive officer of the Roche Group, resigned from the board.
The Genentech Foundation for Biomedical Sciences, an independent foundation, awarded 23 grants totaling $1,061,090 to San Francisco Bay Area educational institutions that support biomedical research and education for local students.
Genentech announced the following senior officer promotions and appointments: Vince Anicetti was promoted to vice president, Product Portfolio Management; Martin Babler was promoted to vice president, Immunology Sales and Marketing; Charlie Johnson was promoted to vice president, Clinical Biotherapeutics; and Karen McCormick was hired as vice president, Specialty Therapeutic Sales & Marketing.
The statements made in this press release relating to the potential launch of Tarceva and 2004 non-GAAP EPS are forward-looking and actual results could differ materially. Among other things, the potential launch of Tarceva could be impacted by a number of factors, including manufacturing issues, discussions with the FDA, the need for additional clinical studies, FDA actions or delays, or the failure to receive FDA approval; and 2004 non-GAAP EPS could be impacted by all of the foregoing and by competition, pricing, new product approvals and launches, government reimbursement rates, the ability to supply product, product withdrawals, achieving sales revenue consistent with internal forecasts, unanticipated expenses such as litigation or legal settlement expenses or equity securities writedowns, costs of sales, R&D expenses, fluctuations in contract revenues and royalties, and fluctuations in tax and interest rates. Genentech disclaims any obligation and does not undertake to upda te or revise the forward-looking statements discussed in this press release.
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GENENTECH, INC. | ||||||||||||||||||
Three Months | ||||||||||||||||||
2004 | 2003 | |||||||||||||||||
GAAP(1) | Differences | Non-GAAP(2) | GAAP(1) | Differences | Non-GAAP(2) | |||||||||||||
Revenues: | ||||||||||||||||||
Product sales | $ | 913,366 | $ | 913,366 | $ | 644,324 | $ | 644,324 | ||||||||||
Royalties | 151,860 | 151,860 | 122,786 | 122,786 | ||||||||||||||
Contract revenue | 62,852 | 62,852 | 32,602 | 32,602 | ||||||||||||||
Total operating revenues | 1,128,078 | 1,128,078 | 799,712 | 799,712 | ||||||||||||||
Costs and expenses: | ||||||||||||||||||
Cost of sales | 186,683 | 186,683 | 123,407 | 123,407 | ||||||||||||||
Research and development | 212,886 | 212,886 | 180,203 | 180,203 | ||||||||||||||
Marketing, general and administrative | 276,654 | 276,654 | 184,258 | 184,258 | ||||||||||||||
Collaboration profit sharing | 145,221 | 145,221 | 107,307 | 107,307 | ||||||||||||||
Recurring charges related to redemption | 38,209 | $ | (38,209) | (3) | - | 38,586 | $ | (38,586) | (3) | - | ||||||||
Special charges: litigation-related | 13,458 | (13,458) | (4) | - | 13,363 | (13,363) | (4) | - | ||||||||||
Total costs and expenses | 873,111 | (51,667) | 821,444 | 647,124 | (51,949) | 595,175 | ||||||||||||
Operating margin | 254,967 | 51,667 | 306,634 | 152,588 | 51,949 | 204,537 | ||||||||||||
Other income, net(5) | 15,444 | - | 15,444 | 40,870 | - | 40,870 | ||||||||||||
Income before taxes | 270,411 | 51,667 | 322,078 | 193,458 | 51,949 | 245,407 | ||||||||||||
Income tax provision | 99,640 | 20,666 | 120,306 | 61,113 | 20,779 | 81,892 | ||||||||||||
Net income | $ | 170,771 | $ | 31,001 | $ | 201,772 | $ | 132,345 | $ | 31,170 | $ | 163,515 | ||||||
Earnings per share:(6) | ||||||||||||||||||
Basic | $ | 0.16 | $ | 0.03 | $ | 0.19 | $ | 0.13 | $ | 0.03 | $ | 0.16 | ||||||
Diluted | $ | 0.16 | $ | 0.03 | $ | 0.19 | $ | 0.13 | $ | 0.03 | $ | 0.16 | ||||||
Weighted average shares used to compute | ||||||||||||||||||
Basic | 1,060,619 | 1,060,619 | 1,025,818 | 1,025,818 | ||||||||||||||
Diluted | 1,087,087 | 1,087,087 | 1,045,829 | 1,045,829 | ||||||||||||||
___________________
(1) | Reflects operating results in accordance with U.S. generally accepted accounting principles (or GAAP). | |
(2) | Non-GAAP amounts exclude litigation-related special charges and recurring charges related to the 1999 redemption of Genentech's Special Common Stock, net of related taxes. | |
(3) | Represents the amortization of other intangible assets related to the 1999 redemption of Genentech's Special Common Stock. | |
(4) | Represents accrued interest and bond costs related to the City of Hope trial judgment. | |
(5) | "Other income, net" includes realized gains and losses from the sale of certain biotechnology equity securities and write-downs for other-than-temporary declines in the fair value of certain biotechnology debt and equity securities. In addition, "other income, net" includes interest income and interest expense. For further detail, refer to our web site at www.gene.com. | |
(6) | All share and per share amounts reflect the May 2004 two-for-one stock split of our Common Stock. 2004 Reconciliation of GAAP and Non-GAAP EPS |
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GENENTECH, INC. | ||||||||||||||||||
Six Months | ||||||||||||||||||
2004 | 2003 | |||||||||||||||||
GAAP(1) | Differences | Non-GAAP(2) | GAAP(1) | Differences | Non-GAAP(2) | |||||||||||||
Revenues: | ||||||||||||||||||
Product sales | $ | 1,677,066 | $ | 1,677,066 | $ | 1,242,806 | $ | 1,242,806 | ||||||||||
Royalties | 305,957 | 305,957 | 236,061 | 236,061 | ||||||||||||||
Contract revenue | 120,190 | 120,190 | 70,517 | 70,517 | ||||||||||||||
Total operating revenues | 2,103,213 | 2,103,213 | 1,549,384 | 1,549,384 | ||||||||||||||
Costs and expenses: | ||||||||||||||||||
Cost of sales | 301,163 | 301,163 | 238,249 | 238,249 | ||||||||||||||
Research and development | 403,231 | 403,231 | 337,636 | 337,636 | ||||||||||||||
Marketing, general and administrative | 523,968 | 523,968 | 321,480 | 321,480 | ||||||||||||||
Collaboration profit sharing | 271,652 | 271,652 | 203,854 | 203,854 | ||||||||||||||
Recurring charges related to redemption | 76,418 | $ | (76,418) | (3) | - | 77,172 | $ | (77,172) | (3) | - | ||||||||
Special charges: litigation-related | 26,857 | (26,857) | (4) | - | 26,608 | (26,608) | (4) | - | ||||||||||
Total costs and expenses | 1,603,289 | (103,275) | 1,500,014 | 1,204,999 | (103,780) | 1,101,219 | ||||||||||||
Operating margin | 499,924 | 103,275 | 603,199 | 344,385 | 130,780 | 448,165 | ||||||||||||
Other income, net(5) | 37,765 | - | 37,765 | 56,573 | - | 56,573 | ||||||||||||
Income before taxes | 537,689 | 103,275 | 640,964 | 400,958 | 130,780 | 504,738 | ||||||||||||
Income tax provision | 190,331 | 41,310 | 231,641 | 117,143 | 41,511 | 158,654 | ||||||||||||
Net income | $ | 347,358 | $ | 61,965 | $ | 409,323 | $ | 283,815 | $ | 62,269 | $ | 346,084 | ||||||
Earnings per share: (6) | ||||||||||||||||||
Basic | $ | 0.33 | $ | 0.06 | $ | 0.39 | $ | 0.28 | $ | 0.06 | $ | 0.34 | ||||||
Diluted | $ | 0.32 | $ | 0.06 | $ | 0.38 | $ | 0.27 | $ | 0.06 | $ | 0.33 | ||||||
Weighted average shares used to compute | ||||||||||||||||||
Basic | 1,057,955 | 1,057,955 | 1,024,796 | 1,024,796 | ||||||||||||||
Diluted | 1,084,618 | 1,084,618 | 1,040,204 | 1,040,204 | ||||||||||||||
___________________
(1) | Reflects operating results in accordance with U.S. generally accepted accounting principles (or GAAP). | |
(2) | Non-GAAP amounts exclude litigation-related special charges and recurring charges related to the 1999 redemption of Genentech's Special Common Stock, net of related taxes. | |
(3) | Represents the amortization of other intangible assets related to the 1999 redemption of Genentech's Special Common Stock. | |
(4) | Represents accrued interest and bond costs related to the City of Hope trial judgment. | |
(5) | "Other income, net" includes realized gains and losses from the sale of certain biotechnology equity securities and write-downs for other-than-temporary declines in the fair value of certain biotechnology debt and equity securities. In addition, "other income, net" includes interest income and interest expense. For further detail, refer to our web site at www.gene.com. | |
(6) | All share and per share amounts reflect the May 2004 two-for-one stock split of our Common Stock. |
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GENENTECH, INC. | ||||||
June 30, | ||||||
2004 | 2003(6) | |||||
Selected balance sheet data: | ||||||
Cash, cash equivalents and short-term investments | $ | 1,619,134 | $ | 1,215,813 | ||
Accounts receivable - product sales, net | 464,032 | 270,993 | ||||
Accounts receivable - royalties, net | 189,513 | 140,693 | ||||
Accounts receivable - other, net | 88,901 | 267,770 | ||||
Inventories | 527,649 | 422,414 | ||||
Long-term marketable debt and equity securities | 1,414,663 | 785,877 | ||||
Property, plant and equipment, net | 1,740,423 | (4) | 1,146,875 | |||
Goodwill | 1,315,019 | 1,315,019 | ||||
Other intangible assets | 710,644 | 865,719 | ||||
Other long-term assets | 817,906 | 793,345 | ||||
Total assets | 9,055,039 | 7,459,115 | ||||
Total current liabilities | 836,876 | 598,721 | ||||
Total liabilities | 2,170,005 | (5) | 1,606,182 | |||
Total stockholders' equity | 6,885,034 | 5,852,933 | ||||
Year-to-date: | ||||||
Capital expenditures | $ | 196,633 | $ | 140,145 | ||
Total GAAP(1) depreciation and amortization expense | 178,520 | 144,871 | ||||
Less: redemption related amortization expense(3) | (76,418) | (77,172) | ||||
$ | 102,102 | $ | 67,699 | |||
___________________
(1) | In accordance with U.S. generally accepted accounting principles (or GAAP). | |
(2) | Non-GAAP amounts exclude amortization of other intangible assets related to the 1999 redemption of Genentech's Special Common Stock. | |
(3) | Represents the amortization of other intangible assets related to the 1999 redemption of Genentech's Special Common Stock. | |
(4) | ||
(5) | Includes $412 million of debt related to the consolidation of a variable interest entity pursuant to FIN 46. | |
(6) | Certain reclassifications of prior period amounts have been made to conform with the current year presentation. |
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