Genentech Announces First Quarter 2008 Results
SOUTH SAN FRANCISCO, Calif. -- April 10, 2008 -- Genentech, Inc. (NYSE: DNA) today announced financial results for the first quarter of 2008. Key results for the first quarter of 2008 include:- U.S. product sales of $2,205 million, an 8 percent increase from U.S. product sales of $2,037 million in the first quarter of 2007.
- Non-GAAP operating revenues of $3,059 million1, an 8 percent increase from operating revenues of $2,843 million in the first quarter of 2007; GAAP operating revenues of $3,063 million.
- Non-GAAP net income of $895 million, a 13 percent increase from $792 million in the first quarter of 20071; GAAP net income of $790 million, a 12 percent increase from $706 million in the first quarter of 2007.
- Non-GAAP earnings per share of $0.84, a 14 percent increase from $0.74 per share in the first quarter of 20071; GAAP earnings per share of $0.74, a 12 percent increase from $0.66 per share in the first quarter of 2007.
Reconciliations between non-GAAP and GAAP earnings per share for first quarters of 2008 and 2007 are provided in the following table:
| Non-GAAP Diluted EPS | Employee Stock-Based Compensation Expense | Net Charges related to Redemption, Acquisition and Special Items | Reported GAAP Diluted EPS | |
| Q1 2008 | $0.84 | ($0.07) | ($0.03) | $0.74 |
| Q1 2007 | $0.74 | ($0.06) | ($0.02) | $0.66 |
The company continues to forecast full-year 2008 non-GAAP earnings to be in the range of $3.35 to $3.45 per share.1
Product Sales and Royalty Revenues
Information on product sales for the three months ended March 31,
2008 and 2007, are provided in the following tables (dollars in
millions):
|
|
Three Months |
|
|
|
|
2008 |
2007 |
% Change |
| Rituxan® | $605 | $535 | 13% |
| Avastin®+ | 600 | 533 | 13 |
| Herceptin® | 339 | 311 | 9 |
| Lucentis® | 198 | 211 | (6) |
| Xolair® | 117 | 111 | 5 |
| Tarceva® | 111 | 102 | 9 |
| Nutropin® Products | 84 | 91 | (8) |
| Thrombolytics | 67 | 68 | (1) |
| Pulmozyme® | 57 | 52 | 10 |
| Raptiva® |
26
|
24
|
8 |
| Total U.S. product sales ++ | $2,205 | $2,037 | 8 |
| Net product sales to collaborators |
174
|
292
|
(40) |
| Total product sales ++ |
$2,379
|
$2,329
|
2 |
+ First quarter 2008 Avastin U.S. product sales results include
a net deferral of approximately $1 million in conjunction with the
company's Avastin Patient Assistance Program. First quarter 2007
Avastin U.S. product sales results included a net deferral of
approximately $3 million.
++ Amounts may not sum due to rounding.
The company also reported that non-GAAP royalty revenues were $612 million1 in the first quarter of 2008, a 46 percent increase from the first quarter of 2007. The increase was primarily due to growth in ex-U.S. sales of products by collaborators Roche and Novartis, in addition to foreign exchange related benefits of the weak dollar.
Total Costs and Expenses
Information on costs and expenses including cost of sales (COS),
research and development (R&D) and marketing, general and
administrative (MG&A) expenses for the three months ended March
31, 2008 and 2007, are provided in the following tables (dollars in
millions)2:
|
|
Three Months |
|
|
|
|
2008 |
2007 |
% Change |
| non-GAAP2 | |||
| COS | $367 | $376 | (2)% |
| R&D | 575 | 572 | 1 |
| MG&A | 471 | 445 | 6 |
| GAAP | |||
| COS | 389 | 392 | (1) |
| R&D | 617 | 610 | 1 |
| MG&A | 517 | 491 | 5 |
Note: Genentech's first quarter 2008 non-GAAP reported COS, R&D and MG&A expenses exclude the effects of employee stock-based compensation expense of $22 million, $42 million, and $46 million, respectively. First quarter 2007 non-GAAP reported COS, R&D and MG&A expenses exclude the effects of employee stock-based compensation expense of $16 million, $38 million, and $46 million, respectively.2
|
|
Three Months Ended |
|
|
|
2008 |
2007 |
| non-GAAP2 | ||
| COS as a % of product sales | 15% | 16% |
| R&D as a % of operating revenues | 19% | 20% |
| MG&A as a % of operating revenues | 15% | 16% |
| GAAP | ||
| COS as a % of product sales | 16% | 17% |
| R&D as a % of operating revenues | 20% | 21% |
| MG&A as a % of operating revenues | 17% | 17% |
Clinical Development
Genentech expects to submit the supplemental Biologics License
Application (sBLA) to the U.S. Food and Drug Administration (FDA)
for accelerated approval of Avastin® (bevacizumab) for the
treatment of relapsed glioblastoma multiforme in the second half of
2008. Data will be presented at the 2008 annual meeting of the
American Society of Clinical Oncology (ASCO).
Genentech announced that the Phase III study sponsored by its collaborator Novartis evaluating Xolair® (Omalizumab) for subcutaneous use in patients 6 to 11 years of age with moderate-to-severe, persistent, inadequately controlled allergic asthma met its primary endpoint, demonstrating a statistically significant reduction in exacerbations in Xolair-treated patients compared with placebo-treated patients with no new safety signals reported. The companies will evaluate the complete study results and feedback from the FDA to determine appropriate next steps. The data will be presented at a medical conference later this year.
Webcast
Genentech will be offering a live webcast of a discussion by
Genentech management of its financial and other business results on
Thursday, April 10, 2008, at 1:45 p.m. Pacific Time (PT). The live
webcast may be accessed on Genentech's website at http://www.gene.com. This
webcast will be available via the website until 5:00 p.m. PT on May
1, 2008. A telephonic audio replay of the webcast will be available
beginning at 4:45 p.m. PT on April 10, 2008 through 4:45 p.m. PT on
April 17, 2008. Access numbers for this replay are: 1-800-642-1687
(U.S./Canada) and 1-706-645-9291 (international); conference ID
number is 39992140.
About Genentech
Founded more than 30 years ago, Genentech is a leading
biotechnology company that discovers, develops, manufactures and
commercializes medicines to treat patients with significant unmet
medical needs. The company has headquarters in South San Francisco,
California and is listed on the New York Stock Exchange under the
symbol DNA. For additional information about the company, please
visit http://www.gene.com.
About Genentech's Commitment to Patient Access
Genentech is committed to patients having access to our therapies.
Through its Genentech Access Solutions program, the company
provides patients and healthcare providers with coverage and
reimbursement support, patient assistance and informational
resources. Patient assistance support is for those eligible
patients in the United States who do not have insurance coverage or
who cannot afford their out-of-pocket co-pay costs. Since 1985,
when its first product was approved, Genentech has donated
approximately $1 billion in free medicine to uninsured patients
through the Genentech® Access to Care Foundation (GATCF) and
other product donation programs. Since 2005, Genentech has also
donated more than $140 million to various independent, non-profit
organizations that provide financial assistance to eligible
patients who cannot access needed medical treatment due to co-pay
costs.
For information on Genentech's latest business and product development events please refer to http://www.gene.com/gene/news/press-releases/index.jsp.
This press release contains forward-looking statements regarding
the presentation of data from clinical studies of Xolair and
Avastin, the submission of an sBLA to the FDA for Avastin, and
expected growth in non-GAAP earnings per share for 2008. Such
statements are predictions and involve risks and uncertainties such
that actual results may differ materially. Such risks and
uncertainties include, but are not limited to, the need for
additional data, data analysis or clinical studies; the results of
clinical trials; BLA preparation and decision making; FDA actions
or delays; failure to obtain or maintain FDA approval; difficulty
in obtaining materials from suppliers; unexpected safety, efficacy
or manufacturing issues for us or our contract/collaborator
manufacturers; product withdrawals; competition; efficacy data
concerning any of our products which shows or is perceived to show
similar or improved treatment benefit at a lower dose or shorter
duration of therapy; pricing decisions by us or our competitors;
our ability to protect our proprietary rights; the outcome of, and
expenses associated with, litigation or legal settlements; our cost
of sales, other expenses and indebtedness; variations in
collaborator sales and expenses; fluctuations in contract revenues
and royalties; actions by Roche that are adverse to our interests;
decreases in third party reimbursement rates; and changes in
accounting or tax laws or the application or interpretation of such
laws. Please also refer to Genentech's periodic reports filed with
the Securities and Exchange Commission. Genentech disclaims, and
does not undertake, any obligation to update or revise
forward-looking statements in this press release.
###
1 Genentech's non-GAAP royalty revenues and operating
revenues exclude recognition of deferred royalty revenue associated
with the acquisition of Tanox, Inc. of $4 million. In the first
quarter of 2008, GAAP royalty revenues and GAAP operating revenues
were $616 million and $3,063 million, respectively. Genentech's
non-GAAP net income and non-GAAP earnings per share exclude the
after-tax impact of certain items associated with the acquisition
of Tanox, Inc., (including recurring recognition of deferred
royalty revenue and recurring amortization of intangible assets);
recurring charges related to the 1999 redemption of Genentech's
stock by Roche Holdings, Inc.; litigation-related and similar
special items; and employee stock-based compensation expense. The
differences in non-GAAP and GAAP amounts are reconciled in the
accompanying tables and on http://www.gene.com.
2 Genentech's non-GAAP reported COS, R&D and
MG&A expenses exclude the effects of employee stock-based
compensation expense associated with Genentech's adoption of FAS
123R on January 1, 2006. The differences in non-GAAP and GAAP
amounts are reconciled in the accompanying tables and on http://www.gene.com.
|
GENENTECH, INC. |
||||
| Three Months Ended March 31, |
||||
|
|
||||
| 2008 | 2007 | |||
|
|
||||
| Revenues: | ||||
| Product sales | $ 2,379 | $ 2,329 | ||
| Royalties | 616 | 419 | ||
| Contract revenue | 68 | 95 | ||
| Total operating revenues |
3,063 |
2,843 |
||
| Costs and expenses: | ||||
| Cost of sales (includes employee stock-based compensation expense: three months—2008—$22; 2007—$16) | 389 | 392 | ||
| Research and development (includes employee stock-based compensation expense: three months—2008—$42; 2007—$38) | 617 | 610 | ||
| Marketing, general and administrative (includes employee stock-based compensation expense: three months—2008 and 2007—$46) | 517 | 491 | ||
| Collaboration profit sharing | 279 | 252 | ||
| Recurring charges related to redemption and acquisition | 43 | 26 | ||
| Special items: litigation-related | 14 | 13 | ||
| Total costs and expenses |
1,859 |
1,784 |
||
| Operating income | 1,204 | 1,059 | ||
| Other income (expense): | ||||
| Interest and other income, net(1) | 74 | 74 | ||
| Interest expense | (18) | (18) | ||
| Total other income, net |
56 |
56 |
||
| Income before taxes | 1,260 | 1,115 | ||
| Income tax provision | 470 | 409 | ||
| Net income |
$ 790 |
$ 706 |
||
| Earnings per share: | ||||
| Basic | $ 0.75 | $ 0.67 | ||
| Diluted | $ 0.74 | $ 0.66 | ||
| Weighted average shares used to compute earnings per share: | ||||
| Basic | 1,053 | 1,053 | ||
| Diluted | 1,068 | 1,071 | ||
(1) "Interest and other income, net" includes interest income, net realized gains from the sale of certain biotechnology equity securities and write-downs for other-than-temporary impairments in the fair value of certain debt and biotechnology equity securities. For further detail, refer to our web site at www.gene.com.
|
GENENTECH, INC. |
||||
| Three Months Ended March 31, |
||||
|
|
||||
| 2008 | 2007 | |||
|
|
||||
| GAAP net income | $ 790 | $ 706 | ||
| Royalty revenue(1) | (4) | - | ||
| Employee stock-based compensation expense under FAS 123R(2) included in the following operating expenses: | ||||
| Cost of sales | 22 | 16 | ||
| Research and development | 42 | 38 | ||
| Marketing, general and administrative | 46 | 46 | ||
| Recurring charges related to redemption and acquisition(3) | 43 | 26 | ||
| Special items: litigation-related(4) | 14 | 13 | ||
| Income tax effect(5) | (58) | (53) | ||
| Non-GAAP net income |
$ 895 |
$ 792 |
||
| Non-GAAP earnings per share: | ||||
| Diluted | $ 0.84 | $ 0.74 | ||
| Non-GAAP weighted average shares used to compute earnings per share(6): | ||||
| Diluted | 1,066 | 1,071 | ||
(1) Represents recognition of deferred royalty revenue.
(2) Represents employee stock-based compensation expense associated with FAS 123R.
(3) Represents the amortization of intangible assets related to the 1999 redemption of our common stock by Roche Holdings, Inc. and our acquisition of Tanox, Inc. in 2007.
(4) Includes accrued interest and bond costs in the first quarters of 2008 and 2007 related to the City of Hope trial judgment.
(5) Reflects the income tax effects of excluding employee stock-based compensation expense under FAS 123R, recurring charges related to the redemption of our common stock, litigation-related special items and items related to our acquisition of Tanox, Inc.
(6) Weighted average shares used to compute non-GAAP diluted earnings per share were computed exclusive of the methodology used to determine dilutive securities under FAS 123R.
Reconciliation of 2008 GAAP and Non-GAAP EPS
Estimates
Our 2008 non-GAAP EPS estimate excludes the effects of: (i)
recurring amortization charges related to the 1999 redemption of
our common stock by Roche Holdings, Inc. and our acquisition of
Tanox, Inc., which the company forecasts to be approximately $172
million on a pretax basis in 2008, (ii) litigation-related and
similar special items for accrued interest and associated bond
costs on the City of Hope judgment which the company forecasts to
be in the range of $15 million to $20 million on a pretax basis in
2008, (iii) recognition of deferred royalty revenue associated with
the accounting for our acquisition of Tanox, Inc., which the
company forecasts to be approximately $15 million on a pretax basis
in 2008, (iv) income tax effect on recurring charges related to the
redemption of our common stock and our acquisition of Tanox, Inc.,
litigation-related and similar special items, and recognition of
deferred royalty revenue, which the company forecasts to be
approximately $67 million to $69 million in 2008, and (v) employee
stock-based compensation expense, which the company forecasts to be
in the range of $0.25 to $0.27 per share for 2008 on an after-tax
basis. Our 2008 GAAP EPS would include the items listed above as
well as any other potential special charges related to existing or
future litigation or its resolution, or changes in or adoption of
accounting principles, all of which may be significant.
The statements regarding the amounts relating to the 1999 Roche redemption of our common stock, amortization of intangible assets and recognition of deferred royalty revenue associated with the acquisition of Tanox, Inc., litigation-related and similar special items and employee stock-based compensation expense are forward-looking and such statements are predictions and involve risks and uncertainties such that actual results may differ materially. The amounts identified above could be affected by a number of factors, including a re-valuation of certain intangible assets, greater than expected litigation-related and similar costs, changes in or adoption of accounting principles, the number of options granted to employees, our stock price and certain valuation assumptions concerning our stock. We disclaim, and do not undertake, any obligation to update or revise any of these forward-looking statements.
| GENENTECH, INC. SELECTED CONSOLIDATED FINANCIAL DATA (In millions) (Unaudited) |
||||
| March
31, 2008 |
December
31, 2007 |
|||
|
|
||||
| Selected consolidated balance sheet data: | ||||
| Cash, cash equivalents and short-term investments | $ 4,857 | $ 3,975 | ||
| Accounts receivable - product sales, net | 889 | 847 | ||
| Accounts receivable - royalties, net | 701 | 620 | ||
| Accounts receivable - other, net | 228 | 299 | ||
| Inventories | 1,469 | 1,493 | ||
| Long-term marketable debt and equity securities | 2,201 | 2,090 | ||
| Property, plant and equipment, net | 5,135 | 4,986 | ||
| Goodwill | 1,577 | 1,577 | ||
| Other intangible assets | 1,127 | 1,168 | ||
| Other long-term assets | 378 | 366 | ||
| Total assets | 20,118 | 18,940 | ||
| Total current liabilities | 3,972 | 3,918 | ||
| Long-term debt(1) | 2,460 | 2,402 | ||
| Total liabilities | 7,204 | 7,035 | ||
| Total stockholders' equity | 12,914 | 11,905 | ||
| Three Months Ended March 31, |
||||
|
|
||||
| 2008 | 2007 | |||
|
|
||||
| Selected consolidated cash flow data: | ||||
| Capital expenditures(1) | $ 200 | $ 209 | ||
| Total GAAP depreciation and amortization expense | 139 | 106 | ||
| Less: redemption and acquisition related amortization expense(2) | (43) | (26) | ||
| Non-GAAP depreciation and amortization expense |
$ 96 |
$ 80 |
||
(1) Capital expenditures exclude approximately $42 million at March 31, 2008 and $57 million at March 31, 2007 in capitalized costs related to our accounting for construction projects for which we are considered to be the owner during the construction period. We have recognized related amounts as a construction financing obligation in long-term debt. The balances in long-term debt related to the construction financing obligation are $440 million at March 31, 2008 and $399 million at December 31, 2007.
(2) Represents the amortization of intangible assets related to the 1999 redemption of our common stock by Roche Holdings, Inc. and our acquisition of Tanox, Inc. in 2007.
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