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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) of the
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) : July 18, 1995
GENENTECH, INC.
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(Exact name of registrant as specified in charter)
Delaware
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(State or other jurisdiction of incorporation)
1-9813 94-2347624
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(Commission File No.) (IRS employer
identification no.)
460 Point San Bruno Boulevard, South San Francisco, California 94080
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 225-1000
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This Form 8-K consists of ______
sequentially numbered pages
Exhibit Index Appears on page _____.
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ITEM 5. OTHER EVENTS.
On July 18, 1995, Genentech issued a press release relating to
its earnings for the quarter ended June 30, 1995. The contents of the press
release, which is attached as Exhibit 1 hereto, are hereby incorporated by
reference to this Form 8-K. The press release is being filed herewith solely
because it makes reference to matters relating to the proposed merger between
Genentech and a wholly owned subsidiary of Roche Holdings, Inc., a transaction
with respect to which Genentech has previously filed proxy materials with the
Securities and Exchange Commission.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
1. Press Release dated July 18, 1995.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENENTECH, INC.
By: /s/ Stephen G. Juelsgaard
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Name: Stephen G. Juelsgaard
Title: Vice President and
General Counsel
Date: July 18, 1995
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EXHIBIT INDEX
Exhibit Sequential
No. Description Page Number
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1. Press Release dated July 18, 1995........
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[Genentech Logo]
NEWS RELEASE
Media Contact: Laura Leber (415) 225-5759
Investor Contact: Lisa Brock (415) 225-1034
GENENTECH REPORTS 1995 SECOND QUARTER RESULTS
-- EARNINGS INCREASE 11 PERCENT:
PULMOZYME SALES UP 62 PERCENT --
SOUTH SAN FRANCISCO, Calif., July 18, 1995 -- Genentech, Inc.
(NYSE: GNE) announced today that earnings for the second quarter of 1995
increased 11 percent to $37.2 million, or 31 cents per share, from $33.4
million, or 28 cents per share, in the second quarter of 1994. The second
quarter 1995 earnings reflect a special charge of $8.0 million -- which, after
taxes, equals 5 cents per share -- in connection with expenses related to
Genentech's proposed merger transaction with Roche Holdings, Inc. Revenues
increased 20 percent to $233.0 million, from $194.9 million in the same quarter
of 1994. This increase results primarily from continued growth in sales of
Pulmozyme(R) (dornase alfa) as well as increased royalty revenues. The increased
royalty revenues reflect increased sales of licensees' products and payments
during the quarter from Eli Lilly and Company following the resolution in
December, 1994, of a long-standing dispute with Lilly regarding recombinant
human growth hormone.
"The results and progress of the second quarter of 1995 clearly
demonstrate the continued strength of our major marketed products," said Arthur
D. Levinson, Genentech's new president and chief executive officer. "During the
quarter, the FDA approved new labeling for Activase, and our market share is now
approximately 75 percent; our patent strength related to human growth hormone,
earlier demonstrated by the Lilly settlement, has been enforced in a preliminary
injunction to halt an infringer; and sales of Pulmozyme for treating cystic
fibrosis have increased substantially."
SPECIAL CHARGE
Genentech had announced a proposed merger agreement with its
majority shareholder Roche on May 1. The $8.0 million special charge relates to
that proposed transaction and includes charges associated with settling
shareholder lawsuits filed after the proposed transaction was announced. Last
week
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Genentech announced an agreement in principle of those lawsuits at the same time
that it announced that its former president and chief executive officer G. Kirk
Raab had resigned and that Dr. Levinson had been named as his successor.
The settlement agreement was reached in return for changes in
the terms of the proposed transaction between the companies. If approved by the
non-Roche stockholders, the proposed transaction announced May 1 gives Roche the
right to cause the redemption of Genentech stock at a predetermined price that
increases each quarter beginning July 1, 1995, through the quarter beginning
April 1, 1999, when the redemption price is $82.00. The same transaction gives
Genentech stockholders the right to "put" (cause Genentech to redeem) some or
all of their stock at $60 per share within a 30 business-day period commencing
July 1, 1999. The changes to the transaction that are part of the settlement, if
approved by the Delaware Chancery Court, include an increase in the call prices
by 50 cents per share, resulting in a final redemption price of $82.50 in the
quarter beginning April 1, 1999. The put price of $60 per share remains
unchanged.
Genentech expects additional expenses related to the proposed
transaction in the third quarter of 1995.
MARKETED PRODUCTS
Sales of Activase(R) (Alteplase, recombinant) t-PA increased to
$74.1 million from $73.5 million in the second quarter of 1994. During the
quarter, the U.S. Food and Drug Administration cleared for marketing the
accelerated infusion of Activase for the management of acute myocardial
infarction (heart attack), allowing revised product labeling that incorporates
data from the worldwide GUSTO1 trial. This international trial showed the new
regimen was superior compared to another clot-dissolving agent in that
significantly fewer patients died. Also during the quarter, a major analysis of
the GUSTO trial published in the New England Journal of Medicine determined that
Activase is cost-effective relative to other medical treatments generally
considered worthwhile, such as bypass surgery for severe coronary artery disease
and medical therapy for severe hypertension. Since the FDA approved Activase's
new labeling, the product's market share has climbed from approximately 70
percent to approximately 75 percent.
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* GUSTO stands for Global Utilization of t-PA and Streptokinase in Occluded
coronary arteries.
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Sales of Genentech's two growth hormone products Protropin(R)
(somatrem for injection) and Nutropin(R) (somatropin [rDNA origin] for
injection) decreased to $55.9 million from $59.5 million in the second quarter
of 1994. This decrease results from the impact of pricing programs for
distribution channels and the managed care sector.
For the past several quarters Genentech has faced the
possibility of additional competition from four competitors in the growth
hormone market. Two companies, Novo Nordisk and BioTechnotogy General (BTG),
received FDA approval of their growth hormone products during the quarter.
However, also during the quarter, a U.S. Federal District Court judge in New
York granted Genentech's request for a preliminary injunction against Novo
Nordisk to prohibit the sale or offer for sale of Novo's human growth hormone
product (Norditropin(R)) in the United States. The preliminary injunction states
it will be in effect pending final determination of Genentech's claims of patent
infringement against Novo, which will be fully tried at a later date. This
injunction replaced a temporary restraining order, in which the judge stated
that Genentech had shown a strong likelihood of success on its claim that Novo
infringes U.S. Patent 4,601,980. BTG has agreed not to commercialize its product
pending a determination on Genentech's motion for a preliminary injunction
against BTG.
Pulmozyme sales by Genentech worldwide increased 62 percent to
$30.3 million from $18.7 million in the second quarter of 1994, reflecting
regulatory approval of the product in additional European countries and
continuing acceptance of the product by cystic fibrosis patients and their
physicians.
RESEARCH AND DEVELOPMENT
Research and development (R&D) expenses in the second quarter
of 1995 increased 19 percent to $87.2 million from $73.0 million in the second
quarter of 1994. The increase reflects a continued commitment to aggressive
investment in R&D, including increased expenses related to two worldwide Phase
III trials, one investigating Pulmozyme in patients with chronic obstructive
pulmonary disease (COPD), and one investigating Genentech's anti-HER2 antibody
as a potential therapy for breast cancer.
Genentech will continue to invest aggressively in R&D. However,
expenses related to the COPD trial will decrease in coming quarters because, as
Genentech announced on July 10, 1995, the company is stopping enrollment in the
trial based on a recommendation of the trial's independent Data and Safety
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Monitoring Board following an interim analysis that showed a lack of benefit.
The findings of the analysis do not change current treatment recommendations for
patients with cystic fibrosis, for which Pulmozyme has a proven record of safety
and efficacy.
Two of Genentech's R&D collaborators reached clinical
milestones during the quarter:
- - Scios Nova announced on May 2, 1995, that a preliminary analysis of its
Phase III clinical study of Auriculin (anaritide) for the treatment of
acute renal (kidney) failure (ARF) revealed that Auriculin did not
reduce the need for dialysis in the broad patient population, nor did
the drug reduce mortality, though it did reduce the need for dialysis
in a prospectively defined subgroup. Genentech and Scios Nova are
collaborating to develop natriuretic peptides for the treatment of ARF
and will determine the next appropriate steps for the development of
Auriculin. Based on the decline in the market value of Scios Nova's
common stock following the announcement on May 2, Genentech wrote down
its investment in Scios Nova by $5.7 million.
- - IDEC Pharmaceuticals began a pivotal Phase III trial of IDEC-C2B8 in
patients with relapsed low grade and follicular nonHodgkin's B-cell
lymphoma. IDEC and Genentech are collaborating to develop treatments
for non-Hodgkin's B-cell lymphomas.
Genentech, Inc. is a leading biotechnology company hat
discovers, develops, manufactures and markets human pharmaceuticals for
significant medical needs. Ten of the currently marketed biotechnology products
stem from Genentech research, five of which Genentech markets directly.
Genentech is headquartered in South San Francisco, California, and is traded on
the New York and Pacific Stock Exchanges under the symbol GNE.
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GENENTECH, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
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1995 1994 1995 1994
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Revenues:
Product sales $161,236 $152,574 $323,303 $300,372
Royalties 49,424 26,099 96,573 59,778
Contract and other 7,861 6,842 24,083 14,369
Interest 14,532 9,407 28,061 19,273
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Total revenues 233,053 194,922 472,020 393,792
Costs and expenses:
Cost of sales 24,312 24,565 51,062 46,696
Research and development 87,167 73,008 182,126 147,384
Marketing, general
and administrative 67,814 60,817 132,137 120,928
Special charge (merger related) 8,000 - 8,000 -
Interest 2,039 1,754 3,910 3,532
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Total costs and expenses 189,332 160,144 377,235 318,540
Income before taxes 43,721 34,778 94,785 75,252
Income tax provision 6,558 1,391 14,218 3,010
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Net income $ 37,163 $ 33,387 $ 80,567 $ 72,242
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Net income per share $ .31 $ .28 $ .67 $ .61
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Weighted average number of
shares used in computing
per share amounts 120,899 119,041 120,696 118,924
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SELECTED BALANCE SHEET DATA:
Cash and short-term investments $ 744,531 $ 599,370
Accounts receivable 185,416 126,633
Inventories 92,888 95,006
Long-term marketable securities 241,228 220,224
Property, plant and equipment, net 483,731 475,6`75
Other long-term assets 88,299 48,398
Total assets 1,890,829 1,575,676
Total current liabilities 228,435 189,773
Long-term debt 175,503 150,804
Total liabilities 426,646 352,435
Total stockholders' equity 1,464,183 1,223,241
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