Genentech's Year-End Results Show Growth Plan on Track: Earnings Increase Nine Percent on Revenues Exceeding $1 Billion.

SOUTH SAN FRANCISCO, Calif.--(BW HealthWire)--Jan. 22, 1997--

-- Four FDA approvals in 1997, and nine late-stage development

products entering 1998 demonstrate strength of company's

Long Range Plan --

Genentech, Inc. (NYSE:GNE) announced today that earnings for 1997 increased nine percent to $129.0 million, or $1.02 per share(a), from $118.3 million in 1996, or 95 cents per share(a). This increase reflects increased revenues partially offset by increased marketing, general and administrative expenses. Earnings for the fourth quarter of 1997 increased to $41.5 million, or 33 cents per share(a), from $7.5 million, or 6 cents per share(a), in the fourth quarter of 1996. This quarter-to-quarter earnings increase primarily reflects increased revenues.

Revenues for 1997 increased 5 percent to $1,016.7 million from $968.7 million in 1996. This growth came from all revenue areas, but primarily from royalties and from contract and other revenues. Revenues for the fourth quarter of 1997 increased 20 percent to $277.0 million from $230.3 million in the fourth quarter of 1996, primarily due to an increase in contract and other revenues. Genentech's royalties in 1997 were $241.1 million compared to $214.7 million in 1996. This increase primarily reflects increased sales by licensees. Contract and other revenues in 1997 were $121.6 million compared to $107.0 million in 1996. The increase in contract and other revenues for the quarter and on a full-year basis is largely due to strategic alliances formed with Sumitomo Pharmaceuticals Co., Ltd., and Pharmacia & Upjohn, Inc.

"1997 was a successful year for Genentech on many levels, validating the corporate strategy for growth that we implemented in 1995," said Arthur D. Levinson, Ph.D., Genentech's president and chief executive officer. "Our financial results were consistent with our plan to begin to see a modest earnings increase in 1997, and we made substantial progress with our pipeline and our strategic relationships. We also implemented a new Long Range Plan to meet our objectives and give us, as we move into the 21st century, the potential for a strong bottom line, strong prospects for future growth and a strong late-stage pipeline."

Genentech received four regulatory approvals from the U.S. Food and Drug Administration in 1997. One was for a new product, Rituxan(TM) (Rituximab), which Genentech launched with its partner IDEC Pharmaceuticals Corporation for the treatment of patients with relapsed or refractory low-grade or follicular, CD20-positive B-cell non-Hodgkins lymphoma. The others were for new indications of certain of Genentech's growth hormone products.

Genentech also announced favorable preliminary Phase III results and began preparing regulatory filings for another new oncology product, Herceptin(TM) (trastuzumab) anti-HER2 antibody, and started or began planning, either alone or with partners, Phase III trials for five potential products. With ongoing trials and an additional Phase III product in-licensed during 1997, Genentech now has nine products or potential products in late-stage clinical development (entering Phase III or beyond). Genentech expects to submit regulatory filings on Herceptin in the second quarter of 1998. Genentech also moved two potential new products into initial clinical testing in 1997.

Marketed Products

Product sales for 1997 increased slightly to $584.9 million from $582.8 million in 1996. Sales from Rituxan and increased sales of Genentech's growth hormone products and Pulmozyme(R) (dornase alfa, recombinant) Inhalation Solution offset the decline in Activase(R)(Alteplase, recombinant) sales.

In 1997, Genentech launched a new BioOncology initiative that includes the marketed product Rituxan as well as the oncology products that Genentech has under clinical development. Genentech and IDEC launched Rituxan on December 16, 1997, and recorded initial sales of $5.5 million for 1997. While Genentech is encouraged by these sales figures, not enough time has passed for these figures to be indicative of future sales, and the figures may reflect pent up demand for the product.

With a new competitive thrombolytic agent on the market and a decline in the overall size of the thrombolytic therapy market as some heart attack patients receive mechanical reperfusion rather than thrombolytic therapy and from two large ongoing clinical studies, Activase sales decreased to $260.7 million in 1997 from $284.1 million in 1996. Activase's market share in the fourth quarter of 1997 was approximately 71 percent compared to approximately 76 percent in the third quarter of 1997 and approximately 80 percent in the fourth quarter of 1996.

Sales of growth hormone products Protropin(R) (somatrem for injection), Nutropin(R) (somatropin (rDNA origin) for injection) and Nutropin AQ(R) (somatropin (rDNA origin) injection) increased slightly to $223.6 million in 1997 from $218.2 million in 1996.

Sales of Pulmozyme were $91.6 million in 1997 compared to $76.0 million in 1996. This increase resulted primarily from increased penetration in patients with mild and moderate cystic fibrosis as well as from variation in customer ordering patterns.

Marketing, General and Administrative Expenses

MG&A expenses for 1997 were $269.9 million compared to $240.1 million in 1996. The increased expenses were primarily in support of marketing and sales for Genentech's launch of its new BioOncology initiative; for its launch of a new indication, growth hormone deficiency in adults, for Nutropin and Nutropin AQ; and for its efforts to defend Activase against new competition. In addition, there was an increase in general and administrative expenses due to royalty expense.

R&D Expenses

Research and development expenses for 1997 were $470.9 million compared to $471.1 million in 1996. R&D expenses as a percentage of revenues in 1997 were 46 percent, compared to approximately 49 percent in 1996.

"This initial decrease in R&D expenses as a percent of revenues," said Levinson, "is in line with our continuing efforts to bring increasing revenues to the bottom line through disciplined spending in all areas of the company."

Genentech, Inc. is a leading biotechnology company that discovers, develops, manufactures, and markets human pharmaceuticals for significant unmet medical needs. Eleven of the currently marketed biotechnology products stem from Genentech science. Genentech markets or promotes eight biotechnology products in the United States. The company has headquarters in South San Francisco, California, and is traded on the New York Stock Exchange and Pacific Exchange under the symbol GNE. -0- (a) All earnings-per-share amounts in the text of this news release represent diluted earnings per share as defined under Statement of Financial Accounting Standards No. 128, "Earnings per Share."

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GENENTECH BUSINESS AND PRODUCT DEVELOPMENT

PROGRESS IN 1997

In 1997 Genentech made significant progress with the products in its pipeline, including several stemming from business collaborations. During the year:

-- Along with partner IDEC Pharmaceuticals Corporation, Genentech

received approval for Rituxan for the treatment of patients with

relapsed or refractory low-grade or follicular, CD20-positive

B-cell non-Hodgkins lymphoma. -- Genentech received approval for Nutropin and Nutropin AQ for the

treatment of growth hormone deficiency in adults. -- Genentech received approval for Nutropin AQ for the treatment of

short stature associated with Turner Syndrome. -- Genentech announced favorable preliminary Phase III trial results

and began preparing regulatory filings for Herceptin for the

treatment of breast cancer. -- Genentech began a Phase III trial of nerve growth factor in

diabetic patients with sensory peripheral neuropathy. -- With partner Boehringer Ingelheim International GmbH (BI),

Genentech began a Phase III trial for TNK t-PA for acute

myocardial infarction. -- BI completed enrollment in its ECASS II stroke study, which is

investigating using Activase for acute ischemic stroke within the

first six hours of symptom onset (Activase is currently approved

for acute ischemic stroke within the first three hours of symptom

onset). -- Genentech began a Phase III Early Intervention Trial with

Pulmozyme in young cystic fibrosis patients with preserved lung

function. -- With partner Alkermes, Inc., Genentech began pivotal Phase III

trials of ProLease(R) sustained-release human growth hormone

(hGH). -- Genentech agreed to provide Sumitomo Pharmaceuticals Co., Ltd.,

exclusive rights to develop, import and distribute in Japan

Nutropin AQ and ProLease sustained release growth hormone. -- Genentech agreed with Alteon, Inc. for continued development and

future marketing in the United States of Pimagedine, currently in

Phase III trials to treat kidney disease in diabetic patients. -- With partners Novartis Pharma AG and Tanox Biosystems, Inc.,

Genentech began planning a Phase III trial of an anti-IgE

antibody for the treatment of allergic asthma. -- Roche began Phase III clinical trials of Sibrafiban, an oral

IIb/IIIa antagonist for acute coronary syndrome. In 1997, Roche

assumed development of Sibrafiban on its own. Genentech will

provide clinical and scientific input for the program and may

subsequently opt-in and join development at any time up to the

New Drug Application filing for the first indication. -- Roche began Phase II clinical trials of the anti-CD18 antibody

for the treatment of shock and burns, and Genentech began

planning Phase II clinical trials of this antibody for the

treatment of acute myocardial infarction. -- Genentech completed one and initiated a second of two planned

Phase I safety trials of vascular endothelial growth factor

(VEGF) in patients with coronary artery disease. -- Genentech completed one and initiated a second of two planned

Phase I safety trials of Genentech's anti-VEGF antibody in

patients with refractory cancer. -- Genentech agreed with LeukoSite Inc. to develop and commercialize

LeukoSite's LDP-02, a humanized monoclonal antibody for the

treatment of inflammatory bowel diseases. LDP-02 is expected to

enter human clinical trials in 1998. -- In exchange for development costs, fees and, upon marketing,

royalties, Genentech agreed to provide to Pharmacia & Upjohn

(P&U) exclusive worldwide rights for thrombopoietin (TPO), which

is in Phase II trials for potential use in treating patients with

complications of cancer chemotherapy. P&U and Genentech will

jointly develop TPO. -- Genentech discontinued IGF-I development effort in Type I and

Type II diabetes, based on the scope and extended time frame of

the clinical program required to address potential concerns about

diabetic retinopathy. -- With partner Scios, Inc., Genentech discontinued development of

Auriculin after an interim analysis of data from an ongoing Phase

III study in oliguric acute renal failure suggested a low

probability of a positive outcome. -- Genentech returned to IDEC Genentech's U.S. marketing rights for

IDEC-Y2B8, a radioimmunotherapy under investigation for the

treatment of relapsed or refractory non-Hodgkin's B-cell

lymphoma. -0-

                            Genentech, Inc.
               Condensed Consolidated Income Statements
               (In thousands, except per share amounts)
                             (unaudited)

                             Three Months                Year
                             Ended Dec 31            Ended Dec 31
                           1997       1996         1997         1996
Revenues:
 Product sales           $143,352   $139,724   $  584,889   $  582,829
 Royalties                 60,789     54,156      241,112      214,702
 Contract and other        54,134     19,046      121,587      107,037
 Interest                  18,778     17,399       69,160       64,110
   Total revenues         277,053    230,325    1,016,748      968,678

Costs and expenses:
 Cost of sales             22,719     26,659      102,536      104,527
 Research and
  development             119,144    128,135      470,923      471,143
 Marketing, general and
  administrative           79,348     65,170      269,852      240,063
 Interest                   1,196      1,024        3,642        5,010
   Total costs and
    expenses              222,407    220,988      846,953      820,743

Income before taxes        54,646      9,337      169,795      147,935

Income tax provision       13,117      1,867       40,751       29,587

Net income               $ 41,529   $  7,470   $  129,044   $  118,348

Net income per share(1):
 Basic                   $   0.33   $   0.06   $     1.05   $     0.98
 Diluted                 $   0.33   $   0.06   $     1.02   $     0.95

Weighted average number of
 shares used in computing
 per share computations:
 Basic                    123,974    121,354      123,042      120,623
 Diluted                  127,230    124,562      126,397      124,197

Selected financial data
 (unaudited):
 Cash and short-term investments               $  833,322   $  623,164
 Accounts receivable                              189,245      197,612
 Inventories                                      116,026       91,943
 Long-term marketable securities                  453,189      535,916
 Property, plant and equipment, net               683,304      586,167
 Other long-term assets                           177,201      149,205
 Total assets                                   2,507,612    2,226,372
 Total current liabilities                        289,557      249,951
 Long-term debt                                   150,000      150,000
 Total liabilities                                476,387      425,313
 Total stockholders' equity                     2,031,225    1,801,059

(1)  All Net Income per share amounts were calculated in accordance
     with Statement of Financial Accounting Standards No. 128.

CONTACT: Genentech, Inc.

Laura Leber, 650/225-5759 (media contact)

Susan Bentley, 650/225-1034 (investor contact)

http://www.gene.com