Genentech, Inc.
460 Point San Bruno Blvd.
South San Francisco, CA 94080
USA
Basel, February 19, 1997
PRIVILEGED AND CONFIDENTIAL
Gentlemen,
In connection with the issuance of the attached "Guiding Principles"
by F. Hoffmann-La Roche Ltd ("Roche") and Genentech, Inc. ("Genentech"),
and in order to avoid any misunderstanding, we are writing to confirm
that Roche views the "Guiding Principles" as a statement of the
expectations of Roche and Genentech. Neither Roche nor Genentech
intends the "Guiding Principles" to be a binding agreement and neither
Roche nor Genentech, by agreeing to issue the "Guiding Principles",
makes any promises, express or implied, with respect to the matters
addressed therein. Nothing in the "Guiding Principles" will change or
alter any of the existing agreements between Genentech and Roche.
F.HOFFMANN-LA ROCHE LTD
\S\DR. FRANZ B. HUMER
------------------------
BY: Dr. Franz B. Humer
TITLE: Chief Operating Officer
AGREED AND ACCEPTED:
GENENTECH, INC.
\S\ARTHUR D. LEVINSON
-------------------------
BY: Arthur D. Levinson, Ph.D.
TITLE: President and CEO
GUIDING PRINCIPLES FOR THE
GENENTECH/ROCHE RELATIONSHIP
Corporate Governance
Genentech will continue to be governed by a Board of Directors as
provided in the current Governance Agreement.
The Genentech Board of Directors (or its designated committee) will
approve Genentech's budget, headcount, long range plan, capital
expenditures, compensation programs and key business decisions in
accordance with its fiduciary duties to its shareholders. The members
of the Board will determine the chairmanship of the Board and its
committees as well as the composition of its committees.
The Genentech CEO will report to the Board. All officers will continue
with their current reporting relationships unless changed by the
Genentech CEO or the Board. The Executive Committee, Product
Development Committee, Organization Development Committee and Research
Review Committee (or their successors as established by the Genentech
CEO or Board) will continue in their roles with respect to operations,
product development and research at Genentech unless changed by the
Genentech CEO or the Board.
Corporate Name
The name of Genentech will continue. It is widely recognized within the
scientific community and stands for excellence in innovation and there
is therefore no reason to expect the important value and positioning of
the name to change.
Employment Practices
Genentech will continue its current employment practices unless changed
by the Genentech CEO or the Board. Roche recognizes the value of
Genentech's culture and of maintaining Genentech as an integrated
entity. It is expected that Genentech will be an integrated, multi-
disciplinary company with all necessary functions. The Genentech CEO or
the Board retain the option to manage headcount as is in the best
interests of Genentech, taking into account the overall interest of
Genentech's shareholders.
Genentech will maintain an independent and entrepreneurial compensation
and benefits policy based on reward for success as approved by the
Genentech CEO or the Board. In the event that Genentech's stock is no
longer publicly traded, a replacement incentive program that maintains
the entrepreneurial approach of Genentech will be implemented.
Research
Research direction will be set by Genentech's head of research in
consultation with the Executive Committee and current practices such as
time allocated to independent research, rapid publication of results to
permit recognition in the scientific community, and use of post-docs
will continue. In addition, Research will seek to remain on the cutting
edge of related technologies through internal efforts and in-licensing
of technology, product rights, and collaborations with third parties.
The current level of Research funding will be maintained unless changed
by the Genentech Board of Directors or Genentech CEO. The level of
Research funding in the future could increase modestly for inflation and
in-licensing. Research collaborations between Genentech and Roche will
be evaluated on the basis of scientific merit and mutual benefit.
Genentech and Roche will continue to exchange scientific information and
knowledge to the benefit of both research groups.
Small Molecule Research
Genentech envisions that it will look for partners for most small
molecule projects and that Roche will be the preferred collaborator
assuming Roche has adequate resources and interest in such a
collaboration. Unless Roche owns 100% of Genentech, appropriate
business terms will be negotiated.
Development
Through Phase II, Genentech projects will be managed by Genentech's
Product Development Committee as overseen by the Executive Committee (or
their successors as established by the Genentech CEO or Board), and the
Genentech CEO. At the initiation of Phase I, Roche will review the data
and the proposed clinical plan. Approximately four months prior to
completion of the Phase II trials, or "proof of concept", Genentech will
supply information to Roche about the product, its proposed development
and its commercial potential. Upon successful completion of Phase II,
or earlier demonstration of "proof of concept", Roche will be provided
the results of the trial(s) and related commercial information. The
meeting of the Genentech and Roche joint development and commercial
committee will be scheduled and held. This meeting will be expected to
review and approve one global development and registration strategy and
plan to bring any new product to the market as quickly and as
effectively as possible. The development work will be carried out
utilizing available resources in both companies with development speed,
development cost, and commercial potential as main criteria for success.
If Roche decides not to develop and market a product, Genentech will be
free to develop the product with a partner or out-license it.
Manufacturing
It is anticipated that Genentech will manufacture its large molecules
and Genentech/Roche jointly developed large molecules and that Roche
will make Genentech/Roche jointly developed small molecules. All other
manufacturing and process technology arrangements will be on a space
available basis at commercial terms.
Sales and Marketing
Genentech has a highly focused efficient and productive sales and
marketing organization with in-depth expertise in specialized markets.
Genentech and Roche intend to preserve the strengths/expertise and the
culture of this organization to maximize sales and market performance of
our products.
GENENTECH, INC. F. HOFFMANN-LA ROCHE LTD
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