Genentech 8-K Genentech Announces Full Year and Fourth Quarter 2006 Results

EXHIBIT 99.2

GENENTECH, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts)

(Unaudited)

	Three Months						Year
	Ended December 31,						Ended December 31,
	2006			2005			2006			2005
Revenues:
Product sales	$	2,244		$	1,577		$	7,640		$	5,488
Royalties		389			265			1,354			935
Contract revenue		81			51			290			210
Total operating revenues		2,714			1,893			9,284			6,633
Costs and expenses:
Cost of sales		338			245			1,181			1,011
Research and development (includes employee stock-based compensation expense: three months-2006-$38; 2005-$0; full year 2006-$140; 2005-$0)		555			412			1,773			1,262
Marketing, general and administrative (includes employee stock-based compensation expense: three months-2006-$45; 2005-$0; full year 2006-$169; 2005-$0)		600			429			2,014			1,435
Collaboration profit sharing		270			228			1,005			823
Recurring charges related to redemption		26			27			105			123
Special items: litigation-related		14			13			54			58
Total costs and expenses		1,803			1,354			6,132			4,712
Operating income		911			539			3,152			1,921
Other income (expense):
Interest and other income, net(1)		77			43			325			142
Interest expense		(18	)		(23	)		(74	)		(50	)
Total other income, net		59			20			251			92
Income before taxes		970			559			3,403			2,013
Income tax provision		376			220			1,290			734
Net income	$	594		$	339		$	2,113		$	1,279
Earnings per share:
Basic	$	0.56		$	0.32		$	2.01		$	1.21
Diluted	$	0.55		$	0.31		$	1.97		$	1.18
Weighted average shares used to compute earnings per share:
Basic		1,054			1,055			1,053			1,055
Diluted		1,072			1,080			1,073			1,081

(1)

“Interest and other income, net” includes interest income, net realized gains from the sale of certain biotechnology equity securities and write-downs for other-than-temporary impairments in the fair value of certain biotechnology debt and equity securities. For further detail, refer to our web site at www.gene.com.

Net income in the three months and year ended December 31, 2006 includes employee stock-based compensation expense of $41 million and $182 million, net of tax, respectively, due to our adoption of Statement of Financial Accounting Standards No. 123(R) (or "FAS 123R") on a modified prospective basis on January 1, 2006. No employee stock-based compensation expense was recognized in GAAP-reported amounts in any period prior to January 1, 2006. Based on the pro forma application of FAS 123 for the calculation of employee stock-based compensation prior to January 1, 2006 (based upon the amounts previously reported in Genentech's financial statement footnotes), pro forma employee stock-based compensation expense in the fourth quarter of 2005 was $49 million, net of tax, (or $0.05 per diluted share), and the resulting pro forma GAAP net income was $290 million (or $0.27 per diluted share).  Pro forma employee stock-based compensation expense for the full year of 2005 was $175 million, net of tax, (or $0.16 per diluted share), and the resulting pro forma GAAP net income was $1.1 billion (or $1.02 per diluted share).

GENENTECH, INC.

SELECTED CONSOLIDATED FINANCIAL DATA

(In millions)

(Unaudited)

	December 31, 2006		December 31, 2005
Selected consolidated balance sheet data:
Cash, cash equivalents and short-term investments	$	2,493	$	2,365
Accounts receivable - product sales, net		965		554
Accounts receivable - royalties, net		453		297
Accounts receivable - other, net(1)		248		199
Inventories		1,178		703
Long-term marketable debt and equity securities		1,832		1,449
Property, plant and equipment, net		4,173		3,349
Goodwill		1,315		1,315
Other intangible assets		476		574
Other long-term assets(1)		1,342		1,074
Total assets		14,842		12,147
Total current liabilities		2,157		1,660
Long-term debt(2)		2,204		2,083
Total liabilities		5,364		4,677
Total stockholders’ equity		9,478		7,470

	Year
	Ended December 31,
	2006		2005
Selected consolidated cash flow data:
Capital expenditures(2)	$	1,214	$	1,400
Total depreciation and amortization expense		407		370

(1)	Certain reclassifications have been made at December 31, 2005 to conform to the December 31, 2006 presentation.
(2)	Capital expenditures exclude approximately $104 million at December 31, 2006, and $94 million at December 31, 2005 in capitalized costs related to our accounting for construction projects of which we are considered to be the owner during the construction period. We have recognized a related amount as a construction financing obligation in long-term debt.