Genentech Reports 34 Percent Increase in Product Sales for Third Quarter.Business Editors SOUTH SAN FRANCISCO South San Francisco, city (1990 pop. 54,312), San Mateo co., W Calif.; inc. 1908. South San Francisco has several industrial parks; its manufactures include medical supplies and equipment, foods, paint, paper products, consumer goods, and clothing. , Calif.--(BUSINESS WIRE)--Oct. 10, 2001 25 Percent Increase in Earnings Per Share and 22 Percent Increase in Net Income, Exclusive of Impact of Redemption Genentech, Inc. (NYSE NYSE See: New York Stock Exchange :DNA DNA: see nucleic acid. DNA or deoxyribonucleic acid One of two types of nucleic acid (the other is RNA); a complex organic compound found in all living cells and many viruses. It is the chemical substance of genes. ) today announced a 25 percent increase in earnings per share/a and a 22 percent increase in net income driven by a 34 percent increase in product sales for the third quarter of 2001, exclusive of the ongoing impact of the 1999 redemption of Genentech's Special Common Stock and related accounting treatment/b. For the three months ended September 30, 2001: -- Earnings per share for the third quarter of 2001 increased 25 percent to 20 cents per share, compared to 16 cents per share for the third quarter of 2000, exclusive of the ongoing impact of the 1999 redemption of Genentech's Special Common Stock and related accounting treatment. -- Net income for the third quarter of 2001 increased 22 percent to $105.4 million, compared to $86.2 million for the third quarter of 2000, exclusive of the ongoing impact of the 1999 redemption of Genentech's Special Common Stock and related accounting treatment. /a All earnings (loss) per share data and number of shares reflect the stock split effective October 2000. /b The accounting treatment under U.S. Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See 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 was "pushed down" to Genentech and reflected on Genentech's financial statements beginning June 30, 1999. The effect of push-down accounting on Genentech's third quarter 2001 and 2000 consolidated statements of operations include recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. charges for the amortization of goodwill and other intangibles and for 2000, the costs related to the sale of inventory that was written up at the redemption. -- Due to recurring charges related to the redemption, the company recorded third quarter net income of $42.7 million, or net income of 8 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. , as compared to a net income of $5.8 million, or a net income of 1 cent per share, in the third quarter of 2000. -- Revenues for the third quarter of 2001 increased 24 percent to $556.1 million from $447.3 million in the third quarter of 2000. This revenue growth was driven primarily by sales of Genentech's BioOncology products, Rituxan(R) (Rituximab) and Herceptin(R) (Trastuzumab). Total product sales increased 34 percent in the third quarter of 2001 to $448.7 million from $334.2 million in the third quarter of 2000. "Our strong third-quarter performance reflects the continuation of our growth strategy and demonstrates progress towards achieving our financial goals for the year," said Arthur D. Levinson Arthur D. Levinson (born March 31, 1950 in Seattle, Washington, United States) is President and Chief Executive Officer of Genentech. He has held these positions since July 1995, and was named chairman of the board of directors in 1999. , Ph.D., Genentech's chairman and chief executive officer. "Along with solid sales performances from our marketed products, Rituxan and Herceptin, we made progress in moving projects through our pipeline, including the approval and launch of Cathflo Activase. We continue to remain focused on our corporate goals and dedicated to our mission of developing breakthrough medicines for the people who need them." Product Sales Marketed products sales increased 34 percent in the third quarter of 2001 to $448.7 million from $334.2 million in the third quarter of 2000. Rituxan sales in the third quarter of 2001 increased 80 percent to $212.8 million from $117.9 million in the third quarter of 2000. This sales increase is due primarily to increased market penetration Noun 1. market penetration - the extent to which a product is recognized and bought by customers in a particular market penetration - the act of entering into or through something; "the penetration of upper management by women" for the treatment of non-Hodgkin's lymphoma non-Hodg·kin's lymphoma n. Any of various malignant lymphomas characterized by the absence of Reed-Sternberg cells. Non-Hodgkin's lymphoma . Herceptin sales in the third quarter of 2001 increased 16 percent to $83.9 million compared to $72.6 million in the third quarter of 2000. Since launch, an increase in the penetration into the metastatic Metastatic The term used to describe a secondary cancer, or one that has spread from one area of the body to another. Mentioned in: Coagulation Disorders metastatic pertaining to or of the nature of a metastasis. breast cancer market has contributed to a positive sales trend and consistent quarter-over-quarter growth in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Combined sales of Genentech's three cardiovascular products, Activase(R) (Alteplase, recombinant), TNKase(TM) (Tenecteplase) and Cathflo(TM) Activase(R) (Alteplase), during the third quarter of 2001 decreased 4 percent to $48.6 million compared to $50.7 million in the third quarter of 2000. Growth hormone growth hormone or somatotropin (sōmăt'ətrō`pən), glycoprotein hormone released by the anterior pituitary gland that is necessary for normal skeletal growth in humans (see protein). sales during the third quarter of 2001 increased 11 percent to $67.7 million compared to $61.1 million in the third quarter of 2000. Pulmozyme(R) (dornase alfa dornase alfa /dor·nase al·fa/ (dor´naz al´fah) recombinant human deoxyribonuclease I (DNase I) used to reduce the viscosity of sputum in cystic fibrosis. dor·nase al·fa n. ) Inhalation inhalation /in·ha·la·tion/ (in?hah-la´shun) 1. the drawing of air or other substances into the lungs.inhala´tional 2. the drawing of an aerosolized drug into the lungs with the breath. 3. Solution sales increased 9 percent to $32.8 million in the third quarter of 2001 compared to $30.0 million in the third quarter of 2000. Total Costs and Expenses Costs and expenses increased as anticipated in the third quarter of 2001 as compared to the third quarter of 2000. Research and development (R&D) expenses increased in the third quarter of 2001 to $128.2 million compared to $113.6 million in 2000. R&D expenses as a percent of revenues in the third quarter of 2001 were 23 percent, compared to approximately 25 percent in the third quarter of 2000. 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 increased to $96.0 million in the third quarter of 2001 from $75.6 million, exclusive of expenses related to the redemption and push-down accounting in the third quarter of 2000. Marketing, general and administrative (MG&A) expenses increased during the third quarter of 2001 to $109.4 million compared to $94.1 million in the third quarter of 2000 due primarily to higher royalty expenses. Collaboration profit-sharing expenses increased to $65.8 million in the third quarter of 2001 from $37.6 million in the third quarter of 2000. The increase was due primarily to increased Rituxan profit-sharing expense due to higher Rituxan sales. Genentech, Inc. is a leading biotechnology company that discovers, develops, manufactures, and markets human pharmaceuticals for significant unmet medical needs. Fifteen of the currently approved biotechnology products stem from or are based on Genentech science. Genentech manufactures and markets ten biotechnology products directly in the United States. The company has headquarters in South San Francisco, California South San Francisco is a city in San Mateo County, California, United States, located on the San Francisco Peninsula in the San Francisco Bay Area. The population was 60,552 at the 2000 census. , and is traded on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. under the symbol DNA. Webcast: Genentech will be offering a live webcast of a discussion by Genentech management of the earnings and other business results on Wednesday, October 10, 2001 at 2:30pm PT. The live webcast may be accessed on Genentech's website at www.gene.com. This webcast will also be available after the call via the website until close of business October 17, 2001. An audio replay of the webcast will be available beginning at 4:30pm PT on October 10, 2001 until 4:30pm PT October 17, 2001. Access numbers for this replay are: 1-800-633-8284 (domestic) and 1-858-587-5842 (international); passcode number is 19704373. Genentech Business and Product Development Events in the Third Quarter, 2001 Marketed and Pipeline Product Events BioOncology -- Tarceva(TM) (OSI-774): With partners OSI Pharmaceuticals OSI Pharmaceuticals, Inc. is an American pharmaceutical company based in Long Island, New York with facilities in Colorado, New Jersey and the United Kingdom. They specialize in the discovery and development of molecular targeted therapies, and are listed in the NASDAQ and Roche, announced initiation of a Phase III clinical trial Noun 1. phase III clinical trial - a large clinical trial of a treatment or drug that in phase I and phase II has been shown to be efficacious with tolerable side effects; after successful conclusion of these clinical trials it will receive formal approval from the evaluating the use of Tarceva in combination with Carboplatin (paraplatin) and Paclitaxel paclitaxel /pac·li·tax·el/ (pak?li-tak´sel) an antineoplastic that promotes and stabilizes polymerization of microtubules, isolated from the Pacific yew tree (Taxus brevifolia); (taxol) for the treatment of non-small cell lung cancer Lung Cancer, Non-Small Cell Definition Non-small cell lung cancer (NSCLC) is a disease in which the cells of the lung tissues grow uncontrollably and form tumors. Description There are two kinds of lung cancers, primary and secondary. . -- Avastin(TM) (Bevacizumab): With Eastern Cooperative Oncology oncology /on·col·o·gy/ (ong-kol´ah-je) the sum of knowledge regarding tumors; the study of tumors. on·col·o·gy n. Group, initiated Phase II/III clinical trial to evaluate Avastin in combination with Carboplatin (paraplatin) and Paclitaxel (taxol) for patients with advanced nonsquamous non-small cell lung cancer. Cardiovascular Medicine -- Cathflo(TM) Activase(R) (Alteplase): Announced that Cathflo Activase, a tissue plasminogen activator tissue plasminogen activator n. Abbr. TPA 1. An enzyme that catalyzes the conversion of plasminogen to plasmin, used to dissolve blood clots rapidly and selectively, especially in the treatment of heart attacks. 2. (t-PA), was approved by the U.S. Food and Drug Administration (FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. ) for the restoration of function to central venous access Venous Access Definition Venous access introduces a needle into a vein, usually for the purpose of withdrawing blood or administering medication. devices (CVADs). Cathflo Activase is the only marketed thrombolytic thrombolytic /throm·bo·lyt·ic/ (throm?bo-lit´ik) dissolving or splitting up a thrombus, or an agent that so acts. thrombolytic 1. dissolving or splitting up a thrombus. 2. an agent that dissolves or splits up a thrombus. available for this indication and offers medical professionals a viable treatment option for a CVAD CVAD central venous access device CVAD Crime Victim Assistance Division (Iowa) CVAD cyclophosphamide, vincristine, adriamycin and dexamethasone (chemotherapy) CVAD central vascular access device complication that can hinder patient care. -- TNKase(TM) (Tenecteplase): Announced ASSENT An intentional approval of known facts that are offered by another for acceptance; agreement; consent. Express assent is manifest confirmation of a position for approval. 3 trial results at the European Society of Cardiology The European Society of Cardiology (ESC) represents more than 50,000 cardiology professionals across Europe and the Mediterranean. Its mission is to reduce the impact of cardiovascular disease in Europe. meeting demonstrating full-dose TNKase with the low-molecular-weight heparin heparin (hĕp`ərĭn), anticoagulant produced by cells in many animals. A polysaccharide, heparin is found in the human body and occurs in greatest concentration in the tissues surrounding the capillaries of the lungs and the liver. , Lovenox(R) (enoxaparin sodium enoxaparin sodium Warning - High-alert drug! Clexane (UK), Lovenox 3. Pharmacologic class: Low-molecular-weight heparin Therapeutic class: Anticoagulant ) as a promising reperfusion re·per·fu·sion n. The restoration of blood flow to an organ or tissue that has had its blood supply cut off, as after a heart attack. therapy regimen regimen /reg·i·men/ (rej´i-men) a strictly regulated scheme of diet, exercise, or other activity designed to achieve certain ends. reg·i·men n. 1. . -- Tracleer(TM)(Bosentan): Partner Actelion Ltd. announced that a FDA Advisory Committee voted unanimously to recommend approval of Tracleer, an oral dual endothelin receptor antagonist A endothelin receptor antagonist (ERA) is a drug which blocks endothelin receptors. Two main kinds of ERAs exist:
the treatment of pulmonary arterial arterial /ar·te·ri·al/ (-al) pertaining to an artery or to the arteries. ar·te·ri·al adj. 1. Of or relating to one or more arteries or to the entire system of arteries. 2. hypertension. Opportunistic opportunistic /op·por·tu·nis·tic/ (op?er-tldbomacn-is´tik) 1. denoting a microorganism which does not ordinarily cause disease but becomes pathogenic under certain circumstances. 2. -- Xanelim(TM) (Efalizumab): With partner XOMA Ltd., presented initial positive results from the second of two pivotal Phase III investigational trials of Xanelim at the American Academy The American Academy in Berlin is a non-partisan academic institution in Berlin. It was founded in September 1994 by a group of prominent Americans and Germans, among them Richard Holbrooke, Henry Kissinger, Richard von Weizsäcker, Fritz Stern and Otto Graf Lambsdorff and opened in of Dermatology dermatology (dûrmətŏl`əjē), branch of medicine concerned with diagnosis and treatment of diseases and disorders of the skin. "ACADEMY 2001" meeting. Based on discussions with the FDA, the companies will be conducting an additional pharmacokinetic study before submitting the Biologics License Application. -- Xolair(TM) (Omalizumab): Productive discussions are ongoing with the FDA. Additional meetings with the FDA are scheduled during the next several weeks and these discussions will enable the companies to give a more accurate timeline for resubmission. Corporate Business Events -- A U.S. Appeals Court reinstated an earlier ruling preventing Bio-Technology General Corp. (BTG BTG BIT (Built-In Test) Target Generator BTG Bridging the Gap BTG British Technology Group BtG Betreuungsgesetz (Germany) BTG Biomass Technology Group BV BTG Begbies Traynor Group ) from selling its human growth hormone product and sent the case back to the lower court for a determination of whether BTG infringes Genentech's patent. -- Began litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. for a trial to decide a contract dispute between Genentech and City of Hope, a cancer research and treatment center in Duarte, California. The contract dispute relates to a 1976 agreement covering sponsored research conducted by two City of Hope scientists, Arthur Riggs Dr. Arthur Riggs, Ph.D, is a geneticist who worked with Genentech to express the first artificial gene in bacteria. His work was critical to the modern biotechnology industry because it enabled the large-scale manufacturing of protein drugs, including insulin. and Keiichi Itakura, that Genentech funded. -- In July, passed a full Good Manufacturing Practices Good Manufacturing Practice or GMP (also referred to as 'cGMP' or 'current Good Manufacturing Practice') is a term that is recognized worldwide for the control and management of manufacturing and quality control testing of foods and pharmaceutical products. (GMP GMP (guanosine monophosphate): see guanine. ) inspection by the FDA Team Biologics confirming the company is in a full state of manufacturing compliance. -- Announced that Genentech was named, for the tenth time, one of the "100 Best Companies for Working Mothers" by Working Mother Magazine. -- Announced the appointment of Andrew C. Chan, M.D., Ph.D., to senior director of immunology immunology, branch of medicine that studies the response of organisms to foreign substances, e.g., viruses, bacteria, and bacterial toxins (see immunity). Immunologists study the tissues and organs of the immune system (bone marrow, spleen, tonsils, thymus, lymphatic in Genentech's Research department. -- Donated over $1 million to the American Red Cross American Red Cross: see Red Cross. Sept. 11 Disaster Relief Fund on behalf of the company and its employees.
GENENTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
Three Months
Ended September 30,
2001 2000
-------------------- -------------------------
Actual Pro Forma(1) Actual Pro Forma(1)
(Restated)(2)(Restated)(2)
-------------------- -------------------------
Revenues:
Product sales $448,700 $448,700 $334,173 $334,173
Royalties 66,051 66,051 51,818 51,818
Contract and other 8,941 8,941 35,637 35,637
Interest 32,473 32,473 25,712 25,712
--------- --------- --------- ---------
Total revenues 556,165 556,165 447,340 447,340
Costs and expenses:
Cost of sales 96,030 96,030 91,356 75,584
Research and
development 128,195 128,195 113,636 113,636
Marketing, general
and administrative 109,365 109,365 94,087 94,087
Collaboration
profit sharing 65,796 65,796 37,639 37,639
Recurring charges
related to redemption 79,404 - 97,780 -
Interest 1,719 1,719 1,175 1,175
--------- --------- --------- ---------
Total costs
and expenses 480,509 401,105 435,673 322,121
Income before taxes 75,656 155,060 11,667 125,219
Income tax provision 32,915 49,619 5,907 39,012
--------- --------- --------- ---------
Net income $ 42,741 $105,441 $ 5,760 $ 86,207
========= ========= ========= =========
Earnings per share:
Basic $ 0.08 $ 0.20 $ 0.01 $ 0.16
========= ========= ========= =========
Diluted $ 0.08 $ 0.20 $ 0.01 $ 0.16
========= ========= ========= =========
Weighted average
shares used to
compute earnings
per share:
Basic 527,328 527,328 522,928 522,928
========= ========= ========= =========
Diluted 533,670 533,670 541,483 541,483
========= ========= ========= =========
(1) Pro Forma amounts exclude recurring charges related to the
redemption, costs in 2000 related to the sale of inventory that
was written up at the redemption and their related tax effects.
(2) The results for the quarter ended September 30, 2000 have been
restated to reflect the adoption of the Securities and Exchange
Commission's Staff Accounting Bulletin No. 101 on revenue
recognition as of January 1, 2000.
GENENTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
Nine Months
Ended September 30,
2001 2000
-------------------- -------------------------
Actual Pro Forma(1) Actual Pro Forma(1)
(Restated)(2)(Restated)(2)
-------------------- -------------------------
Revenues:
Product sales $1,250,862 $1,250,862 $ 926,765 $ 926,765
Royalties 193,128 193,128 148,805 148,805
Contract and other 68,359 58,355 105,998 105,998
Interest 99,772 99,772 69,448 69,448
----------- ----------- ---------- ----------
Total revenues 1,612,121 1,602,117 1,251,016 1,251,016
Costs and expenses:
Cost of sales 256,013 256,013 295,148 204,724
Research and
development 387,984 387,984 340,605 340,605
Marketing, general
and administrative 345,084 345,084 263,960 263,960
Collaboration
profit sharing 170,077 170,077 86,870 86,870
Recurring charges
related to
redemption 242,411 - 294,399 -
Interest 4,554 4,554 3,701 3,701
----------- ----------- ---------- ----------
Total costs
and expenses 1,406,123 1,163,712 1,284,683 899,860
Income (loss)
before taxes
and cumulative
effect of
accounting
change 205,998 438,405 (33,667) 351,156
Income tax
provision (benefit) 92,220 140,290 (1,951) 109,441
----------- ----------- ---------- ----------
Income (loss)
before cumulative
effect of
accounting change 113,778 298,115 (31,716) 241,715
Cumulative effect
of accounting
change, net
of tax (2)(3) (5,638) - (57,800) -
----------- ----------- ---------- ----------
Net income (loss) $ 108,140 $ 298,115 $(89,516) $ 241,715
=========== =========== ========== ==========
Earnings (loss)
per share:
Basic:
Earnings (loss)
before
cumulative
effect of
accounting
change $ 0.22 $ 0.57 $ (0.06) $ 0.46
Cumulative
effect of
accounting
change,
net of tax (0.01) - (0.11) -
----------- ----------- ---------- ----------
Net earnings
(loss) per
share $ 0.21 $ 0.57 $ (0.17) $ 0.46
=========== =========== ========== ==========
Diluted:
Earnings (loss)
before
cumulative
effect of
accounting
change $ 0.21 $ 0.56 $ (0.06) $ 0.45
Cumulative
effect of
accounting
change,
net of tax (0.01) - (0.11) -
----------- ----------- ---------- ----------
Net earnings
(loss) per share $ 0.20 $ 0.56 $ (0.17) $ 0.45
=========== =========== ========== ==========
Weighted average
shares used to
compute earnings
(loss) per share:
Basic 526,709 526,709 521,097 521,097
=========== =========== ========== ==========
Diluted 534,783 534,783 521,097 540,060
=========== =========== ========== ==========
(1) Pro Forma amounts exclude recurring charges related to the
redemption, costs in 2000 related to the sale of inventory that
was written up at the redemption and their related tax effects. In
addition, pro forma excludes the cumulative effect of the changes
in accounting principle net of tax, adopted in 2001 and 2000, and
the changes in fair value of certain derivatives ($10.0 million)
recorded in Q1 2001 under Statement of Financial Accounting
Standard 133 (FAS 133).
(2) The results for the three- and nine-months ended September 30,
2000 have been restated to reflect the adoption of the SEC's Staff
Accounting Bulletin No. 101 on revenue recognition as of January
1, 2000, and the related cumulative effect of a change in
accounting principle associated with contract revenues recognized
in prior periods. The related deferred revenue is being recognized
over the term of the agreements.
(3) Genentech adopted Accounting for Derivative Instruments and
Hedging Activities on January 1, 2001, and recorded a cumulative
effect of a change in accounting principle related to recording
derivative instruments at fair value.
GENENTECH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
September 30,
2001 2000
(Restated)
----------- -----------
Selected balance sheet data:
Cash and short-term investments $ 1,500,443 $ 996,786
Accounts receivable 309,054 238,993
Inventories 340,069 237,834
Long-term marketable securities 1,022,419 1,567,247
Property, plant and equipment, net 797,146 743,378
Goodwill 1,340,814 1,493,114
Other intangible assets 1,154,469 1,321,244
Other long-term assets 320,300 167,366
Total assets 6,865,633 6,918,181
Total current liabilities 643,789 413,220
Long-term debt - 149,692
Total liabilities 1,057,786 1,321,406
Total stockholders' equity 5,807,847 5,596,775
Year-to-date:
Capital expenditures 118,753 78,999
Pro forma depreciation
and amortization expense 80,682 72,866
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