GENENTECH REPORTS 21% INCREASE IN 1ST QTR PRODUCT SALES.

Genentech, Inc. (NYSE:DNA), South San Francisco, has announced a 21 percent increase in product sales and a 27 percent increase in earnings per share for the first quarter of 2000, exclusive of the impact of charges associated with the redemption of Genentech's Special Common Stock and related accounting treatment, and a legal settlement in the first quarter of 1999. As a result of the redemption-related charges, the company recorded a net loss for the first quarter of 2000.

For the three months ended March 31, 2000:

-- Net income increased to $74.7 million, or 28 cents per share, an increase in earnings per share of 27 percent over the first quarter of 1999, exclusive of the impact of the redemption in the first quarter of 2000 and the impact of a special charge for a legal settlement of $50 million in the first quarter of 1999.

-- Due to charges related to the redemption, the company recorded a first quarter net loss of $25.9 million, or a net loss per share of 10 cents, as compared to net income of $14.4 million, or 5 cents per share, in the first quarter of 1999. The company recorded net income of $58.5 million or 22 cents per share for the first quarter of 1999, exclusive of the impact of a special charge for a legal settlement.

All earnings (loss) per share data and number of shares reflect the stock split effective November 2, 1999.

The accounting treatment under U.S. Generally Accepted Accounting Principles (GAAP) requires Genentech to establish a new accounting basis for the company's assets and liabilities. This accounting treatment is the result of Roche's exercise of its option to redeem Genentech's Special Common Stock in June 1999. The company's new accounting basis is based on the cost of Roche's 1990 through 1997 purchases of Genentech shares and the redemption of Genentech's Special Common Stock on June 30, 1999. Roche's cost of acquiring Genentech is "pushed down" to Genentech and reflected on Genentech's financial statements beginning June 30, 1999. The effect of push-down accounting on Genentech's first quarter 2000 consolidated statement of operations include recurring charges for the amortization of goodwill and other intangibles, and costs related to the sale of inventory that was written up at the redemption.

-- Revenues increased 20 percent to $385.7 million from $322.3 million in the same quarter of 1999. This revenue growth was driven primarily by sales of Herceptin(R) (Trastuzumab) and Rituxan(R) (Rituximab) and gains on the sale of certain marketable equity securities.

"We begin the year with progress on all fronts -- solid sales performances from our marketed biooncology products, positive advances with the products in our pipeline and strategic headway with our business alliances," said Arthur D. Levinson, Ph.D., Genentech's chairman and chief executive officer. "Herceptin and Rituxan have once again achieved record sales this quarter. In addition, Genentech announced positive Phase III results for anti-IgE and we have also enhanced our cardiovascular portfolio of pipeline products with the addition of tezosentan and the initiation of the combination trials for TNKase."

During the quarter, Genentech, with partners Novartis Pharma AG and Tanox, Inc., presented positive Phase III results for anti-IgE, a recombinant humanized monoclonal antibody to IgE, in asthma at the annual meeting of the American Academy of Allergy, Asthma and Immunology in March. Treatment with anti-IgE may reduce the number of asthma exacerbations while reducing the need for steroids and rescue medication in children and adults. The companies plan to file for regulatory approval in the United States and in Europe by second quarter 2000.

Genentech also continued its positive momentum in the focus on cardiovascular medicine by announcing plans to collaborate with other major pharmaceutical manufacturers to test the new, single-bolus thrombolytic, TNKase(TM) (Tenecteplase), in combination with various leading anti-thrombotic agents in the treatment of acute myocardial infarction or heart attack. The company also signed a licensing agreement with Actelion, Ltd. for the development and co-promotion of tezosentan, which is being developed for the potential treatment of acute heart failure.

Product Sales

Sales of marketed products increased 21 percent in the first quarter of 2000 to $283.2 million from $234.1 million in the first quarter of 1999.

Sales of Herceptin in the first quarter of 2000 were $68.7 million compared to $39.9 million in the first quarter of 1999. Since launch, an increase of physician acceptance of Herceptin has contributed to a positive sales trend and successful penetration into the breast cancer market. Genentech has begun one and is preparing a second Phase III clinical trial of Herceptin in adjuvant therapy for breast cancer and has begun Phase II clinical trials in non-small cell lung cancer.

Sales of Rituxan in the first quarter of 2000 increased 49 percent to $85.1 million from $57.1 million in the first quarter of 1999. This sales increase is due primarily to increased market penetration for the treatment of non-Hodgkin's lymphoma. With partners IDEC Pharmaceuticals Corporation and Roche, Genentech continues to explore other uses of Rituxan as a single agent as well as in combination with other traditional therapies through clinical trials. A Genentech/IDEC Phase III clinical trial of Rituxan in intermediate- and high-grade non-Hodgkin's lymphoma that is intended to extend product labeling was initiated in the fourth quarter of 1999.

Sales of Activase(R) (Alteplase, recombinant) during the first quarter of 2000 were $47.5 million compared to $52.0 million in the first quarter of 1999. Sales of Activase decreased due to a decline in the overall size of the acute myocardial infarction market due to mechanical reperfusion and continued competition. This decrease was partially offset by an increase in sales relating to the drug's increased use in peripheral blood vessel occlusions.

Sales of Genentech's three growth hormone products, Protropin(R) (somatrem for injection), Nutropin(R) (somatropin (rDNA origin) for injection) and Nutropin AQ(R) (somatropin (rDNA origin) injection), were $55.1 million compared to $56.2 million in the first quarter of 1999.

In December 1999, Genentech announced Nutropin Depot(TM) (somatropin (rDNA origin) for injectable suspension) -- the first long-acting dosage form of recombinant growth hormone -- received approval from the U.S. Food and Drug Administration (FDA) for pediatric growth hormone deficiency after being granted a six-month priority review. Genentech expects to launch Nutropin Depot by mid-2000.

Sales of Pulmozyme(R) (dornase alfa) Inhalation Solution decreased to $26.8 million in the first quarter of 2000 compared to $28.2 million in the first quarter of 1999 primarily due to fluctuations in timing of orders and the impact of recording a provision against sales related to a packaging defect.

Total Costs and Expenses

Costs and expenses increased in the first quarter of 2000 as compared to the first quarter of 1999.

Research and development (R&D) expenses increased in the first quarter of 2000 to $111.4 million compared to $90.7 million in 1999. The increase is primarily due to an in-license agreement with Actelion that included an upfront fee of $15 million in February 2000. R&D expenses as a percentage of revenues in the first quarter of 2000 were 29 percent, compared to approximately 28 percent in the first quarter of 1999. R&D expenses as a percent of revenues are expected to vary over the next several periods 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, exclusive of expenses related to the redemption and push down accounting, increased to $62.9 million in the first quarter of 2000 from $45.7 million in the first quarter of 1999.

Marketing, general and administrative (MG&A) expenses increased during the first quarter of 2000 to $101.9 million compared to $97.2 million in the first quarter of 1999 due to an increase in marketing and selling expenses in support of Genentech's oncology products, including the Rituxan profit-sharing expense. This increase is partially offset by a decrease in general and administrative expenses related to royalties and write down of investments.

Genentech, Inc. is a leading biotechnology company that discovers, develops, manufactures, and markets human pharmaceuticals for significant unmet medical needs. Thirteen of the currently approved biotechnology products stem from Genentech science. Genentech markets seven 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.

Genentech Business and Product Development Events in the First Quarter, 2000

Genentech Recently Announced the Following:

-- With Novartis Pharma AG and Tanox, Inc., presented positive Phase III results for anti-IgE in asthma at the annual meeting of the American Academy of Allergy, Asthma and Immunology in March. Positive Phase III results of anti-IgE treatment for seasonal allergic rhinitis were announced in 1999. The companies plan to file for regulatory approval in the United States and in Europe by second quarter 2000.

-- Announced plans to collaborate with other major pharmaceutical manufacturers to test the new, single-bolus thrombolytic -- TNKase -- in combination with various leading anti-thrombotic agents in treatment of acute myocardial infarction or heart attack.

-- Signed licensing agreement with Actelion, Ltd. for the development and co-promotion of tezosentan in the United States for the potential treatment of acute heart failure.

-- Began first of two Phase III clinical trials of Herceptin in adjuvant therapy for breast cancer.

-- With Aradigm Corporation, announced the start of a U.S. Phase IIa clinical trial of Genentech's Pulmozyme (dornase alfa inhalation solution) using Aradigm's proprietary AERx pulmonary delivery system.

-- Millennium Pharmaceuticals, Inc. announced the initiation of a Phase II clinical trial of LDP-02 for Crohn's disease. Genentech is collaborating with Millennium in the development of the antibody and holds exclusive worldwide commercialization rights.

-- XOMA Ltd. announced the initiation of a Phase I/II clinical study of anti-CD11a in the prevention of kidney transplant rejection. Genentech is collaborating with XOMA to develop the antibody.

-- Announced the public offering by Roche of 17.3 million Genentech shares in March and the January Roche offering of a zero-coupon debt instrument exchangeable for shares of Genentech common stock owned by Roche.

-- In early April, announced the purchase of a cell culture manufacturing facility in Porrino, Spain, from Glaxo Wellcome Biofarma S.A. The facility has been established as a wholly owned subsidiary company, "Genentech Espana S.L.," and will supplement Genentech's existing bulk cell culture production capacity.

-- Filed a motion with the Federal Circuit Court of Appeals in Washington DC seeking an expedited appeal and reinstatement of an injunction granted in 1995 that has prevented Bio-Technology General Corporation from selling its human growth hormone product in the United States. The motion is in response to a decision by a U.S. Federal District Court in New York finding one of Genentech's human growth hormone patents invalid following a week-long jury trial.

-- Issued a drug notification regarding a defect in the packaging of its cystic fibrosis drug, Pulmozyme.

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