SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the quarterly period ended March 31, 1995.
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from to .
Commission File Number
1-9813
GENENTECH, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2347624
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
460 Point San Bruno Boulevard, South San Francisco, California 94080
(Address of principal executive offices and zip code)
(415) 225-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock $.02 par value 67,133,409
Class Outstanding at March 31, 1995
Redeemable Common Stock $.02 par value 50,447,727
Class Outstanding at March 31, 1995
<PAGE>
GENENTECH, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Condensed Consolidated Statements of Income -
for the three months ended March 31, 1995 and 1994 3
Condensed Consolidated Statements of Cash Flows -
for the three months ended March 31, 1995 and 1994 4
Condensed Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994 5
Notes to Condensed Consolidated Financial Statements 6-8
Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-12
Independent Accountants' Review Report 13
PART II. OTHER INFORMATION 14
SIGNATURES 15
Page 2
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
GENENTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(thousands, except per share amounts)
(unaudited)
<CAPTION>
Three Months
Ended March 31
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Revenues:
Product sales $ 162,067 $ 147,798
Royalties 47,149 33,679
Contract and other 16,222 7,527
Interest 13,529 9,866
---------- ----------
Total revenues 238,967 198,870
Costs and expenses:
Cost of sales 26,750 22,131
Research and development 94,959 74,376
Marketing, general and administrative 64,323 60,111
Interest 1,871 1,778
---------- ----------
Total costs and expenses 187,903 158,396
Income before taxes 51,064 40,474
Income tax provision 7,660 1,619
---------- ----------
Net income $ 43,404 $ 38,855
========== ==========
Net income per share $ .36 $ .33
========== ==========
Weighted average number of shares used
in computing per share amounts 120,493 118,806
========== ==========
<FN>>
See notes to condensed consolidated financial statements.
</TABLE>
Page 3
<PAGE>
<TABLE>
GENENTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands)
(unaudited)
<CAPTION>
Three Months
Ended March 31
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 43,404 $ 38,855
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 14,345 12,394
Gain on sales of securities available-for-sale (4,034) -
Writedown of a security available-for-sale 427 -
Net loss on fixed asset dispositions 2 99
Changes in assets and liabilities:
Receivables and other current assets (27,272) 5,250
Inventories 8,900 (6,998)
Accounts payable, other current liabilities
and other long-term liabilities (16,754) (3,010)
---------- ----------
Net cash provided by operating activities 19,018 46,590
Cash flows from investing activities:
Purchases of securities held-to-maturity (154,860) (316,849)
Proceeds from maturities of securities held-to-maturity 316,319 220,917
Purchases of securities available-for-sale (139,276) -
Proceeds from sales of securities available-for-sale 5,053 -
Capital expenditures (9,558) (21,600)
Increase in other assets (27,771) (186)
---------- ----------
Net cash used in investing activities (10,093) (117,718)
Cash flows from financing activities:
Stock issuances 9,062 13,003
Additions to long-term debt and
short-term borrowings 25,624 -
Repayment of long-term debt, including
current portion (211) (191)
---------- ----------
Net cash provided by financing activities 34,475 12,812
---------- ----------
Net increase (decrease) in cash and cash equivalents 43,400 (58,316)
Cash and cash equivalents at beginning of period 66,713 117,473
---------- ----------
Cash and cash equivalents at end of period $ 110,113 $ 59,157
========== ==========
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
Page 4
<PAGE>
<TABLE>
GENENTECH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(thousands)
<CAPTION>
March 31, December 31,
1995 1994
------------ ------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 110,113 $ 66,713
Short-term investments 612,261 652,461
Accounts receivable, net 166,143 146,267
Inventories 94,300 103,200
Prepaid expenses and other current assets 33,386 28,475
------------ ------------
Total current assets 1,016,203 997,116
Long-term marketable securities 219,975 201,726
Property, plant and equipment, less
accumulated depreciation
(1995-$232,844; 1994-$215,255) 482,117 485,293
Other assets 88,551 60,989
------------ ------------
Total assets $ 1,806,846 $ 1,745,124
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts and notes payable $ 24,593 $ 30,963
Other current liabilities 181,209 189,536
------------ ------------
Total current liabilities 205,802 220,499
Long-term debt 175,140 150,358
Other long-term liabilities 23,658 25,483
------------ ------------
Total liabilities 404,600 396,340
Stockholders' equity:
Preferred stock - -
Redeemable common stock 1,009 1,002
Common stock 1,343 1,343
Other stockholders' equity 1,399,894 1,346,439
------------ ------------
Total stockholders' equity 1,402,246 1,348,784
------------ ------------
Total liabilities and stockholders' equity $ 1,806,846 $ 1,745,124
============ ============
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
Page 5
<PAGE>
GENENTECH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Statement of Accounting Presentation
In the opinion of Genentech, Inc. (the Company), the accompanying unaudited
condensed consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting only of adjustments of a normal recurring nature) considered
necessary for a fair presentation have been included. Operating results for
the three-month periods ended March 31, 1995 and 1994 are not necessarily
indicative of the results that may be expected for the year ending December
31, 1995. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report to
Stockholders for the year ended December 31, 1994.
Note 2. Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. These debt
instruments are recorded at amortized cost which approximates fair value.
Note 3. Inventories
Inventories at March 31, 1995 and December 31, 1994 are summarized below:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
(thousands)
<S> <C> <C>
Raw materials $ 13,697 $ 13,145
Work in process 66,275 76,974
Finished goods 14,328 13,081
---------- ----------
Total $ 94,300 $ 103,200
========== ==========
<FN>
Inventories are stated at the lower of cost or market. Cost is determined
using a weighted-average approach which approximates the first-in, first-out
method.
</TABLE>
Note 4. Quasi-Reorganization
On February 18, 1988 the Company's Board of Directors approved the elimination
of the Company's accumulated deficit through an accounting reorganization of
its stockholders' equity accounts (a quasi-reorganization) effective October
1, 1987 that did not involve any revaluation of assets or liabilities. The
quasi-reorganization did not involve any revaluation of assets or liabilities
because for similar classes of assets their fair values were no less than
their book values and for similar classes of liabilities their book values
were no less than their fair values. The accumulated deficit of $329.5
million was eliminated by a transfer from additional paid-in capital in an
amount equal to the accumulated deficit. Simultaneously with the quasi-
reorganization, the Company adopted Financial Accounting Standards Board
Page 6
<PAGE>
GENENTECH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Statement (FAS) 96. FAS 96 provided for recognition of the tax benefits of
operating loss and tax credit carryforward items that arose prior to a quasi-
reorganization involving only the elimination of a deficit in retained
earnings being reported in the income statement and then being reclassified
from retained earnings to additional paid-in capital. Subsequently, in
September 1989, the staff of the Securities and Exchange Commission (SEC)
issued Staff Accounting Bulletin (SAB) 86 which states that a quasi-
reorganization cannot involve only an elimination of a deficit in retained
earnings and, therefore, the tax benefits of prior operating loss and tax
credit carry-forwards must be reported as a direct addition to additional
paid-in capital rather than being recorded in the income statement.
In February 1992, the Financial Accounting Standards Board issued FAS 109,
which supersedes FAS 96. FAS 109 requires companies that have previously both
adopted FAS 96 and effected a quasi-reorganization that involves only a
deficit elimination, as did the Company, to continue to report the tax
benefits of prior operating losses and tax credit carryforwards in a manner
consistent with FAS 96. FAS 109 also provides that companies effecting a
quasi-reorganization after February 1992 that involves only a deficit
elimination shall report the tax benefits of prior operating losses and tax
credit carryforwards in a manner consistent with SAB 86.
The Company will continue to report in income the recognition of operating
loss and tax credit carryforward items arising prior to the quasi-
reorganization due to the Company's adoption of its quasi-reorganization in
the context of its interpretation of FAS 96 and the quasi-reorganization
literature existing at the date the quasi-reorganization was effected. The
SEC staff has indicated that it would not object to the Company's accounting
for such tax benefits. If the provisions of SAB 86 had been applied, net
income for the three months ended March 31, 1995 would have been reduced by
approximately $10.0 million or $.08 per share (1994 - net income reduced by
$13.6 million or $.11 per share).
Note 5. Legal Proceedings
The Company is a party to various legal proceedings including patent
infringement cases involving human growth hormone, Activase and antibodies to
IgE (a protein central to allergic reactions), and product liability cases
involving Activase. The Company and its directors are defendants in two suits
filed in California challenging their actions in connection with the Company's
1990 merger with a wholly owned subsidiary of Roche Holdings, Inc. (Roche).
In addition, the Company, its directors, a former director and Roche are
defendants in a number of suits filed in Delaware by certain individual
shareholders purporting to represent shareholders as a class alleging, in
general, breach of their fiduciary duties to the Company in connection with
the proposed extension of Roche's option to cause the Company to redeem its
Redeemable Common Stock and transactions related thereto. See also Note 6 -
Subsequent Event - Roche Holdings, Inc.
Based upon the nature of the claims made and the investigation completed to
date by the Company and its counsel, the Company believes the outcome of the
above actions will not have a material adverse effect on the financial
position, results of operations or cash flows of the Company.
Page 7
<PAGE>
GENENTECH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 6. Subsequent Event - Roche Holdings, Inc.
On May 1, 1995 the Company announced a proposed agreement with Roche, subject
to the approval of a majority of shares not held by Roche or its affiliates,
to extend for four years Roche's option to cause Genentech to redeem the
outstanding redeemable common stock of the Company at a predetermined price.
The option price is set at $61.25 per share on July 1, 1995, increasing by
$1.25 per share each quarter through June 30, 1997, and thereafter escalating
at $1.50 per share each quarter, to $82.00 per share at the end of the option
period on June 30, 1999. If Roche does not cause the redemption as of June
30, 1999, or the Company is insolvent, Genentech's stockholders will have the
option to cause the Company to redeem some or all of their shares (and Roche
will concurrently purchase a like number of shares of common stock at $60.00
per share) at $60.00 per share within thirty business days following July 1,
1999 and sixty business days in an insolvency situation. Under the agreement
Roche may increase its ownership of the Company up to 79.9% by making
purchases on the open market. Roche currently holds approximately 65% of the
outstanding common equity of the Company. As part of the agreement, Roche
will be granted an option at terms discussed below for ten years for licenses
to use and sell certain of Genentech's products in non-U.S. markets. As a
general matter, such option for a Genentech product must be exercised at, or
prior to, the conclusion of Phase II clinical trials. If Roche exercises such
an option, the Company and Roche will split equally all development expenses,
including preclinical, clinical, process development and related expenses, both
prospectively, and retroactively, incurred by the Company with respect to the
development of the product in the United States. Roche will pay all non-U.S.
development expenses. In general, Roche will pay a royalty of 12.5% until a
product reaches $100 million in aggregate sales outside of the U.S., when the
royalty rate increases to 15%. As part of the agreement, Roche will have
exclusive rights to, and pay the Company 20% royalties on, Canadian sales of
the Company's existing products, as well as European sales of Pulmozyme. The
Company will supply its products to Roche for sales outside of the U.S. at
cost plus 20 percent. Roche retains its right to cause the Company to redeem
all of its redemmable common stock on or prior to June 30, 1995 at $60.00 per
share.
Note 7. Subsequent Event - Research and Development Arrangements
In December 1994, the Company entered into a collaboration with Scios Nova
Inc. (Scios Nova) for the development of Scios Nova's Auriculin for the
treatment of acute renal failure, as previously disclosed. In May 1995, the
preliminary results of the drug's Phase III clinical trials were announced,
indicating that, except for a subpopulation of acute renal failure patients,
the drug did not either decrease the need for dialysis or decrease mortality
in the population studied. Subsequent to the announcement, the market price
of Scios Nova's common stock lost approximately 46% of its value. Upon
further analysis of the clinical data, Scios Nova and the Company will
determine the next appropriate steps for the development of Auriculin.
Subject to the outcome of this analysis, and the stock market's reaction to
it, the decline in the market value of Scios Nova's common stock may be deemed
to be other than temporary. If so, and based upon the current value of the
shares of Scios Nova, the Company could record a loss on its investment in
Scios Nova's stock of approximately $6 million in future periods.
Page 8
<PAGE>
GENENTECH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
As discussed in Note 6 in the Notes to Condensed Consolidated Financial
Statements, under the proposed agreement with Roche, Roche will have exclusive
rights to Canadian sales of the Company's existing products, and European
sales of Pulmozyme. In return the Company will receive royalties at the rate
of 20% of sales. Roche will receive at commercial terms an option to
collaborate on the development and sales of future drugs. Subject to
stockholder approval of the agreement and Roche's exercise of rights to
develop or sell the Company's products, product sales, royalties and contract
revenue, as well as R & D and other expenses, could be significantly affected
in future periods.
<TABLE>
RESULTS OF OPERATIONS
(dollars in millions, except per share amounts)
<CAPTION>
Three Months Ended March 31
-------------------------------
REVENUES 1995 1994 % Change
- --------- -------- -------- ---------
<S> <C> <C> <C>
Revenues $239.0 $198.9 20%
======== ======== =========
PRODUCT SALES
- ----------------------
Activase $ 78.2 $ 70.2 11%
Protropin and Nutropin 54.4 53.6 1
Pulmozyme 28.5 22.4 27
Actimmune 1.0 1.6 (38)
-------- -------- ---------
Total product sales $162.1 $147.8 10%
======== ======== =========
</TABLE>
Sales of Activase, registered trademark, (Alteplase, recombinant) tissue-
plasminogen activator increased 11% in the quarter ended March 31, 1995
compared to the quarter ended March 31, 1994. Total Activase sales in 1995
included $3.8 million of sales to Japanese licensees. Sales in the U.S. and
Canada were higher due to an increase in the number of patients receiving
thrombolytic therapy and the continued positive impact of the results of the
worldwide Global Utilization of Activase and Streptokinase in Occluded
Coronary Arteries (GUSTO) clinical trial. This international trial showed
that a new accelerated infusion regimen for Activase was superior compared to
another clot-dissolving agent for the management of acute myocardial
infarction (heart attack). In April 1995, the Food and Drug Administration
(FDA) approved for marketing the accelerated infusion of Activase, allowing
revised labeling for the product incorporating data from the GUSTO study.
Page 9
<PAGE>
Sales of the Company's two growth hormone products - Protropin, registered
trademark, (somatrem for injection) and Nutropin, registered trademark,
(somatropin [rDNA origin] for injection)- increased to $54.4 million in the
first quarter of 1995 from $53.6 million in the first quarter of 1994. In May
1995, a competitor received Food and Drug Administration approval to market
its growth hormone product in the United States. Decreases in sales may occur
as competitors enter the market.
Sales of Pulmozyme, registered trademark, (dornase alfa), increased 27% in the
first three months of 1995 over the comparable period in the prior year. The
product was launched in the United States and Canada during the first quarter
of 1994, and launched in Europe at the end of that quarter. The increase
between quarters reflects market launches in additional European countries and
continued adoption of this new therapy by physicians to treat cystic fibrosis
patients. The Company currently markets the drug in the United States and,
through its Canadian subsidiary, in Canada. Under the existing collaboration
with F. Hoffmann-LaRoche, Ltd. (HLR), Genentech Europe Limited and its
affiliates promote Pulmozyme in the United Kingdom, Ireland, the Netherlands
and Germany, while HLR is responsible for promoting the product in the
remaining Western European countries in the collaboration.
<TABLE>
<CAPTION>
Three Months Ended March 31
ROYALTIES, CONTRACT AND ------------------------------
OTHER, AND INTEREST INCOME 1995 1994 % Change
- ----------------------------- -------- -------- --------
<S> <C> <C> <C>
Royalties $ 47.1 $33.7 40%
Contract and other 16.2 7.5 116
Interest income 13.6 9.9 37
</TABLE>
Royalty income increased primarily as a result of increases in licensees' net
sales subject to royalties and the recognition of $7.5 million of royalties in
the first quarter of 1995 relating to the December 1994 settlement with Eli
Lilly and Company. The impact on total royalties of changes in foreign
currency translation rates, net of gains and losses recognized on foreign
exchange hedging instruments and the amortization of expense related to
foreign currency options outstanding during the period, was not material.
Contract revenues increased between quarters due to variations in the timing
of contract benchmark achievements, varying payment amounts and the initiation
of new arrangements. Other revenues in 1995 included $4.0 million of gains
recorded from the sales of biotechnology equity securities owned by the
Company.
The increase in interest income occurred due to higher available interest
rates and a larger investment portfolio in 1995. The total investment
portfolio, consisting of cash, cash equivalents, short-term marketable
securities and long-term marketable securities increased from $780.7 million
as of March 31, 1994 to $942.3 million as of March 31, 1995.
Page 10
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31
------------------------------
COSTS AND EXPENSES 1995 1994 % Change
- -------------------------- -------- -------- --------
<S> <C> <C> <C>
Cost of sales $ 26.8 $ 22.1 21%
Research and development 94.9 74.4 28
Marketing, general and
administrative 64.3 60.1 7
Interest expense 1.9 1.8 6
-------- -------- --------
Total costs and expenses $187.9 $158.4 19%
======== ======== ========
<FN>
Cost of sales increased in the first quarter of 1995 due to a change in
product mix, a 10% increase in product sales and inventory write offs in 1995.
</TABLE>
R&D expenses for the first three months of 1995 increased over the comparable
period in 1994 due to increased production of products for clinical trials and
higher in-licensing expenses. In-licensing expenses in the first quarter of
1995 included $4.0 million paid to IDEC Pharmaceutical Corporation (IDEC)
under the previously disclosed collaboration to develop IDEC's anti-CD20
monoclonal antibody, IDEC-C2B8.
Marketing, general and administrative expenses increased in the first quarter
of 1995 due to higher marketing and selling expenses in Europe, as Pulmozyme
is now sold in more European countries than in the first quarter of 1994, and
due to an overall increase in other corporate expenses.
Interest expense relates primarily to interest on the Company's 5% convertible
subordinated debentures, net of capitalized interest, and interest on a new
$25.0 million long-term borrowing arrangement of the Company's Canadian
subsidary.
<TABLE>
<CAPTION>
Three Months Ended March 31
------------------------------
INCOME TAXES 1995 1994 % Change
- ------------- -------- -------- ---------
<S> <C> <C> <C>
Income taxes $ 7.7 $ 1.6 381%
</TABLE>
The increase in income tax expense was due to higher income before taxes and
an increase in the effective income tax rate, from 4% in the first quarter of
1994 to 15% in the first quarter of 1995. The increase in the effective tax
rate was primarily related to a higher alternative minimum tax (AMT) in 1995,
due to the complete utilization of available AMT loss carryforwards in 1994.
Page 11
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31
------------------------------
NET INCOME 1995 1994 % Change
- ------------------- -------- -------- --------
<S> <C> <C> <C>
Net income $43.4 $38.9 12%
Earnings per share .36 .33 9
<FN>
Net income increased in 1995 due to overall higher revenues from all sources,
partially offset by increases in research and development and other expenses,
including income taxes.
</TABLE>
<TABLE>
<CAPTION>
LIQUIDITY AND CAPITAL
RESOURCES March 31, 1995 December 31, 1994
- -------------------------- ---------------- -------------------
<S> <C> <C>
Cash, cash equivalents,
short-term investments
and long-term marketable
securities $942.3 $920.9
Working capital 810.4 776.6
</TABLE>
Cash generated from operations, maturities of short-term investments, stock
issuances and proceeds from borrowings, was used to make investments in long-
term marketable securities, other assets and capital expenditures. Cash and
cash equivalents at March 31, 1995 increased $43.4 million compared to
December 31, 1994. Working capital increased $33.8 million. The Company
believes that its cash, cash equivalents, and short-term and long-term
investments, together with funds provided by operations and leasing
arrangements, will be sufficient to meet its operating cash requirements.
Page 12
<PAGE>
GENENTECH, INC.
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors and Stockholders
Genentech, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Genentech, Inc. as of March 31, 1995, and the related condensed consolidated
statements of income and cash flows for the three-month periods ended March
31, 1995 and 1994. These financial statements are the responsibility of the
Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which will
be performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Genentech, Inc. as of December
31, 1994, and the related consolidated statements of income, stockholders'
equity, and cash flows for the year then ended (not presented herein) and in
our report dated January 17, 1995, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated balance sheet as of December
31, 1994, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
ERNST & YOUNG LLP
San Jose, California
April 10, 1995
Page 13
<PAGE>
GENENTECH, INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In May 1995, a number of purported shareholder class action lawsuits were
filed in Delaware's Chancery Court against the Company, its directors, a
former director, and Roche alleging, in general, breach of their fiduciary
duties to the Company in connection with the proposed extension of Roche's
option to cause the Company to redeem its redeemable common stock and
transactions related thereto.
See also Note 5, "Legal Proceedings" in Part I, "Notes to Consolidated
Financial Statements."
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
15.1 Letter re: Unaudited Interim Financial Information
27.1 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter ended
March 31, 1995.
Page 14
<PAGE>
GENENTECH, INC.
SIGNATURES
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.
Date: May 15, 1995 GENENTECH, INC.
/S/G. KIRK RAAB /S/LOUIS J. LAVIGNE, JR.
----------------------------- -----------------------------
G. Kirk Raab Louis J. Lavigne, Jr.
President and Chief Executive Officer Senior Vice President and
Chief Financial Officer
/S/BRADFORD S. GOODWIN
-----------------------------
Bradford S. Goodwin
Vice President and Controller
Page 15
<PAGE>
Exhibit 15.1
May 15, 1995
Securities and Exchange Commission
Washington, DC 20549
We are aware of the incorporation by reference in the Registration Statements
pertaining to the 1994 Stock Option Plan, the 1991 Employee Stock Plan, the
1990 Stock Option/Stock Incentive Plan, the 1984 Incentive Stock Option Plan
and the 1984 Non-Qualified Stock Option Plan, the shares issuable to certain
warrant holders, the shares issuable to certain convertible subordinated
debenture holders, the Genentech, Inc. Tax Reduction Investment Plan and in
the related prospectuses, as applicable, contained in such Registration
Statements of our report dated April 10, 1995 relating to the unaudited
condensed consolidated interim financial statements of Genentech, Inc. which
are included in its Form 10-Q for the quarter ended March 31, 1995.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part
of the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
Very truly yours,
ERNST & YOUNG LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets, consolidated statements of income and consolidated
statements of cash flows included in the Company's Form 10-Q for the three
month period ended March 31, 1995, and is qualified in its entirety by
reference to such financial statements and the notes thereto.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 110113
<SECURITIES> 832236
<RECEIVABLES> 171689
<ALLOWANCES> 5546
<INVENTORY> 94300
<CURRENT-ASSETS> 1016203
<PP&E> 714961
<DEPRECIATION> 232844
<TOTAL-ASSETS> 1806846
<CURRENT-LIABILITIES> 205802
<BONDS> 175140
<COMMON> 2352
0
0
<OTHER-SE> 1399894
<TOTAL-LIABILITY-AND-EQUITY> 1806846
<SALES> 162067
<TOTAL-REVENUES> 238967
<CGS> 26750
<TOTAL-COSTS> 26750
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