Genentech Reports 21 Percent Increase in Product Sales for First Quarter; 27 Percent Increase in Earnings Per Share, Exclusive of Impact of Redemption
SOUTH SAN FRANCISCO, Calif.--(BW HealthWire)--April 12, 2000--
Genentech, Inc. (NYSE:DNA) today announced a 21 percent increase in
product sales and a 27 percent increase in earnings per share(1) 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(2), 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.
(1) All earnings (loss) per share data and number of shares
reflect the stock split effective November 2, 1999.
(2) 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.
GENENTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
Three Months
Ended March 31,
2000 1999
Actual Pro Forma(1) Actual Pro Forma(1)
Revenues:
Product sales $ 283,178 $ 283,178 $ 234,069 $ 234,069
Royalties 47,344 47,344 46,618 46,618
Contract and other 33,696 33,696 19,266 19,266
Interest 21,474 21,474 22,399 22,399
Total revenues 385,692 385,692 322,352 322,352
Costs and expenses:
Cost of sales 106,135 62,857 45,723 45,723
Research and
development 111,406 111,406 90,740 90,740
Marketing,
general and
administrative 101,946 101,946 97,201 97,201
Special charge:
Legal
settlements -- -- 50,000 --
Recurring charges
related to
redemption 98,548 -- -- --
Interest 1,287 1,287 1,363 1,363
Total costs
and expenses 419,322 277,496 285,027 235,027
Income (loss)
before taxes (33,630) 108,196 37,325 87,325
Income
tax (benefit)
provision (7,725) 33,541 22,910 28,817
Net income
(loss) $ (25,905) $ 74,655 $ 14,415 $ 58,508
Earnings
(loss) per
share
Basic $ (0.10) $ 0.29 $ 0.06 $ 0.23
Diluted $ (0.10) $ 0.28 $ 0.05 $ 0.22
Weighted
average
shares used
to compute
earnings
(loss) per
share:
Basic 259,565 259,565 255,408 255,408
Diluted 259,565 270,161 265,045 265,045
March 31,
2000 1999
Selected balance
sheet data:
Cash and
short-term
investments $ 631,490 $ 894,970
Accounts
receivable 242,034 168,816
Inventories 254,922 146,712
Long-term
marketable
securities 1,280,274 767,450
Property,
plant and
equipment,
net 736,920 698,887
Goodwill 1,590,062 --
Other
intangible
assets 1,397,269 64,132
Other
long-term
assets 204,237 133,201
Total assets 6,454,638 2,926,108
Total
current
liabilities 238,972 319,776
Long-term
debt 149,692 149,990
Total
liabilities 1,033,268 536,404
Total
stockholders'
equity 5,421,370 2,389,704
(1) Pro Forma amounts exclude the special charge related to a legal
settlement, recurring charges related to the redemption and costs
related to the sale of inventory that was written up at the
redemption.
--30--jr/sf* sdf/sf
CONTACT:
Genentech, Inc.
Laura Leber, 650/225-5759 (Media)
Sabrina Johnson, 650/225-2742 (Media)
Susan Bentley, 650/225-1034 (Investor)
gene.com |
