SOUTH SAN FRANCISCO, Calif., Oct. 10 /PRNewswire-FirstCall/ -- Genentech, Inc. today announced financial results for the third quarter of 2005. Key results for the third quarter of 2005 included:
* Non-GAAP earnings per share increase of 46 percent to $0.35 per share
from $0.24 per share in the third quarter of 2004; GAAP earnings per
share increase of 57 percent to $0.33 per share from $0.21 per share in
the third quarter of 2004;
* Total product sales of $1,451.0 million, a 44 percent increase over
product sales of $1,005.5 million in the third quarter of 2004;
* Operating revenues of $1,751.8 million, a 46 percent increase over
operating revenues of $1,202.6 million in the third quarter of 2004;
* Non-GAAP net income increase of 48 percent to $383.8 million from $259.6
million in the third quarter of 2004; GAAP net income increase of 56
percent to $359.4 million from $230.9 million in the third quarter of
2004.
"Genentech's first nine months of 2005 have been exceptional, with a string of five consecutive positive Phase III trial results and record product sales and earnings," said Arthur D. Levinson, Ph.D., Genentech's chairman and chief executive officer. "We are pleased with our continued strong financial results as we enter the last quarter of our 5x5 program."
"For the full year 2005, we are currently expecting year-over-year non- GAAP earnings per share growth of approximately 50 percent," said David Ebersman, senior vice president and chief financial officer.
Note: Genentech's non-GAAP net income and non-GAAP earnings per share exclude recurring charges related to the 1999 Roche redemption of Genentech's stock and litigation-related special items. The differences in non-GAAP and GAAP numbers are reconciled in the tables below and on http://www.gene.com/. All share and per share amounts reflect the May 2004 two-for-one split of Genentech common stock.
Product Sales
"We are very proud of the strong bio-oncology business that we have built; for the first time in Genentech's history, quarterly oncology U.S. product sales topped one billion dollars," said Ian T. Clark, senior vice president, Commercial Operations. "While our policies only allow our sales force to promote our products for on-label usage, we see increasing use of Avastin in other cancer areas outside of the approved indication of first-line metastatic colorectal cancer, and of Herceptin in the adjuvant setting, also an unapproved use."
For the three months ended September 30, 2005:
* Total product sales, comprised of U.S. product sales and product sales
to collaborators (primarily ex-U.S. sales), increased 44 percent to
$1,451.0 million from $1,005.5 million in the third quarter of 2004.
* U.S. product sales increased 44 percent to $1,365.3 million, from U.S.
product sales of $950.0 million in the third quarter of 2004.
* U.S. sales of Avastin(R) (bevacizumab) increased 78 percent to $325.2
million, from U.S. sales of $183.0 million in the third quarter of 2004.
Sequential quarter-over-quarter Avastin sales increased 32 percent from
second quarter 2005 U.S. sales of $245.7 million.
* U.S. sales of Herceptin(R) (Trastuzumab) increased 70 percent to $215.1
million, from U.S. sales of $126.3 million in the third quarter of 2004.
Sequential quarter-over-quarter Herceptin sales increased 41 percent
from second quarter 2005 U.S. sales of $152.4 million.
* U.S. sales of Tarceva(R) (erlotinib) were $73.2 million. Sequential
quarter-over-quarter Tarceva sales increased 4 percent from second
quarter 2005 U.S. sales of $70.2 million. Tarceva was launched in the
United States in November 2004.
* U.S. sales of Rituxan(R) (Rituximab) increased 16 percent to $456.2
million, from U.S. sales of $393.0 million in the third quarter of 2004.
* U.S. sales of Xolair(R) (Omalizumab) increased 51 percent to $81.6
million, from U.S. sales of $53.9 million in the third quarter of 2004.
* U.S. sales of RAPTIVA(R) (efalizumab) increased 28 percent to $20.9
million, from U.S. sales of $16.3 million in the third quarter of 2004.
* U.S. sales of legacy products, including growth hormone, cardiovascular
products and Pulmozyme(R) (dornase alfa, recombinant) Inhalation
Solution, increased 9 percent to $193.1 million, from U.S. sales of
$177.6 million in the third quarter of 2004.
* Product sales to collaborators increased 54 percent to $85.7 million,
from sales of $55.5 million in the third quarter of 2004. The increase
in product sales to collaborators primarily consisted of Avastin sales
to Roche.
Royalties and Contract Revenues
* Royalties increased 55 percent to $237.8 million from $153.9 million in
the third quarter of 2004.
* Contract revenues increased 46 percent to $63.0 million from $43.2
million in the third quarter of 2004.
Total Costs and Expenses
* Cost of sales increased 39 percent to $230.1 million from $166.0 million
in the third quarter of 2004, primarily due to higher product sales.
Cost of sales as a percentage of product sales was 16 percent, compared
to 17 percent in the third quarter of 2004.
* Research and development (R&D) expenses increased 40 percent to $328.9
million from $234.1 million in the third quarter of 2004. R&D expenses
as a percentage of operating revenues were 19 percent, comparable to the
third quarter of 2004.
* Marketing, general and administrative (MG&A) expenses increased 32
percent to $349.3 million from $264.6 million in the third quarter of
2004. MG&A expenses as a percentage of operating revenues were 20
percent, compared to 22 percent in the third quarter of 2004.
* Collaboration profit-sharing expenses in the third quarter of 2005
increased 45 percent to $219.6 million from $151.9 million in the third
quarter of 2004.
The unrestricted cash and investments portfolio totals approximately $4.1 billion as of September 30, 2005. Among other items, the cash balance reflects the receipt of $2 billion from the company's July 2005 debt offering and the use of approximately $929 million related to share repurchase activity in the third quarter. Also in the third quarter, the company paid approximately $585 million to buy out two synthetic lease obligations associated with its Vacaville and South San Francisco facilities.
Clinical Development
"We are making good progress in our efforts with the FDA to establish our filing timelines. We completed two sBLAs for Rituxan in the past quarter and plan to submit additional filings for Lucentis, Herceptin, Rituxan and Avastin within the next nine months," said Susan D. Hellmann, M.D., M.P.H., president of Product Development. "We plan to file sBLAs for Avastin in first-line non- squamous, non-small cell lung cancer and in first-line metastatic breast cancer during the first half of 2006."
Genentech anticipates filing a supplemental Biologics License Application (sBLA) in the first quarter of 2006 for Herceptin in the adjuvant setting based on data from U.S. studies. Genentech announced that, in addition to initiating the Phase III study of Avastin in first-line metastatic ovarian cancer, it completed enrollment in both the Phase I/II second-generation Anti- CD20 study in rheumatoid arthritis and the Phase I BR3-Fc study in rheumatoid arthritis.
Other Company Activity
The company provided additional information on the pending reexamination of the Cabilly, et al. U.S. Patent No. 6,331,415 (Cabilly patent). Genentech estimates that the process leading up to a final Office action or a notice of intent to issue a reexamination certificate from the U.S. Patent and Trademark Office may take from two to 12 months and that any appeals process may take several years. The overall net pre-tax income to Genentech from revenues and expenses related to the Cabilly patent was approximately $20 million for the third quarter of 2005, or approximately $0.01 per share. Genentech believes that the third quarter 2005 Cabillly-related pre-tax income figure represents approximately one-quarter of the full year's expected results, excluding the effects of a one-time licensee payment related to 2004 sales that was recorded in the first quarter of 2005.
In September 2005 the FDA granted approval for the manufacture of Rituxan bulk drug substance at Lonza's Portsmouth, New Hampshire production facility.
Webcast:
Genentech will be offering a live webcast of a discussion by Genentech management of the earnings and other business results on Monday, October 10, 2005, at 2:15 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 October 24, 2005. A telephonic audio replay of the webcast will be available beginning at 5:15 p.m. PT on October 10, 2005 through 5:15 p.m. PT on October 17, 2005. Access numbers for this replay are: 1-800-642-1687 (U.S./Canada) and 1-706-645-9291 (international); conference ID number is 9678548.
About Genentech:
Genentech is a leading biotechnology company that discovers, develops, manufactures and commercializes biotherapeutics for significant unmet medical needs. A considerable number of the currently approved biotechnology products originated from or are based on Genentech science. Genentech manufactures and commercializes multiple biotechnology products directly in the United States and licenses several additional products to other companies. The company has headquarters in South San Francisco, California and is traded on the New York Stock Exchange under the symbol DNA. For additional information about the company, please visit http://www.gene.com/ .
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 timeframe of potential FDA filings for Lucentis, Herceptin, Rituxan and Avastin; growth in non-GAAP EPS for 2005; and expected 2005 Cabilly-related income. Actual results could differ materially. Among other things, the timeframe for potential FDA filings could be affected by product safety, efficacy or manufacturing issues, additional time requirements to achieve study endpoints or for data analysis or filing preparation, need for additional clinical studies, and FDA actions or delays; and Cabilly-related income could be affected by sales growth of our licensees' products and our own products, the outcome of the re-examination or other related legal proceedings, and fluctuations in tax rates; the growth of new oncology products and indications may be affected by variables such as demand, penetration, reimbursement and duration of use; and non-GAAP EPS growth could be affected by all of the foregoing and by failure to receive FDA approval; competition, pricing, the ability to supply product, product withdrawals, new product approvals and launches, achieving sales revenue consistent with internal forecasts, unanticipated expenses such as litigation or legal settlement expenses or equity securities write-downs, costs of sales, R&D expenses, fluctuations in royalties and contract revenues, and fluctuations in interest rates. Genentech disclaims, and does not undertake, any obligation to update or revise any forward-looking statements in this press release.
Media Contact: Debra Charlesworth (650) 225-2742
Caroline Pecquet (650) 467-7078
Investor Contact: Kathee Littrell (650) 225-1034
Sue Morris (650) 225-6532
GENENTECH, INC.
CONSOLIDATED STATEMENTS OF INCOME DATA
(in thousands, except per share amounts)
(unaudited)
Three Months
Ended September 30,
2005
GAAP(1) Difference Non-GAAP(2)
Revenues:
Product sales $1,450,979 $1,450,979
Royalties 237,777 237,777
Contract revenue 63,066 63,066
Total operating
revenues 1,751,822 1,751,822
Costs and expenses:
Cost of sales 230,127 230,127
Research and development 328,850 328,850
Marketing, general and
administrative 349,323 349,323
Collaboration profit
sharing 219,591 219,591
Recurring charges related
to redemption 27,191 $(27,191)(3) --
Special items:
litigation-related 13,507 (13,507)(4) --
Total costs and
expenses 1,168,589 (40,698) 1,127,891
Operating margin 583,233 40,698 623,931
Other income, net(5) 22,391 -- 22,391
Income before taxes 605,624 40,698 646,322
Income tax provision 246,211 16,280 262,491
Net income $359,413 $24,418 $383,831
Earnings per share:
Basic $0.34 $0.02 $0.36
Diluted $0.33 $0.02 $0.35
Weighted average
shares used to
compute earnings
per share:
Basic 1,060,539 1,060,539
Diluted 1,086,964 1,086,964
Three Months
Ended September 30,
2004
GAAP(1) Difference Non-GAAP(2)
Revenues:
Product sales $1,005,511 $1,005,511
Royalties 153,942 153,942
Contract revenue 43,191 43,191
Total operating
revenues 1,202,644 1,202,644
Costs and expenses:
Cost of sales 165,990 165,990
Research and development 234,086 234,086
Marketing, general and
administrative 264,648 264,648
Collaboration profit
sharing 151,894 151,894
Recurring charges
related to redemption 34,534 $(34,534)(3) --
Special items:
litigation-related 13,419 (13,419)(4) --
Total costs and expenses 864,571 (47,953) 816,618
Operating margin 338,073 47,953 386,026
Other income, net(5) 23,510 -- 23,510
Income before taxes 361,583 47,953 409,536
Income tax provision 130,709 19,181 149,890
Net income $230,874 $28,772 $259,646
Earnings per share:
Basic $0.22 $0.03 $0.25
Diluted $0.21 $0.03 $0.24
Weighted average
shares used to
compute earnings
per share:
Basic 1,055,140 1,055,140
Diluted 1,077,093 1,077,093
(1) Reflects operating results in accordance with U.S. generally
accepted accounting principles (or GAAP).
(2) Non-GAAP amounts exclude litigation-related special items and
recurring charges related to the 1999 redemption of Genentech's
Special Common Stock, net of tax effects.
(3) Represents the amortization of other intangible assets related to
the 1999 redemption of Genentech's Special Common Stock.
(4) Represents accrued interest and bond costs in Q3 2005 and 2004
related to the City of Hope trial judgment.
(5) "Other income, net" includes interest income, interest expense, 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 biotechnology debt and equity securities.
For further detail, refer to our web site at http://www.gene.com/.
2005 Reconciliation of GAAP and Non-GAAP EPS
Our 2005 non-GAAP EPS estimate does not include recurring charges related
to the 1999 redemption of our stock by Roche, which are estimated to be
approximately $123 million on a pretax basis in 2005. In addition, the
2005 non-GAAP EPS estimate does not include litigation-related special
items for accrued interest and associated bond costs on the City of Hope
judgment and net amounts paid on other litigation settlements, which were
approximately $44 million through the third quarter of 2005 and currently
estimated to be approximately $58 million on a pretax basis in 2005. Our
2005 GAAP EPS would include the redemption-related recurring charges and
the litigation-related special items as well as any other potential
special charges related to existing or future litigation or its
resolution, or changes in accounting principles, all of which may be
significant.
GENENTECH, INC.
CONSOLIDATED STATEMENTS OF INCOME DATA
(in thousands, except per share amounts)
(unaudited)
Nine Months
Ended September 30,
2005
GAAP(1) Difference Non-GAAP(2)
Revenues:
Product sales $3,911,095 $3,911,095
Royalties 670,014 670,014
Contract revenue 159,170 159,170
Total operating revenues 4,740,279 4,740,279
Costs and expenses:
Cost of sales 750,649 750,649
Research and development 850,215 850,215
Marketing, general and
administrative 1,021,174 1,021,174
Collaboration profit
sharing 594,666 594,666
Recurring charges
related to
redemption 96,155 $(96,155)(3) --
Special items:
litigation-related 44,291 (44,291)(4) --
Total costs and
expenses 3,357,150 (140,446) 3,216,704
Operating margin 1,383,129 140,446 1,523,575
Other income, net(5) 70,290 -- 70,290
Income before taxes 1,453,419 140,446 1,593,865
Income tax provision 513,666 56,178 569,844
Net income $939,753 $84,268 $1,024,021
Earnings per share:
Basic $0.89 $0.08 $0.97
Diluted $0.87 $0.08 $0.95
Weighted average
shares used to
compute earnings
per share:
Basic 1,055,028 1,055,028
Diluted 1,080,921 1,080,921
Nine Months
Ended September 30,
2004
GAAP(1) Difference Non-GAAP(2)
Revenues:
Product sales $2,682,577 $2,682,577
Royalties 459,899 459,899
Contract revenue 163,381 163,381
Total operating
revenues 3,305,857 3,305,857
Costs and expenses:
Cost of sales 467,153 467,153
Research and development 637,317 637,317
Marketing, general and
administrative 788,616 788,616
Collaboration profit
sharing 423,546 423,546
Recurring charges related
to redemption 110,952 $(110,952)(3) --
Special items:
litigation-related 40,276 (40,276)(4) --
Total costs and
expenses 2,467,860 (151,228) 2,316,632
Operating margin 837,997 151,228 989,225
Other income, net(5) 61,274 -- 61,274
Income before taxes 899,271 151,228 1,050,499
Income tax provision 321,040 60,491 381,531
Net income $578,231 $90,737 $668,968
Earnings per share:
Basic $0.55 $0.08 $0.63
Diluted $0.53 $0.09 $0.62
Weighted average shares
used to compute earnings
per share:
Basic 1,057,006 1,057,006
Diluted 1,082,081 1,082,081
(1) Reflects operating results in accordance with U.S. generally
accepted accounting principles (or GAAP).
(2) Non-GAAP amounts exclude litigation-related special items and
recurring charges related to the 1999 redemption of Genentech's
Special Common Stock, net of tax effects.
(3) Represents the amortization of other intangible assets related to
the 1999 redemption of Genentech's Special Common Stock.
(4) Represents accrued interest and bond costs in 2005 and 2004 related
to the City of Hope trial judgment, and net amounts paid in 2005
related to other litigation settlements.
(5) "Other income, net" includes interest income, interest expense, 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 biotechnology debt and equity securities.
For further detail, refer to our web site at http://www.gene.com/.
2005 Reconciliation of GAAP and Non-GAAP EPS
Our 2005 non-GAAP EPS estimate does not include recurring charges related
to the 1999 redemption of our stock by Roche, which are estimated to be
approximately $123 million on a pretax basis in 2005. In addition, the
2005 non-GAAP EPS estimate does not include litigation-related special
items for accrued interest and associated bond costs on the City of Hope
judgment and net amounts paid on other litigation settlements, which were
approximately $44 million through the third quarter of 2005 and currently
estimated to be approximately $58 million on a pretax basis in 2005. Our
2005 GAAP EPS would include the redemption-related recurring charges and
the litigation-related special items as well as any other potential
special charges related to existing or future litigation or its
resolution, or changes in accounting principles, all of which may be
significant.
GENENTECH, INC.
CONSOLIDATED BALANCE SHEETS DATA
(in thousands)
(unaudited)
September 30,
2005 2004
Selected balance sheet data:
Cash, cash equivalents and short-term
investments $2,905,543 $1,760,164
Accounts receivable - product sales, net 509,465 548,555
Accounts receivable - royalties, net 264,179 193,650
Accounts receivable - other, net 189,341 143,622
Inventories 621,389 559,920
Long-term marketable debt and equity
securities 1,242,866 1,310,422
Property, plant and equipment, net 3,128,089 1,922,313
Goodwill 1,315,019 1,315,019
Other intangible assets 587,911 677,049
Long-term assets 1,030,842 774,435
Total assets 12,099,306 9,408,360
Total current liabilities 1,354,938 1,106,656
Total liabilities 4,376,048 2,441,064
Total stockholders' equity 7,723,258 6,967,566
Year-to-date:
Capital expenditures $1,106,930 $418,214
Total GAAP(1) depreciation and
amortization expense 275,632 259,583
Less: redemption related
amortization expense(3) (96,155) (110,952)
Non-GAAP(2) depreciation and
amortization expense $179,477 $148,631
(1) In accordance with U.S. generally accepted accounting principles
(or GAAP).
(2) Non-GAAP amounts exclude amortization of other intangible assets
related to the 1999 redemption of Genentech's Special Common Stock.
(3) Represents the amortization of other intangible assets related to
the 1999 redemption of Genentech's Special Common Stock.
GENENTECH, INC.
NET PRODUCT SALES DETAIL
(in thousands)
(unaudited)
Three Months
Ended September 30,
2005 2004
Net U.S. Product Sales
Rituxan $456,227 $393,000
Herceptin 215,148 126,300
Avastin 325,156 183,003
Growth Hormone 88,585 84,931
Thrombolytics 57,903 52,867
Pulmozyme 46,593 39,816
Xolair 81,550 53,856
Raptiva 20,887 16,265
Tarceva 73,222 --
Total U.S. product sales 1,365,271 950,038
Net product sales to collaborators 85,708 55,473
Total Product Sales $1,450,979 $1,005,511
Nine Months
Ended September 30,
2005 2004
Net U.S. Product Sales
Rituxan $1,347,125 $1,144,813
Herceptin 497,205 352,996
Avastin 773,695 354,134
Growth Hormone 275,570 256,896
Thrombolytics 160,105 147,133
Pulmozyme 137,482 114,340
Xolair 227,183 127,332
Raptiva 58,803 35,971
Tarceva 190,993 --
Total U.S. product sales 3,668,161 2,533,615
Net product sales to collaborators 242,934 148,962
Total Product Sales $3,911,095 $2,682,577