Genentech Reports 38 Percent Increase in Product Sales for First Quarter.Business Editors/Health & Medical Writers 20 Percent Increase in Net Income and 21 Percent Increase in Earnings Per Share, Exclusive of Impact of Redemption and Change in Accounting 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)--April 12, 2001 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 20 percent increase in net income and a 21 percent increase in earnings per share(1) driven by a 38 percent increase in product sales for the first quarter of 2001, exclusive of the ongoing impact of the 1999 redemption of Genentech's Special Common Stock and related accounting treatment(2), and the cumulative effect of accounting changes(3)(4). For the three months ended March 31, 2001: -- Published the findings of a pivotal Phase III study evaluating Herceptin plus chemotherapy in the New England Journal of Medicine. The results demonstrated a significant 24 percent increase in median overall survival in women with HER2 positive metastatic breast cancer who were treated initially with Herceptin and chemotherapy, compared to women treated with chemotherapy alone. An sBLA has been submitted to the FDA to add this median survival data to the Herceptin package insert. -- Announced with partners OSI Pharmaceuticals and Roche a global codevelopment and commercialization agreement for OSI-774. An inhibitor of the epidermal growth factor receptor, OSI-774 is currently in Phase II clinical studies for non-small cell lung, head and neck, and ovarian cancers. -- Submitted an sBLA to the FDA to revise the Herceptin product labeling to include FISH (Fluorescence in situ hybridization) testing as an additional method to select patients appropriate for treatment with Herceptin. "As we celebrate Genentech and biotech's first 25 years with our products having touched the lives of over one million people, we continue to move projects through our pipeline to treat cancer, heart disease and other significant unmet un·met adj. Not satisfied or fulfilled: unmet demands. medical needs while providing strong financial returns for our stockholders," 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. During the first quarter of 2001, Genentech continued to advance its BioOncology focus with the strong performance of its two marketed cancer products, Rituxan and Herceptin. On March 14, 2001, findings of a pivotal Phase III Noun 1. phase III - 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 FDA study evaluating Herceptin plus chemotherapy chemotherapy (kē'mōthĕr`əpē), treatment of disease with chemicals or drugs. One chemotherapeutic approach is the development of selectively toxic substances, i.e. were published in the New England Journal of Medicine The New England Journal of Medicine (New Engl J Med or NEJM) is an English-language peer-reviewed medical journal published by the Massachusetts Medical Society. It is one of the most popular and widely-read peer-reviewed general medical journals in the world. . The results demonstrated a significant 24 percent increase in median overall survival in women with HER2 positive 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 who were treated initially with Herceptin and chemotherapy, compared to women treated with chemotherapy alone. A supplemental Biologics License Application (sBLA) has been submitted to 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. ) to add this median survival data to the Herceptin package insert package insert Pharmacology A synopsis of key physicochemical, pharmacologic, clinical efficacy, and clinical safety properties of a prescription drug, bundled therewith, intended to be highly readable and helpful to clinicians looking for specific . In December 2000, encouraging data from 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 of Rituxan in combination with chemotherapy were presented at the 42nd annual meeting of the American Society of Hematology hematology Branch of medicine concerned with the nature, function, and diseases of the blood. It covers the cellular and serum composition of blood, the coagulation process, blood-cell formation, hemoglobin synthesis, and disorders of all these. . These and other ongoing studies show Rituxan may play an important role in improving the response rates for patients with common forms of lymphoma lymphoma, a cancer of the tissue of the lymphatic system. There are two categories of lymphomas. One type is termed Hodgkin's disease, the other, non-Hodgkin's lymphoma (see lymphoma, non-Hodgkin's). See also neoplasm. . Genentech also made progress with its cardiovascular pipeline products during the quarter. In March, with partner Actelion, Ltd., Genentech announced preliminary positive results from a Phase III trial (RITZ 2) of the first intravenous intravenous /in·tra·ve·nous/ (-ve´nus) within a vein or veins.intrave´nously in·tra·ve·nous adj. Abbr. IV Within or administered into a vein. , dual endothelin receptor antagonist A endothelin receptor antagonist (ERA) is a drug which blocks endothelin receptors. Two main kinds of ERAs exist:
n. The volume of blood pumped by the heart in a unit of time divided by the body surface area, usually expressed in liters per minute per square meter. (the amount of blood pumped by the heart per minute/body surface area), and in secondary endpoints including pulmonary capillary wedge pressure pulmonary capillary wedge pressure n. An indirect indication of left atrial pressure obtained by wedging a catheter into a small pulmonary artery tightly enough to block flow from behind and thus to sample the pressure beyond. at 6 hours and patient assessed dypsnea at 24 hours. Product Sales Sales of marketed products increased 38 percent in the first quarter of 2001 to $391.9 million from $283.2 million in the first quarter of 2000. Sales of Rituxan in the first quarter of 2001 increased 102 percent to $172.1 million from $85.1 million in the first 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 . Sales of Herceptin in the first quarter of 2001 increased 18 percent to $81.4 million compared to $68.7 million in the first quarter of 2000. Since launch, an increase in the penetration into the metastatic 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 two cardiovascular products, Activase(R) (Alteplase, recombinant recombinant /re·com·bi·nant/ (re-kom´bi-nant) 1. the new entity (e.g., gene, protein, cell, individual) that results from genetic recombination. 2. pertaining or relating to such an entity. See also under DNA. ) and TNKase(TM) (Tenecteplase), during the first quarter of 2001 increased 10 percent to $52.1 million compared to $47.5 million for Activase sales alone in the first quarter of 2000. The increase in sales reflects the steady sales growth of TNKase based on its ability to be administered in a single, 5-second injection. Sales of Genentech's four 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). products were $55.5 million compared to $55.1 million in the first quarter of 2000. Sales of 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 increased 12 percent to $29.9 million in the first quarter of 2001 compared to $26.8 million in the first quarter of 2000. Total Costs and Expenses Costs and expenses increased in the first quarter of 2001 as compared to the first quarter of 2000. Research and development (R&D) expenses increased in the first quarter of 2001 to $136.3 million compared to $111.4 million in 2000. R&D expenses as a percent of revenues in the first quarter of 2001 were 26 percent, compared to approximately 29 percent in the first 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 $83.8 million in the first quarter of 2001 from $62.9 million, exclusive of expenses related to the redemption and push-down accounting in the first quarter of 2000. Marketing, general and administrative (MG&A) expenses increased during the first quarter of 2001 to $127.9 million compared to $83.6 million in the first quarter of 2000. This increase was due to the write-down of certain biotech bi·o·tech n. Informal Biotechnology. biotech Noun short for biotechnology Noun 1. investments due to current market conditions, preparation for the Xolair(TM) (Omalizumab) market introduction, an increase in the marketing and selling expenses in continuing support of Genentech's 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. products and royalty expenses associated with licensee licensee n. a person given a license by government or under private agreement. (See: license, licensor) LICENSEE. One to whom a license has been given. 1 M. Q. & S. 699 n. sales. Fluctuations in investment write-down expenses are expected over the next several periods dependent on market conditions. Collaboration profit sharing profit sharing, arrangement by which employees receive, in addition to their wages, a share of the net profits of a business. The purpose is to give them an incentive to increase their output through enhanced morale, less wasteful use of materials, better care of expenses increased to $46.4 million in the first quarter of 2001 from $18.3 million in the first 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. Fourteen of the currently approved biotechnology products stem from Genentech science. Genentech markets nine 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 Thursday, April 12, 2001 at 2:30pm PDT PDT abbr. Pacific Daylight Time PDT Pacific Daylight Time PDT n abbr (US) (= Pacific Daylight Time) → hora de verano del Pacífico PDT . 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 April 19, 2001. An audio replay of the webcast will be available beginning at 4:30pm PDT on April 12, 2001 until 4:30pm PDT April 19, 2001. Access numbers for this replay are: 1-800-633-8284 (domestic) and 1-858-812-6440 (international); passcode number is 18421584.
Genentech Business and Product Development
Events in the First Quarter, 2001
Marketed and Pipeline Product Events BioOncology -- Published the findings of a pivotal Phase III study evaluating Herceptin plus chemotherapy in the New England Journal of Medicine. The results demonstrated a significant 24 percent increase in median overall survival in women with HER2 positive metastatic breast cancer who were treated initially with Herceptin and chemotherapy, compared to women treated with chemotherapy alone. An sBLA has been submitted to the FDA to add this median survival data to the Herceptin package insert. -- Announced with partners OSI Pharmaceuticals and Roche a global codevelopment and commercialization agreement for OSI-774. An inhibitor of the epidermal growth factor receptor, OSI-774 is currently in Phase II clinical studies for non-small cell lung, head and neck, and ovarian cancers. -- Submitted an sBLA to the FDA to revise the Herceptin product labeling to include FISH (Fluorescence in situ hybridization) testing as an additional method to select patients appropriate for treatment with Herceptin. Cardiovascular Medicine -- With partner Actelion, presented encouraging results from a Phase III trial, RITZ 2, of the first intravenous, dual endothelin receptor antagonist Veletri in acute heart failure at the 50th Annual Scientific Session of the American College American College is the name of:
of Cardiology cardiology Medical specialty dealing with heart diseases and disorders. It began with the 1749 publication by Jean Baptiste de Sénac of contemporary knowledge of the heart. Diagnostic methods improved in the 19th century, and in 1905 the electrocardiograph was invented. . -- Entered into a copromotion agreement with COR cor (kor) [L.] heart. acute cor pulmonale acute overload of the right ventricle due to pulmonary hypertension, usually due to acute pulmonary embolism. Therapeutics therapeutics Treatment and care to combat disease or alleviate pain or injury. Its tools include drugs, surgery, radiation therapy, mechanical devices, diet, and psychiatry. , Inc. and Schering-Plough. Under this agreement, Genentech will copromote the most widely used GP IIb/IIIa inhibitor inhibitor /in·hib·i·tor/ (in-hib´i-tor) 1. any substance that interferes with a chemical reaction, growth, or other biologic activity. 2. INTEGRILIN(R) (eptifibatide) for non-ST-segment acute coronary syndrome in 5,000 U.S. hospitals Genentech's representatives currently call upon, and COR and Schering-Plough will copromote TNKase and Activase for acute myocardial infarction acute myocardial infarction (  ·kyōōtˑ mī·ō·karˑ·dē· in 2,000 hospitals they currently call upon. 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. -- Announced with partner Alkermes, Inc. the continuation of clinical development of Nutropin Depot(TM) (somatropin (rDNA) for injectable in·ject·a·ble adj. Capable of being injected. Used of a drug. n. A drug or medicine that can be injected. suspension) in adults with growth hormone deficiency. -- With Novartis Pharmaceuticals Corporation, announced the FDA advised the companies that it does not plan to convene CONVENE, civil law. This is a technical term, signifying to bring an action. the scheduled Pulmonary-Allergy Drugs Advisory Committee (PADAC) meeting on April 26. Genentech and Novartis anticipate FDA approval of Xolair in the latter part of 2001 or the early part of 2002. -- XOMA, Ltd., presented research findings from two clinical studies in moderate-to-severe plaque psoriasis psoriasis (sôrī`əsĭs), occasionally acute but usually chronic and recurrent inflammation of the skin. The exact cause is unknown, but the disease appears to be an inherited, possibly autoimmune disorder that causes the patients at the 59th Annual Meeting of the American Academy of Dermatology The American Academy of Dermatology (AAD) is the largest organization of dermatologists in the world. The Academy grants Fellowships and Associate Memberships, as well as Fellowships for Nonresidents (of the United States of America or Canada). . In the first study, patients treated with Xanelim(TM) (efalizumab) for 12 weeks achieved significant improvements in psoriasis symptoms. In the second study, psoriasis patients retreated with a second course of Xanelim achieved symptom improvements similar to the first course of treatment. Xanelim is being developed in collaboration with Genentech. -- Millennium Pharmaceuticals Millennium Pharmaceuticals NASDAQ: MLNM is a biotechnology company based in the Cambridge, Massachusetts area of the United States of America. Founded in 1993, the company conducts research in various scientific areas, currently focusing on inflammation and oncology. , Inc., initiated a Phase II clinical trial of LDP-02 for ulcerative colitis ulcerative colitis Inflammation of the colon, especially of its mucous membranes. The inflamed membranes develop patches of tiny ulcers, and the diarrhea contains blood and mucus. in Canada. LDP-02 is being developed in collaboration with Genentech. Corporate Business Events -- Announced the appointment of Richard H. Scheller as senior vice president, Research and the promotions of Robert Garnick as senior vice president, Regulatory, Quality and Compliance; Kim Popovits as senior vice president, Marketing and Sales; and John Whiting as vice president in addition to his role as controller and chief accounting officer. (1) All earnings (loss) per share data and number of shares reflect the stock split effective October 2000. (2) 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 first 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. (3) Genentech adopted Statement of Financial Accounting Standards No. 133 ("FAS 133") on Accounting for Derivatives and Hedging Activities on January 1, 2001 and recorded a $5.6 million charge, net of tax, upon adoption. The charge was reflected as a cumulative effect of a change in accounting principle related to recording derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. at fair value. As a result of the adoption and changes in fair value of these derivative instruments recognized in contract and other revenues in the quarter ($10.0 million), the net of tax impact of FAS 133 on Q1 2001 was not material. (4) Genentech adopted the Securities and Exchange Commission's Staff Accounting Bulletin No. 101 ("SAB SAB Spontaneous abortion. See Abortion. 101") on revenue recognition, effective January 1, 2000, and recorded a $57.8 million charge, net of tax, which was reflected as a cumulative effect of a change in accounting principle. The cumulative effect was recorded as deferred revenue and is being recognized over the remaining term of the agreements. As a result, Q1 of 2001 and 2000 include the recognition of such revenues, the change of which was not material from period to period.
GENENTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
Three Months
Ended March 31,
2001
--------------------------------
Actual (2) Pro Forma (1)
--------------- ---------------
Revenues:
Product sales $ 391,904 $ 391,904
Royalties 74,631 74,631
Contract and other 38,483 28,479
Interest 35,064 35,064
--------- ---------
Total revenues 540,082 530,078
Costs and expenses:
Cost of sales 83,796 83,796
Research and
development 136,340 136,340
Marketing, general
and administrative 127,920 127,920
Collaboration profit
sharing 46,373 46,373
Recurring charges
related to redemption 81,516 --
Interest 1,491 1,491
--------- ---------
Total costs and expenses 477,436 395,920
Income (loss) before taxes
and cumulative effect of
accounting change 62,646 134,158
Income tax provision
(benefit) 30,258 42,931
--------- ---------
Income (loss) before cumulative
effect of accounting change 32,388 91,227
Cumulative effect of accounting
change, net of tax (5,638) --
--------- ---------
Net income (loss) $ 26,750 $ 91,227
========= =========
Earnings (loss) per share:
Basic: Earnings (loss) before
cumulative effect of accounting
change $ 0.06 $ 0.17
Cumulative effect of accounting
change, net of income tax (0.01) --
--------- ---------
Net earnings (loss) per share $ 0.05 $ 0.17
========= =========
Diluted: Earnings (loss)
before cumulative effect of
accounting change $ 0.06 $ 0.17
Cumulative effect of accounting
change, net of income tax (0.01) --
--------- ---------
Net earnings (loss) per share $ 0.05 $ 0.17
========= =========
Weighted average shares used to
compute earnings (loss) per share:
Basic 525,795 525,795
========= =========
Diluted 535,209 535,209
========= =========
Three Months
Ended March 31,
2000
--------------------------------
Actual (3) Pro Forma (1)
--------------- ---------------
Revenues:
Product sales $ 283,178 $ 283,178
Royalties 47,344 47,344
Contract and other 35,854 35,854
Interest 21,474 21,474
--------- ---------
Total revenues 387,850 387,850
Costs and expenses:
Cost of sales 106,135 62,857
Research and
development 111,406 111,406
Marketing, general
and administrative 83,613 83,613
Collaboration profit
sharing 18,333 18,333
Recurring charges
related to redemption 98,548 --
Interest 1,287 1,287
--------- ---------
Total costs and expenses 419,322 277,496
Income (loss) before taxes
and cumulative effect of
accounting change (31,472) 110,354
Income tax provision
(benefit) (6,862) 34,404
--------- ---------
Income (loss) before cumulative
effect of accounting change (24,610) 75,950
Cumulative effect of accounting
change, net of tax (57,800) --
--------- ---------
Net income (loss) $ (82,410) $ 75,950
========= =========
Earnings (loss) per share:
Basic: Earnings (loss) before
cumulative effect of accounting
change $ (0.05) $ 0.15
Cumulative effect of accounting
change, net of income tax (0.11) --
--------- ---------
Net earnings (loss) per share $ (0.16) $ 0.15
========= =========
Diluted: Earnings (loss)
before cumulative effect of
accounting change $ (0.05) $ 0.14
Cumulative effect of accounting
change, net of income tax (0.11) --
--------- ---------
Net earnings (loss) per share $ (0.16) $ 0.14
========= =========
Weighted average shares used to
compute earnings (loss) per share:
Basic 519,131 519,131
========= =========
Diluted 519,131 540,323
========= =========
(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 2001 under FAS 133.
(2) Genentech adopted Statement of Financial Accounting Standard
133 (FAS 133) on Accounting for Derivative Instruments and Hedging
Activities (FAS 133) on January 1, 2001, and recorded a cumulative
effect of a change in accounting principle related to recording
derivative instruments at fair value. As a result of the adoption and
the changes in fair value of these derivative instruments in the
quarter, the net of tax impact of FAS 133 on Q1 2001 was not material.
(3) Genentech adopted Securities and Exchange Commission's Staff
Accounting Bulletin No. 101 on Revenue Recognition effective January
1, 2000, and recorded a cumulative effect of a change in accounting
principle related to contract revenues recognized in prior periods.
The related deferred revenue is being recognized over the term of the
agreements. As a result, Q1 of 2001 and 2000 include the recognition
of such revenues, the change of which was not material from period to
period.
GENENTECH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
March 31,
------------------------------
2001 2000
------------ --------------
Selected balance sheet data:
Cash and short-term
investments $1,332,073 $ 631,490
Accounts receivable 269,570 242,034
Inventories 294,620 254,922
Long-term marketable
securities 974,873 1,280,274
Property, plant and
equipment, net 765,176 736,920
Goodwill 1,417,457 1,570,403
Other intangible assets 1,239,335 1,397,269
Other long-term assets 220,415 204,237
Total assets 6,600,355 6,440,279
Total current liabilities 548,318 244,099
Long-term debt -- 149,692
Total liabilities 924,513 1,088,362
Total stockholders' equity 5,675,842 5,351,917
Year-to-date:
Capital expenditures 36,323 28,243
Pro forma depreciation and
amortization expense 26,599 23,382
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