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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-3
AMENDMENT NO. 1
RULE 13E-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
GENENTECH, INC.
(Name of Issuer)
GENENTECH, INC.
ROCHE HOLDINGS, INC.
(Name of Persons Filing Statement)
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COMMON STOCK, $.02 PAR VALUE 368710208
(Title of Class of Securities) (CUSIP Number of Class of Securities)
</TABLE>
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<TABLE>
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JOHN P. MCLAUGHLIN, ESQ.
SENIOR VICE PRESIDENT AND SECRETARY
GENENTECH, INC. ROCHE HOLDINGS, INC.
460 POINT SAN BRUNO BOULEVARD 15 EAST NORTH STREET
SOUTH SAN FRANCISCO, CALIFORNIA 94080 DOVER, DELAWARE 19901
(415) 225-1000
</TABLE>
(Name, Address and Telephone Number of Persons Authorized to Receive Notices and
Communications on Behalf of the Persons Filing Statement)
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COPIES TO:
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RICHARD D. KATCHER, ESQ. PETER R. DOUGLAS, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ DAVIS POLK & WARDWELL
51 WEST 52ND STREET 450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10017
(212) 403-1000 (212) 450-4000
</TABLE>
SEPTEMBER 8, 1995
(Date Proxy Statement First Published, Sent or Given to Security Holders)
This statement is filed in connection with (check the appropriate box):
a. /X/ The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under
the Securities Exchange Act of 1934.
b. / / The filing of a registration statement under the Securities Act of
1933.
c. / / A tender offer.
d. / / None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies. /X/
CALCULATION OF FILING FEE
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TRANSACTION VALUATION AMOUNT OF FILING FEE
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$2,976,632,664* $595,327
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* For purposes of calculation of fee only, this amount is based upon the sum of
(A) the product of (i) 57,198,521, the number of outstanding shares of
Redeemable Common Stock, par value $.02 per share ("Redeemable Common Stock")
of Genentech outstanding on June 2, 1995 (the original filing date of this
Schedule 13E-3), assuming the exercise of all Genentech warrants and stock
options (whether or not currently exercisable), not including shares of
Redeemable Common Stock then held by Roche Holdings, Inc. and its affiliates,
and (ii) $48.1875, the average of the high and low sales price of a share of
Redeemable Common Stock quoted on the New York Stock Exchange on May 26, 1995
as reported in published financial sources, and (B) the product of (i)
4,670,282 (the incremental number of outstanding shares for which a fee was
not paid in connection with the initial filing of this Schedule 13E-3 on June
2, 1995, which number assumes the exercise of all warrants and stock options,
whether or not currently exercisable) and (ii) $47.1875 (the average of the
high and low sales price of the Common Stock into which the Redeemable Common
Stock was converted automatically after June 30, 1995 on the New York Stock
Exchange on August 31, 1995). In accordance with Rule 0-11 under the
Securities Exchange Act of 1934, the filing fee is determined by multiplying
the amount calculated pursuant to the preceding sentence by 1/50th of one
percent.
/X/ Check box if any part of the fee is offset as provided by Rule 0-11(a)(2).
Amount Previously Paid: $555,000
Filing Party: Genentech, Inc.
Form or Registration No.: Schedule 14A
Date Filed: June 2, 1995
and
Amount Previously Paid: $75,993
Filing Party: Genentech, Inc.
Form or Registration No.: Form S-4, No. 33-59949
Date Filed: September 8, 1995
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Genentech, Inc., a Delaware corporation ("Genentech") and Roche Holdings,
Inc., a Delaware corporation ("Roche") hereby amend and supplement their Rule
13e-3 Transaction Statement on Schedule 13E-3 (as amended, the "Statement"). The
Statement relates to a proposed Agreement and Plan of Merger dated as of May 23,
1995, as amended and restated (the "Merger Agreement") among Genentech, Roche
and HLR (U.S.) II, Inc. ("Merger Sub"), a Delaware corporation and a
wholly-owned subsidiary of Roche. The purpose of such Merger Agreement and
resulting conversion of Genentech Common Stock into Genentech Special Common
Stock is to, among other matters, (i) extend by four years the period during
which the publicly traded stock of Genentech is subject to redemption by
Genentech at the option of Roche, with such redemption during such four-year
period being at specified prices per share ranging from $62.50 during the
quarter ending December 31, 1995 increasing $1.25 per share for the next six
quarters and $1.50 per share for the next eight quarters to $82.00 during the
quarter ending June 30, 1999 (the "Call Rights"), and (ii) provide holders
thereof the right to require Genentech to redeem all or a portion (at the
election of the holder) of their shares of such stock for a 30-business-day
period beginning in July 1999 (unless such right is accelerated following the
occurrence of certain insolvency events of Genentech) at a price of $60.00 per
share in the event that Roche does not cause the exercise of the Call Rights.
(Upon final court approval of certain shareholder class action and derivative
complaints pending in the Court of Chancery of the State of Delaware in and for
New Castle County consolidated under the caption In re Genentech, Inc.
Shareholders Litigation, Cons. C.A. No. 14265, each of the redemption prices set
forth in clause (i) of the preceding sentence will be increased by $0.50 per
share of Special Common Stock, resulting in a final price of $82.50. If such
final court approval occurs after payment of the applicable redemption price
described above, such $0.50 increase will be promptly thereafter paid by
Genentech for each share of such publicly traded stock for which payment of the
redemption price had previously been paid.) This Statement is intended to
satisfy the reporting requirements of Section 13(e) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Revised preliminary proxy
materials of Genentech (the "Proxy Statement/Prospectus") were filed by
Genentech with the Securities and Exchange Commission (the "Commission")
immediately prior to the filing of this Statement, as part of Amendment No. 1 to
a Registration Statement on Form S-4.
The cross reference sheet below is being supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the Proxy
Statement/Prospectus of the information required to be included in response to
the items of this Statement. The information in the Proxy Statement/Prospectus,
including all exhibits thereto, is hereby expressly incorporated herein by
reference and the responses to each item in this Statement are qualified in
their entirety by the information contained in the Proxy Statement/Prospectus.
<PAGE> 3
CROSS-REFERENCE SHEET
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<CAPTION>
ITEM IN
SCHEDULE 13E-3 WHERE LOCATED IN THE PROXY STATEMENT/PROSPECTUS
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Item 1(a) Cover Page; BUSINESS OF GENENTECH
Item 1(b) GENERAL INFORMATION -- Record Date; Voting Rights; Proxies
</TABLE>
<TABLE>
<S> <C>
Item 1(c)-(d) MARKET PRICES OF AND DIVIDENDS ON THE REDEEMABLE COMMON STOCK AND THE COMMON STOCK
Item 1(e) **
Item 1(f) CERTAIN INFORMATION CONCERNING ROCHE AND ROCHE HOLDING; PRINCIPAL STOCKHOLDERS OF GENENTECH; CERTAIN INFORMATION
CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF ROCHE AND ROCHE HOLDING
Item 2(a)-(g) Cover Page; BUSINESS OF GENENTECH; CERTAIN INFORMATION CONCERNING ROCHE AND ROCHE HOLDING; CERTAIN INFORMATION
CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY; CERTAIN INFORMATION CONCERNING THE DIRECTORS AND
EXECUTIVE OFFICERS OF ROCHE AND ROCHE HOLDING
Item 3(a)(1) CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 3(a)(2) THE PROPOSED TRANSACTIONS -- Background of the Proposed Transactions; CERTAIN INFORMATION CONCERNING THE
DIRECTORS AND EXECUTIVE OFFICERS OF ROCHE AND ROCHE HOLDING
Item 3(b) THE PROPOSED TRANSACTIONS -- Background of the Proposed Transactions
Item 4(a) Pages i-ii; SUMMARY AND SPECIAL FACTORS -- Terms of the Proposed Transactions; THE PROPOSED TRANSACTIONS --
Purpose and Structure of the Transactions; THE MERGER AGREEMENT; THE CHARTER AMENDMENT; DESCRIPTION OF THE
SPECIAL COMMON STOCK; ARTICLE ELEVENTH OF THE CERTIFICATE OF INCORPORATION; THE AMENDED GOVERNANCE AGREEMENT;
GUARANTY OF ROCHE HOLDING; THE LICENSING AGREEMENT
Item 4(b) Pages i-ii; SUMMARY AND SPECIAL FACTORS -- Terms of the Proposed Transactions; THE PROPOSED TRANSACTIONS --
Purpose and Structure of the Transactions; THE MERGER AGREEMENT; THE CHARTER AMENDMENT; DESCRIPTION OF THE
SPECIAL COMMON STOCK; ARTICLE ELEVENTH OF THE CERTIFICATE OF INCORPORATION; THE AMENDED GOVERNANCE AGREEMENT;
GUARANTY OF ROCHE HOLDING; THE LICENSING AGREEMENT
Item 5(a)-(f) SUMMARY AND SPECIAL FACTORS; THE MERGER AGREEMENT; THE CHARTER AMENDMENT; DESCRIPTION OF THE SPECIAL COMMON
STOCK; THE AMENDED GOVERNANCE AGREEMENT; GUARANTY OF ROCHE HOLDING; THE LICENSING AGREEMENT; CONDUCT OF
GENENTECH'S BUSINESS AFTER COMPLETION OF THE PROPOSED TRANSACTIONS; ROCHE'S PLANS WITH RESPECT TO GENENTECH;
INCORPORATION OF DOCUMENTS BY REFERENCE; THE PROPOSED TRANSACTIONS -- Interests of Certain Persons in the
Proposed Transactions
Item 5(g) **
Item 6(a)-(b) THE PROPOSED TRANSACTIONS -- Source of Funds; Expenses; GUARANTY OF ROCHE HOLDING; CERTAIN INFORMATION CONCERNING
ROCHE AND ROCHE HOLDING
Item 6(c)-(d) **
Item 7(a)-(c) SUMMARY AND SPECIAL FACTORS; THE PROPOSED TRANSACTIONS -- Background of the Proposed Transactions; -- Purpose and
Structure of the Transactions
Item 7(d) SUMMARY AND SPECIAL FACTORS; THE PROPOSED TRANSACTIONS -- Interests of Certain Persons in the Proposed
Transactions; THE MERGER AGREEMENT; THE CHARTER AMENDMENT; DESCRIPTION OF THE SPECIAL COMMON STOCK; THE AMENDED
GOVERNANCE AGREEMENT; GUARANTY OF ROCHE HOLDING; THE LICENSING AGREEMENT; CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS
Item 8(a)-(c) SUMMARY AND SPECIAL FACTORS; THE PROPOSED TRANSACTIONS -- Recommendation of the Board of Directors; Fairness of
the Transaction; -- Opinions of Financial Advisors; MARKET PRICES OF AND DIVIDENDS ON THE REDEEMABLE COMMON STOCK
AND THE COMMON STOCK; THE CHARTER AMENDMENT; DESCRIPTION OF THE SPECIAL COMMON STOCK; GENERAL
INFORMATION -- Required Vote
Item 8(d) *
Item 8(e) SUMMARY AND SPECIAL FACTORS; THE PROPOSED TRANSACTIONS -- Recommendation of the Board of Directors; Fairness of
the Transaction
Item 8(f) **
Item 9(a)-(c) SUMMARY AND SPECIAL FACTORS; and THE PROPOSED TRANSACTIONS -- Opinions of Financial Advisors
Item 10(a)-(b) GENERAL INFORMATION -- Required Vote; PRINCIPAL STOCKHOLDERS OF GENENTECH; SECURITY OWNERSHIP OF MANAGEMENT;
CERTAIN INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY; CERTAIN INFORMATION CONCERNING
THE DIRECTORS AND EXECUTIVE OFFICERS OF ROCHE AND ROCHE HOLDING
Item 11 SUMMARY AND SPECIAL FACTORS; CONDUCT OF GENENTECH'S BUSINESS AFTER COMPLETION OF THE PROPOSED TRANSACTIONS;
ROCHE'S PLANS WITH RESPECT TO GENENTECH; THE MERGER AGREEMENT; THE CHARTER AMENDMENT; DESCRIPTION OF THE SPECIAL
COMMON STOCK; THE AMENDED GOVERNANCE AGREEMENT; GUARANTY OF ROCHE HOLDING
Item 12(a)-(b) THE PROPOSED TRANSACTIONS -- Recommendation of the Board of Directors; Fairness of the Transaction; -- Opinions
of Financial Advisors; THE MERGER AGREEMENT
Item 13(a) GENERAL INFORMATION -- No Appraisal Rights
Item 13(b) **
Item 13(c) **
Item 14 SELECTED HISTORICAL FINANCIAL DATA; INCORPORATION OF DOCUMENTS BY REFERENCE
Item 15(a) GENERAL INFORMATION -- Solicitation of Proxies
Item 15(b) GENERAL INFORMATION -- Solicitation of Proxies; THE PROPOSED TRANSACTIONS -- Source of Funds; Expenses
Item 16 **
Item 17(a) *
Item 17(b) Annex B and Annex C
Item 17(c) Annex A
Item 17(d) **
Item 17(e) **
Item 17(f) **
</TABLE>
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* The information requested by this item is not required to be included in the
Proxy Statement/Prospectus.
** The Item is inapplicable or the answer thereto is in the negative.
ITEM 1. ISSUER AND CLASS OF SECURITIES SUBJECT TO THE TRANSACTION.
(a) The information set forth on the cover page of, and "BUSINESS OF
GENENTECH" in the Proxy Statement/Prospectus is incorporated herein by
reference.
2
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(b) The information set forth under "GENERAL INFORMATION -- Record
Date; Voting Rights; Proxies" in the Proxy Statement/Prospectus is
incorporated herein by reference.
(c)-(d) The information set forth in the Proxy Statement/Prospectus
under "MARKET PRICES OF AND DIVIDENDS ON THE REDEEMABLE COMMON STOCK AND THE
COMMON STOCK" is incorporated herein by reference.
(e) Not applicable.
(f) The information set forth under "CERTAIN INFORMATION CONCERNING
ROCHE AND ROCHE HOLDING", "PRINCIPAL STOCKHOLDERS OF GENENTECH" and "CERTAIN
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF ROCHE AND
ROCHE HOLDING" is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
Genentech, a person filing this statement, is the issuer of the class of
equity securities which is the subject of the Rule 13e-3 transaction.
(a)-(g) Additionally, the information set forth on the cover page of
the Proxy Statement/Prospectus and under "BUSINESS OF GENENTECH," "CERTAIN
INFORMATION CONCERNING ROCHE AND ROCHE HOLDING," "CERTAIN INFORMATION
CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY" and "CERTAIN
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF ROCHE AND
ROCHE HOLDING" is incorporated herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)(1) The information set forth in the Proxy Statement/Prospectus
under "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" is incorporated
herein by reference.
(2) The information set forth in the Proxy Statement/Prospectus under
"THE PROPOSED TRANSACTIONS -- Background of the Proposed Transactions"
and "CERTAIN INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS
OF ROCHE AND ROCHE HOLDING" is incorporated herein by reference.
(b) The information set forth in the Proxy Statement/Prospectus under
"THE PROPOSED TRANSACTIONS -- Background of the Proposed Transactions" is
incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in the Proxy Statement/Prospectus on
pages i-ii and under the captions "SUMMARY AND SPECIAL FACTORS -- Terms of
the Proposed Transactions", "THE PROPOSED TRANSACTIONS -- Purpose and
Structure of the Transactions", "THE MERGER AGREEMENT", "THE CHARTER
AMENDMENT; DESCRIPTION OF THE SPECIAL COMMON STOCK", "ARTICLE ELEVENTH OF
THE CERTIFICATE OF INCORPORATION", "THE AMENDED GOVERNANCE AGREEMENT",
"GUARANTY OF ROCHE HOLDING", and "THE LICENSING AGREEMENT" is incorporated
herein by reference.
(b) The information set forth in the Proxy Statement/Prospectus on
pages i-ii and under the captions "SUMMARY AND SPECIAL FACTORS -- Terms of
the Proposed Transactions", "THE PROPOSED TRANSACTIONS -- Purpose and
Structure of the Transactions", "THE MERGER AGREEMENT", "THE CHARTER
AMENDMENT; DESCRIPTION OF THE SPECIAL COMMON STOCK", "ARTICLE ELEVENTH OF
THE CERTIFICATE OF INCORPORATION", "THE AMENDED GOVERNANCE AGREEMENT",
"GUARANTY OF ROCHE HOLDING", and "THE LICENSING AGREEMENT" is incorporated
herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OF AFFILIATE.
(a)-(f) The information set forth in the Proxy Statement/Prospectus
under the captions "SUMMARY AND SPECIAL FACTORS", "THE MERGER AGREEMENT",
"THE CHARTER AMENDMENT; DESCRIPTION OF THE SPECIAL COMMON STOCK", "THE
AMENDED GOVERNANCE AGREEMENT", "GUARANTY OF ROCHE HOLDING", "THE LICENSING
AGREEMENT", "CONDUCT OF GENENTECH'S BUSINESS AFTER COMPLETION OF THE
PROPOSED TRANSACTIONS; ROCHE'S PLANS WITH RESPECT TO GENENTECH",
"INCORPORATION OF DOCUMENTS BY REFERENCE" and "THE PROPOSED
TRANSACTIONS -- Interests of Certain Persons in the Proposed Transactions"
is incorporated herein by reference.
(g) Not applicable.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in the Proxy Statement/Prospectus
under "THE PROPOSED TRANSACTIONS -- Source of Funds; Expenses", "GUARANTY OF
ROCHE HOLDING" and "CERTAIN INFORMATION CONCERNING ROCHE AND ROCHE HOLDING"
is incorporated herein by reference.
(c)-(d) Not applicable.
ITEM 7. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS.
(a)-(c) The information set forth in the Proxy Statement/Prospectus
under "SUMMARY AND SPECIAL FACTORS"; "THE PROPOSED
TRANSACTIONS -- Background of the Proposed Transactions", and "-- Purpose
and Structure of the Transactions" is incorporated herein by reference.
(d) The information set forth in the Proxy Statement/Prospectus under
"SUMMARY AND SPECIAL FACTORS", "THE PROPOSED TRANSACTIONS -- Interests of
Certain Persons in the Proposed Transactions", "THE MERGER AGREEMENT", "THE
CHARTER AMENDMENT; DESCRIPTION OF THE SPECIAL COMMON STOCK", "THE AMENDED
GOVERNANCE AGREEMENT", "GUARANTY OF ROCHE HOLDING", "THE LICENSING
AGREEMENT", and "CERTAIN FEDERAL INCOME TAX CONSIDERATIONS AND ACCOUNTING
TREATMENT" is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)-(c) The information set forth in the Proxy Statement/Prospectus
under "SUMMARY AND SPECIAL FACTORS", "THE PROPOSED
TRANSACTIONS -- Recommendation of the Board of Directors; Fairness of the
Transaction" and "-- Opinions of Financial Advisors", "MARKET PRICES OF AND
DIVIDENDS ON THE REDEEMABLE COMMON STOCK AND THE COMMON STOCK", "THE CHARTER
AMENDMENT; DESCRIPTION OF THE SPECIAL COMMON STOCK" and "GENERAL
INFORMATION -- Required Vote" is incorporated herein by reference.
(d) No representative was hired solely on the behalf of unaffiliated
security holders.
(e) The information set forth in the Proxy Statement/Prospectus under
"SUMMARY AND SPECIAL FACTORS" and "THE PROPOSED
TRANSACTIONS -- Recommendation of the Board of Directors; Fairness of the
Transaction" is incorporated herein by reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)-(c) The information set forth in the Proxy Statement/Prospectus
under "SUMMARY AND SPECIAL FACTORS"; "THE PROPOSED TRANSACTIONS -- Opinions
of Financial Advisors" is incorporated herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a)-(b) The information set forth in the Proxy Statement/Prospectus
under "GENERAL INFORMATION -- Required Vote"; "PRINCIPAL STOCKHOLDERS OF
GENENTECH"; "SECURITY OWNERSHIP OF MANAGEMENT"; "CERTAIN INFORMATION
CONCERNING DIREC-
3
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TORS AND EXECUTIVE OFFICERS OF THE COMPANY"; and "CERTAIN INFORMATION
CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF ROCHE AND ROCHE HOLDING"
is incorporated by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The information set forth in the Proxy Statement/Prospectus under
"SUMMARY AND SPECIAL FACTORS", "CONDUCT OF GENENTECH'S BUSINESS AFTER
COMPLETION OF THE PROPOSED TRANSACTIONS; ROCHE'S PLANS WITH RESPECT TO
GENENTECH", "THE MERGER AGREEMENT", "THE CHARTER AMENDMENT; DESCRIPTION OF
THE SPECIAL COMMON STOCK", "THE AMENDED GOVERNANCE AGREEMENT" and "GUARANTY
OF ROCHE HOLDING" is incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a)-(b) The information set forth in the Proxy Statement/Prospectus
under "THE PROPOSED TRANSACTIONS -- Recommendation of the Board of
Directors; Fairness of the Transaction", "-- Opinions of Financial
Advisors", and "THE MERGER AGREEMENT" is incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in the Proxy Statement/Prospectus under
"GENERAL INFORMATION -- No Appraisal Rights" is incorporated herein by
reference.
(b) Not applicable.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
The information set forth in the Proxy Statement/Prospectus under "SELECTED
HISTORICAL FINANCIAL DATA" is incorporated herein by reference. In addition, the
information set forth in (i) Item 14(a)(2) of Part IV of Genentech's Annual
Report on Form 10-K for the year ended December 31, 1994, (ii) Part II of
Genentech's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995
(iii) Part II of Genentech's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995 and (iv) pages 39-61 of Genentech's Annual Report to Stockholders
for the year ended December 31, 1994 is incorporated herein by reference.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) The information set forth in the Proxy Statement/Prospectus under
"GENERAL INFORMATION -- Solicitation of Proxies" is incorporated herein by
reference.
(b) The information set forth in the Proxy Statement/Prospectus under
"GENERAL INFORMATION -- Solicitation of Proxies" and "THE PROPOSED
TRANSACTIONS -- Source of Funds; Expenses" is incorporated herein by
reference.
ITEM 16. ADDITIONAL INFORMATION.
Reference is hereby made to the Proxy Statement/Prospectus and to each
exhibit attached thereto, each of which is incorporated herein by reference.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(b)(2) Materials, entitled "Roche Holding AG -- Discussion Materials,"
forming part of the presentation made by Lehman Brothers to the Genentech
Board of Directors on April 29, 1995.
(b)(3) Materials, entitled "Roche Holding AG -- Updated Presentation
Based on New Structure," forming part of the presentation made by Lehman
Brothers to the Genentech Board of Directors on April 29, 1995.
(b)(4) Opinion of Morgan Stanley & Co. (incorporated by reference to
Annex C to the Proxy Statement/Prospectus).
(b)(5) Materials forming part of the presentation made by Morgan Stanley
& Co. to the Genentech Board of Directors on July 7, 1995.
(c)(1) Agreement and Plan of Merger, dated May 23, 1995, as amended and
restated, among Roche, Merger Sub and Genentech (incorporated by reference
to Annex A to the Proxy Statement/Prospectus). (The exhibit filed herewith
supercedes the exhibit previously filed under this exhibit number.)
(c)(2) Amended and Restated Governance Agreement, as amended, to be
entered into at the effective time of the merger contemplated by the Merger
Agreement included as Exhibit (c)(1) hereof (incorporated by reference to
Exhibit A to Annex A to the Proxy Statement/Prospectus). (The exhibit filed
herewith supercedes the exhibit previously filed under this exhibit number.)
(c)(3) Guaranty of Roche Holding Ltd, as amended, to be dated as of the
effective date of the merger contemplated by the Merger Agreement included
as Exhibit (c)(1) hereof (incorporated by reference to Exhibit B to Annex A
to the Proxy Statement/Prospectus). (The exhibit filed herewith supercedes
the exhibit previously filed under this exhibit number.)
(c)(4) Article THIRD to Amended and Restated Certificate of
Incorporation of Genentech, as amended (incorporated by reference to Exhibit
C to Annex A to the Proxy Statement/Prospectus). (The exhibit filed herewith
supercedes the exhibit previously filed under this exhibit number.)
(c)(5) Agreement, dated as of July 7, 1995, among Roche, Merger Sub and
Genentech (incorporated by reference to Exhibit 2.2 to Genentech's
Registration Statement on Form S-4, as amended (File No. 33-59949)).
(c)(6) Agreement, dated as of September 6, 1995, among Roche, Merger Sub
and Genentech (incorporated by reference to Exhibit 2.3 to Genentech's
Registration Statement on Form S-4, as amended (File No. 33-59949)).
(c)(7) Agency Agreement, dated as of September 6, 1995, among Genentech,
Citibank, N.A., as agent, and Roche Holding (incorporated by reference to
Exhibit 10.4 to Genentech's Registration Statement on Form S-4, as amended
(File No. 33-59949)).
(c)(8) Letter Agreement, dated September 6, 1995, among Genentech, Roche
and Roche Holding (incorporated by reference to Exhibit 10.5 to Genentech's
Registration Statement on Form S-4, as amended (File No. 33-59949)).
(d) Proxy Statement/Prospectus and related Notice of Special Meeting,
Letter to Shareholders and Proxy (incorporated by reference to the Proxy
Statement/Prospectus and related material filed under a Schedule 14A by
Genentech on the date hereof). (The exhibit filed herewith supercedes the
exhibit previously filed under this exhibit number.)
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SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Date: September 8, 1995 GENENTECH, INC.
By: /s/ John P. McLaughlin
---------------------------------------------
Name: John P. McLaughlin
Title: Senior Vice President and Secretary
ROCHE HOLDINGS, INC.
By: /s/ Henri B. Meier
---------------------------------------------
Name: Henri B. Meier
Title: Vice President
5
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. PAGE NO.
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<S> <C> <C>
(b)(2) Materials, entitled "Roche Holding AG -- Discussion Materials," forming part of the presentation made by
Lehman Brothers to the Genentech Board of Directors on April 29, 1995.
(b)(3) Materials, entitled "Roche Holding AG -- Updated Presentation Based on New Structure," forming part of the
presentation made by Lehman Brothers to the Genentech Board of Directors on April 29, 1995.
(b)(4) Opinion of Morgan Stanley & Co. (incorporated by reference to Annex C to the Proxy Statement).
(b)(5) Materials forming part of the presentation made by Morgan Stanley & Co. to the Genentech Board of
Directors on July 7, 1995.
(c)(1) Agreement and Plan of Merger, dated May 23, 1995, as amended, and restated, among Roche, Merger Sub and
Genentech (incorporated by reference to Annex A to the Proxy Statement/Prospectus). (The exhibit filed
herewith supercedes the exhibit previously filed under this exhibit number.)
(c)(2) Amended and Restated Governance Agreement, as amended, to be entered into at the effective time of the
merger contemplated by the Merger Agreement included as Exhibit (c)(1) hereof (incorporated by reference
to Exhibit A to Annex A to the Proxy Statement/Prospectus). (The exhibit filed herewith supercedes the
exhibit previously filed under this exhibit number.)
(c)(3) Guaranty of Roche Holding Ltd, as amended, to be dated as of the effective date of the merger contemplated
by the Merger Agreement included as Exhibit (c)(1) hereof (incorporated by reference to Exhibit B to Annex
A to the Proxy Statement). (The exhibit filed herewith supercedes the exhibit previously filed under this
exhibit number.)
(c)(4) Article THIRD to Amended and Restated Certificate of Incorporation of Genentech, as amended (incorporated
by reference to Exhibit C to Annex A to the Proxy Statement/Prospectus). (The exhibit filed herewith
supercedes the exhibit previously filed under this exhibit number.)
(c)(5) Agreement, dated as of July 7, 1995, among Roche, Merger Sub and Genentech (incorporated by reference to
Exhibit 2.2 to Genentech's Registration Statement on Form S-4, as amended (File No. 33-59949)).
(c)(6) Agreement, dated as of September 6, 1995, among Roche, Merger Sub and Genentech (incorporated by reference
to Exhibit 2.3 to Genentech's Registration Statement on Form S-4, as amended (File No. 33-59949)).
(c)(7) Agency Agreement, dated as of September 6, 1995, among Genentech, Citibank, N.A., as agent, and Roche
Holding (incorporated by reference to Exhibit 10.4 to Genentech's Registration Statement on Form S-4, as
amended (File No. 33-59949)).
(c)(8) Letter Agreement, dated September 6, 1995, among Genentech, Roche and Roche Holding (incorporated by
reference to Exhibit 10.5 to Genentech's Registration Statement on Form S-4, as amended (File No.
33-59949)).
(d) Proxy Statement/Prospectus and related Notice of Special Meeting, Letter to Shareholders and Proxy
(incorporated by reference to the Proxy Statement/Prospectus and related material filed by Genentech under
a Schedule 14A and on Form S-4 on the date hereof). (The exhibit filed herewith supercedes the exhibit
previously filed under this exhibit number.)
</TABLE>
<PAGE> 1
EXHIBIT B2
Roche Holding AG
Discussion Materials
April 29, 1995
Lehman Brothers
<PAGE> 2
I. VALUATION OF PROPOSED STRUCTURES
<TABLE>
<CAPTION>
Fully Diluted Fully Diluted
Stock Price Value (a) Value (b)
----------- --------- ---------
<S> <C> <C>
$82 $4,692 $10,963
$63 (PV of $82 @ 7%; AAA Bond Rate) $3,605 $8,423
$60 $3,434 $8,022
$46 (PV of $60 @ 7%; AAA Bond Rate) $2,632 $6,150
</TABLE>
-------
(a) Value of remaining 57.225 million shares that are currently not held by
Roche on a fully diluted basis.
(b) Value of 133.701 million shares on a fully-diluted basis. Includes stock
options and warrants.
<PAGE> 3
VALUATION PARAMETERS
<TABLE>
<CAPTION>
Transaction Value + Net Debt
As a Multiple of:
-----------------
LTM LTM
Transactions Revenues EBIT
------------ -------- ----
<S> <C> <C>
American Home Products / American Cyanamid 2.21 18.6
Hoffman La Roche / Syntex 2.77 16.2
Glaxo / Wellcome 3.86 12.2
Hoechst / Marion Merrell Dow (pending) 2.21 11.7
---------------------------------------------------------------------------------------------
Median 2.49 14.2
---------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
IMPUTED VALUATION OF GENENTECH FROM BENCHMARKS
<TABLE>
<CAPTION>
Transaction Value + Net Debt Benchmark Imputed
as a Multiple of: Median (a) Value (b)
----------------- ---------- ---------
<S> <C> <C>
Revenue 2.49 $1,874
EBIT 14.2 $1,210
</TABLE>
-------
(a) Multiple of Transaction Value.
(b) Based on results of Fiscal Year ended December 31, 1994 ($ in millions).
<PAGE> 5
VALUATION PARAMETERS: PROXY BENCHMARKS
Selected Transactions in the Pharmaceutical and Biotechnology Industries
($ in millions)
<TABLE>
<CAPTION>
Total
Total Transaction
Announcement EBIT Transaction Value + Net
Date Revenues Margin Value Debt
---- -------- ------ ----- ----
<S> <C> <C> <C> <C> <C>
Hoechst / Marion
Merrell Dow 2/28/95 $3,061.4 19.0% $ 7,328.7 $ 6,765.7
Glaxo / Wellcome 1/23/95 3,545.2 31.6% 14,503.8 13,684.6
American Home /
ACY 8/18/94 4,386.1 9.6% 9,424.1 9,704.5
Roche / Syntex 5/2/94 1,869.0 17.1% 5,359.3 5,183.1
</TABLE>
<TABLE>
<CAPTION>
Transaction Value As a Multiple of:
-----------------------------------
LTM EPS Book Value
------- ----------
<S> <C> <C>
Hoechst / Marion
Merrell Dow 16.4x 3.42x
Glaxo / Wellcome 20.5 5.36
American Home /
ACY 26.9 6.34
Roche / Syntex 18.9 4.11
</TABLE>
<TABLE>
<CAPTION>
Transaction Value + Net Debt As a Multiple of:
----------------------------------------------
Revenues EBIT EBITDA Less Cash
-------- ---- ------ ---------
<S> <C> <C> <C> <C>
Hoechst / Marion
Merrell Dow 2.21x 11.7x 9.3x NAx
Glaxo / Wellcome 3.86 12.2 10.9 4.85
American Home /
ACY 2.21 18.6 15.2 1.78
Roche / Syntex 2.77 16.2 11.8 2.44
</TABLE>
<TABLE>
<CAPTION>
Transaction
-----------
Value As a Multiple of: Transaction Value + Net Debt As a Multiple of:
----------------------- ----------------------------------------------
LTM EPS Book Value Revenues EBIT EBITDA Less Cash
------- ---------- -------- ---- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Mean 20.7x 4.81x 2.76x 14.7x 11.8x 3.02x
Median 19.7 4.74 2.49 14.2 11.4 2.44
High 26.9 6.34 3.86 18.6 15.2 4.85
Low 16.4 3.42 2.21 11.7 9.3 1.78
</TABLE>
<PAGE> 6
ADJUSTED GOING CONCERN VALUE OF GENENTECH
<TABLE>
<CAPTION>
Base Case R&D R&D
R&D (a) 17% of Sales 20% of Sales
------- ------------ ------------
<S> <C> <C> <C>
1995E Net Income (a) $164.8 $253.6 (b) $237.4 (b)
1995E EPS (a) $ 1.35 $ 2.08 $ 1.95
Est. Market Capitalization (c) $2,537 $3,906 $3,656
</TABLE>
-------
(a) Source: Company Projections. 1995E R&D of $363.8 million.
(b) R&D expense reduced to 17% and 20% of Sales. Tax rate adjusted to 38%.
(c) Net Income multiplied by mean of benchmark forward (1995) PE of 15.4x.
Benchmark companies include Amgen, Astra, Wellcome (pre-merger) and Glaxo.
The benchmark companies were selected based on the following selection
criteria: Strong financial records, research driven and growth record a
function of limited product breadth
<PAGE> 7
DISCOUNTED CASH FLOW MODEL
Discounted Cash Flow Analysis (a)
Base Case (b) Aggregate Equity Value
<TABLE>
<CAPTION>
25% 30% 35% 40%
<S> <C> <C> <C> <C>
10x $3,096 $2,792 $2,548 $2,352
12x 3,392 3,035 2,750 2,520
14x 3,689 3,279 2,952 2,688
</TABLE>
Base Case (b) Per Fully Diluted Share (c)
<TABLE>
<CAPTION>
25% 30% 35% 40%
<S> <C> <C> <C> <C>
10x $23.16 $20.88 $19.06 $17.59
12x 25.37 22.70 20.57 18.85
14x 27.59 24.52 22.08 20.10
</TABLE>
Sensitivity Case I (b) Aggregate Equity Value
<TABLE>
<CAPTION>
25% 30% 35% 40%
<S> <C> <C> <C> <C>
10x $2,653 $2,419 $2,232 $2,082
12x 2,882 2,608 2,388 2,212
14x 3,112 2,796 2,544 2,342
</TABLE>
Sensitivity Case I (b) Per Fully Diluted Share (c)
<TABLE>
<CAPTION>
25% 30% 35% 40%
<S> <C> <C> <C> <C>
10x $19.84 $18.10 $16.70 $15.57
12x 21.56 19.50 17.86 16.54
14x 23.27 20.91 19.03 17.51
</TABLE>
Sensitivity Case II (b) Aggregate Equity Value
<TABLE>
<CAPTION>
25% 30% 35% 40%
<S> <C> <C> <C> <C>
10x $2,706 $2,465 $2,272 $2,116
12x 2,944 2,660 2,433 2,251
14x 3,181 2,855 2,595 2,385
</TABLE>
Sensitivity Case II (b) Per Fully Diluted Share (c)
<TABLE>
<CAPTION>
25% 30% 35% 40%
<S> <C> <C> <C> <C>
10x $20.24 $18.44 $16.99 $15.83
12x 22.02 19.90 18.20 16.83
14x 23.79 21.35 19.41 17.84
</TABLE>
-------
(a) The net present value of unlevered free cash flows + the PV of a range of
10 - 14x 1999 EBIT + net cash (debt). Unlevered free cash flow is equal to
the after-tax operating income (tax rate based on Company projections as of
April 28, 1995) + non-cash operating adjustments and capital expenditures.
(b) Adjusted for net cash of $1,233.1.
(c) Assumes fully-diluted shares of 133.701 million, including all outstanding
options and warrants.
(d) Sensitivity Case I: One Year Delay in revenue.
(e) Sensitivity Case II: Achieve 80% of plan.
<PAGE> 1
EXHIBIT B3
Roche Holding AG
Updated Presentation Based on New Structure
April 29, 1995
Lehman Brothers
<PAGE> 2
IRR OF HYPOTHETICAL RCS OPTION EXTENSION TO GENENTECH
<TABLE>
<CAPTION>
June June June June June
Redemption Price (per share) 1995 1996 1997 1998 1999
---------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Quarterly Step-Up -- $1.25 $1.25 $1.50 $1.50
Total Redemption Price $60.00 $65.00 $70.00 $76.00 $82.00
Implied IRR
-----------
From 9/10/90 (a) 21.1% 18.8% 17.1% 16.0% 15.0%
From 6/30/95 @ $50.125 (b) -- 29.7% 18.2% 14.9% 13.1%
From 6/30/95 @ $40 -- 62.5% 32.3% 23.9% 19.7%
From 6/30/95 @ $30 -- 116.7% 52.8% 36.3% 28.6%
</TABLE>
-------
(a) Based on stock price of $23.875 on 9/10/90, the first trading day for
Genentech redeemable common.
(b) Based on closing stock price of $50.125 at 4/25/95.
<PAGE> 3
ROCHE OWNERSHIP OF GENENTECH
<TABLE>
<CAPTION>
(shares in thousands) Common RCS Total
------ --- -----
<S> <C> <C> <C>
Roche Ownership
1995 Proxy Date 67,133 4,453 71,587
Recent Purchases -- 4,890 4,890
------- ------- -------
Total @ 3/31/95 67,133 9,343 76,476
Total Shares
Outstanding (Roche %) 67,133 (100%) 50,448 (18.5%) 117,581 (65.0%)
Options
(Vested & Non-Vested) (a) 15,981
Warrants 139
------
16,120
Total Fully-Diluted Shares
Outstanding (Roche %) 67,133 (100%) 66,567 (14.0%) 133,701 (57.2%)
Implied Open-Market Share Primary 17,589
Purchases to Reach 80% Fully-diluted 30,485
</TABLE>
---------------
(a) As of December 31, 1994.
<PAGE> 4
ROCHE OWNERSHIP OF GENENTECH - OPEN MARKET PURCHASE ANALYSIS
<TABLE>
<S> <C> <C> <C> <C>
(thousand shares)
Target Share Ownership (a) 75% 80%
--- ---
Total Open Market Purchases (a) 11,710 $673,325 17,589 $1,011,368
--------- ----------
% of "Free" Float (b) 30.8% 46.2%
Implied Quarterly Purchases (c) 976 1,466
% of Quarterly Trading Volume (d) 9.0% 13.5%
</TABLE>
----------
(a) Based on current shares outstanding (117.6 million) as of 3/31/95. $ Value
based on purchase price of $57.50.
(b) Float of 38.05 million RCS shares outstanding excluding Roche and employee
stock ownership.
(c) Equal amounts purchased quarterly from July 1995 through June 1998 (12
periods).
(d) Based on the average quarterly trading volume for Genentech of 10.83
million for the quarters from 1/1/93 through 12/31/94.
<PAGE> 5
IMPLIED COST OF TOTAL EQUITY PURCHASE TO ROCHE
(in $ million except per share data)
<TABLE>
<CAPTION>
Cost of Exercise @: Common (a) Redeemable Common (b) Redeemable Common (c) Total (c)
------------------- ---------- --------------------- --------------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$60 (June 1995) Shares: 67.13 Shares: 9.34 Shares: 57.22 Shares: 133.70
Cost: $2,025 Cost: $371 Cost: $3,433 Cost: $5,829
------ ---- ------ ------
Avg Price: $30.16 Avg Price: $39.81 Avg Price: $60.00 Avg Price: $43.60
$82 (June 1999) Shares: 67.13 Shares: 9.34 Shares: 57.22 Shares: 133.70
Cost: $2,025 Cost: $371 Cost: $4,692 Cost: $7,088
------ ---- ------ ------
Avg Price: $30.16 Avg Price: $39.81 Avg Price: $82.00 Avg Price: $53.02
$82 June 1999 Shares: 67.13 Shares: 39.83 Shares: 26.74 Shares: 133.70
(with ownership Cost: $2,025 Cost: $2,123 Cost: $2,193 Cost: $6,340
increase to 80%) ------ ------ ------ ------
Avg Price: $30.16 Avg Price: $53.30 Avg Price: $82.00 Avg Price: $47.42
</TABLE>
----------
(a) 1990 Transaction.
(b) Based on Genentech estimate of Roche open market purchase of 9.343 million
shares of RCS as of March 31, 1995. In the third case, Roche is assumed to
make additional open market purchase prior to December 1998 at an average
price of $57.50 to bring its combined ownership to 80% prior to option
exercise in December 1998 at $82 a share.
(c) Total shares based on 67,133,409 common shares outstanding and 50,447,727
shares of RCS outstanding as of March 31, 1995. Includes outstanding
options (15,980,807) and warrants (138,915) as of December 31, 1994.
<PAGE> 6
COST OF REDEEMABLE STOCK OPTION EXERCISE TO ROCHE
<TABLE>
<CAPTION>
(in $ millions) Gross Cost Net Cash Net Cost of Option Exercise
of Option -------- ---------------------------
Cost of Exercise @: Exercise W/O Div. W/O Div.
------------------- ---------- -------- --------
<S> <C> <C> <C>
$60 (June 1995) $3,433 (b) $1,353 $2,080
$82 (June 1999) $4,692 (b) $1,763 $2,929
$82 (June 1999 with
ownership increase to 80%) (d) $3,945 (b) (c) $1,763 $2,182
</TABLE>
----------
(a) Assuming 75% of projected cash balance as of December 1995 for $60
exercise and Year-end 1999 cash balance for $82 exercise available to
offset option exercise. Includes option proceeds of $565 million.
(b) Includes outstanding options and warrants.
(c) Includes additional open market purchases of RCS to reach 80% ownership
level.
(d) Assumes open market purchase price of RCS at $57.50 up to 80% and the
exercise of option for the remaining 26.74 million shares at $82 per share.
<PAGE> 7
GENENTECH HISTORICAL STOCK PRICE PERFORMANCE
[Graph plotting Genentech daily stock price from $22.500 on 1/1/91 to $50.125 on
4/27/95 against redemption price from $39 on 1/1/91 to $60 on 4/27/95, stepping
$1 the first quarter, $1.25 quarterly the next 15 quarters and $1 the last
period.]
<PAGE> 8
GENENTECH HISTORICAL PUBLIC MARKET VALUATION MODEL (STAND-ALONE)
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 (P)
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
EPS Range
Genentech Forward Year EPS (a) $0.65 $0.33(c) $0.50(c) $0.82 $1.28
Genentech EPS Actual $0.39 $0.20(c) $0.77(c) $1.04 1.35(f)
Calculated P/E Multiple (b) 36.0 34.6(d) 24.8(d) 18.0 32.7
Implied Genentech Stock
Price Range $23.40-$14.04 $11.42-$6.92 $12.40-$19.10 $14.76-$18.72 $41.86-$44.15
Actual High-Low (e) $28.50-$21.00 $31.88-$26.50 $39.50-$32.25 $50.88-$44.00 $51.00-$44.50
Mean Variance, Actual to Implied + 32.2% + 218.3% + 127.8% + 183.4% + 11.0%
</TABLE>
----------
(a) Median IBES estimate as of February of the corresponding year.
(b) 1-year forward P/E multiples for comparables (AMGN, GENZ, CHIR).
(c) 2-year forward IBES EPS estimate as of the beginning and end of the
corresponding period.
(d) 2-year forward P/E multiple for comparables (AMGN, GENZ, CHIR).
(e) High-Low closing prices Q1 of the corresponding year.
(f) Company projections as provided by Genentech management.
<PAGE> 9
GENENTECH PUBLIC MARKET VALUATION MODEL - BASE CASE (STAND-ALONE)
<TABLE>
<CAPTION>
June 30, June 30, June 30, June 30, June 30,
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Projected EPS (a) $ 1.35 $ 1.50 $ 1.64 $ 2.00 $ 2.48
Implied Stock Price Based On:
Forward P/E Ratio (b) $ 44.15 $ 49.05 $ 53.63 $ 65.40 $ 81.10
Forward P/E-to 5 yr
Growth Rate Model (c) $ 19.22 $ 24.00 $ 29.56 $ 44.04 $ 61.81
------ ------ ------ ------ ------
Average $ 31.68 $ 36.52 $ 41.59 $ 54.72 $ 71.45
Discount to Extended Option Price 47.2% 43.8% 40.6% 28.0% 12.9%
</TABLE>
---------------
(a) Source: Company projections as provided by Genentech management.
(b) 32.7x, based on mean forward P/E multiple of comparable companies (AMGN,
GENZ, CHIR).
(c) Based on growth-rate-adjusted forward P/E multiple (0.75x) derived from
comparable companies and applied to company projections. Used 5-yr growth
rate for 1995 (19.0%) and 1996 (21.3%), 4-yr growth rate for 1997 (24.0%)
and 1998 (29.4%), and 3-yr growth rate for 1999 (33.2%).
<PAGE> 10
GENENTECH HISTORICAL STOCK PRICE PERFORMANCE
[Graph plotting Genentech projected stand-alone stock price from 7/95 to 6/99
shown annually against Roche quarterly Option Exercise Price starting at $61.25
and stepping $1.25 the first 7 quarters to $70 and stepping $1.50 the remaining
8 quarters to $82.]
Standalone Stock Price - Base Case
Jul-95 $31.68
Jun-96 $36.52
Jun-97 $41.59
Jun-98 $54.72
Jun-99 $71.45
<PAGE> 11
GENENTECH PUBLIC MARKET VALUATION MODEL - WITH RCS OPTION EXTENSION
<TABLE>
<CAPTION>
Historical
----------
Jun-91 Jun-92 Jun-93 Jun-94
------ ------ ------ ------
<S> <C> <C> <C> <C>
RCS Option Exercise Price $ 40 $ 45 $ 50 $ 55
Genentech Historical Stock Price (d) $ 27.50 $ 31.75 $ 44.00 $ 49.25
Implied IRR to Final Option Price 21.5% 23.6% 16.8% 21.8%
Discount to Near-term Option Price 31.3% 29.4% 12.0% 10.5%
</TABLE>
<TABLE>
<CAPTION>
Projected
---------
Jun-95 Jun-96 Jun-97 Jun-98
------ ------ ------ ------
<S> <C> <C> <C> <C>
RCS Option Exercise Price $ 60 $ 65 $ 70 $ 76
Genentech Historical Stock Price (d) ------Assumptions(a)--------
Implied IRR to Final Option Price 21.6% 21.6% 21.6% 21.6%
Discount to Near-term Option Price 31.3% 29.4% 12.0% 10.5%
Projected Stock Price Based on: ------Implied Values(a)---
Implied IRR (b) $ 37.50 $ 45.61 $ 55.46 $ 67.43
Discount to Near-term Option Price (c) $ 41.22 $ 45.89 $ 61.60 $ 68.02
----------------------------------------------------
Average Projected Genentech Public Market Price
with Option Extension $ 39.36 $ 45.75 $ 58.53 $ 67.73
</TABLE>
----------
(a) Projected data are derived by applying historical data to the RCS option
extension period.
(b) Historical IRR of 21.6% for the period between 9/10/90 to 6/30/95.
(c) Applied the same observed discounts for the historical 4-year period to the
projected 4-year period.
(d) Stock price as of end of June of each corresponding period.
<PAGE> 12
GENENTECH VALUATION MODEL (WITH EXTENSION) VS. RCS OPTION EXERCISE PRICE
[Graph plotting projected Genentech stock price with Option Extension from 7/95
to 6/98 shown annually against Roche quarterly Option Exercise Price starting at
$61.25 and stepping $1.25 the first 7 quarters to $70 and stepping $1.50 the
remaining 8 quarters to $82.]
Projected Stock price with Option Extension
<TABLE>
<S> <C>
Jul-95 $39.36
Jun-96 $45.75
Jun-97 $58.53
Jun-98 $67.73
</TABLE>
<PAGE> 13
COMPARISON OF STAND-ALONE AND RCS OPTION EXTENSION VALUATION MODELS
[Graph plotting Genentech projected stock price with Option Extension from 7/95
to 6/98 shown annually against Genentech projected stand-alone stock price from
7/95 to 6/99 shown annually and against Roche Option Exercise Price starting at
$61.25 and stepping $1.25 quarterly the first 7 quarters to $70 and stepping
$1.50 the remaining 8 quarters to $82. Percent difference between Stand-alone
Price and Price with Extension is noted.]
<TABLE>
<CAPTION>
Stand-alone With Option Extension % Difference
<S> <C> <C> <C>
Jul-95 $31.68 $39.36 24.2%
Jun-96 $36.52 $45.75 25.3%
Jun-97 $41.59 $58.53 40.7%
Jun-98 $54.72 $67.73 23.8%
Jun-99 $71.45 --- ---
</TABLE>
<PAGE> 14
GENENTECH CONTROL VALUATION ANALYSIS - MANAGEMENT PROJECTIONS
($ in millions, except per share data)
<TABLE>
<CAPTION>
5-Year
1994A 1995 1996 1997 1998 1999 CAGR
----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Base Projection
---------------
Total Revenues (a) $ 753 $ 874 $ 950 $1,101 $1,279 $1,490 14.6%
% Growth 16.1% 8.7% 15.9% 16.2% 16.5%
Operating Income (b) 85 149 188 256 350 452 39.6%
% Margin 11.3% 17.0% 19.8% 23.2% 27.3% 30.3%
Net Income (c) 124 165 186 207 257 324 21.1%
% Margin 16.5% 18.9% 19.5% 18.9% 20.1% 21.7%
EPS $1.04 $1.35 $1.50 $ 1.64 $ 2.00 $ 2.48 19.0%
% Growth 29.8% 11.0% 9.6% 21.6% 24.2%
International Collaboration
---------------------------
Total Revenues (a) $ 753 $ 948 $ 985 $1,106 $1,193 $1,334 12.1%
% Growth 26.0% 3.9% 12.3% 7.9% 11.8%
Operating Income (b) 85 223 267 325 359 409 36.8%
% Margin 11.3% 23.5% 27.1% 29.4% 30.1% 30.7%
Net Income (c) 124 228 259 276 299 336 22.0%
% Margin 16.5% 24.1% 26.3% 25.0% 25.1% 25.2%
EPS $1.04 $1.87 $2.10 $ 2.19 $ 2.33 $ 2.57 19.8%
% Growth 79.6% 12.4% 4.2% 6.5% 10.3%
</TABLE>
-------
(a) Interest income is presented below the operating line.
(b) Before European profit sharing and net interest expense.
(c) Based on effective tax rates of: 1994 - 4%; 1995 - 15%; 1996 - 25%; 1997 to
1999 - 35%.
<PAGE> 15
GENENTECH CONTROL VALUATION ANALYSIS
Comparison of Control Multiples
<TABLE>
<CAPTION>
$60 @ $82 @
Jun-95 Jun-99
------ ------
<S> <C> <C>
Shares (Fully-diluted) 133.7 133.7
Transaction Value 8,022.1 10,963.5
Transaction Value + Net Debt (a) 6,556.4 8,951.9
Transaction Value as Multiple of:
Last Fiscal Year EPS 57.7x 41.0x
Forward Year EPS 44.4x 23.1x
Transaction Value + Net Debt as a Multiple of:
Last Fiscal Year Revenues 8.71x 7.00x
Forward Year Revenues 7.50x 6.01x
Last Fiscal Year EBIT 77.1x 25.6x
Forward Year EBIT 44.0x 19.8x
Last Fiscal Year EBIT + R&D 16.4x 11.6x
Forward Year EBIT + R&D 12.8x 10.2x
</TABLE>
-------
(a) Adjusted for option proceeds.
<PAGE> 16
VALUATION PARAMETERS: PROXY BENCHMARKS
Selected Transactions in the Pharmaceutical and Biotechnology Industries
($ in millions)
<TABLE>
<CAPTION>
Total
Total Transaction
Announcement EBIT Transaction Value + Net
Date Revenues Margin Value Debt
---- -------- ------ ----- ----
<S> <C> <C> <C> <C> <C>
Hoechst / Marion
Merrell Dow 2/28/95 $3,061.4 19.0% $ 7,328.7 $ 6,765.7
Glaxo / Wellcome 1/23/95 3,545.2 31.6% 14,503.8 13,684.6
American Home / 8/18/94 4,386.1 9.6% 9,424.1 9,704.5
ACY
Roche / Syntex 5/2/94 1,869.0 17.1% 5,359.3 5,183.1
</TABLE>
<TABLE>
<CAPTION>
Transaction Value As a Multiple of:
-----------------------------------
LTM EPS Book Value
------- ----------
<S> <C> <C>
Hoechst / Marion
Merrell Dow 16.4x 3.42x
Glaxo / Wellcome 20.5 5.36
American Home / 26.9 6.34
ACY
Roche / Syntex 18.9 4.11
</TABLE>
<TABLE>
<CAPTION>
Transaction Value + Net Debt As a Multiple of:
----------------------------------------------
Revenues EBIT EBITDA Less Cash
-------- ---- ------ ---------
<S> <C> <C> <C> <C>
Hoechst / Marion
Merrell Dow 2.21x 11.7x 9.3x NAx
Glaxo / Wellcome 3.86 12.2 10.9 4.85
American Home / 2.21 18.6 15.2 1.78
ACY
Roche / Syntex 2.77 16.2 11.8 2.44
</TABLE>
<TABLE>
<CAPTION>
Transaction
-----------
Value As a Multiple of: Transaction Value + Net Debt As a Multiple of:
----------------------- ----------------------------------------------
LTM EPS Book Value Revenues EBIT EBITDA Less Cash
------- ---------- -------- ---- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Mean 20.7x 4.81x 2.76x 14.7x 11.8x 3.02x
Median 19.7 4.74 2.49 14.2 11.4 2.44
High 26.9 6.34 3.86 18.6 15.2 4.85
Low 16.4 3.42 2.21 11.7 9.3 1.78
</TABLE>
<PAGE> 17
DISCOUNTED CASH FLOW MODEL
Discounted Cash Flow Analysis (a)
Base Case (b) Aggregate Equity Value
<TABLE>
<CAPTION>
25% 30% 35% 40%
<S> <C> <C> <C> <C>
10x $3,096 $2,792 $2,548 $2,352
12x 3,392 3,035 2,750 2,520
14x 3,689 3,279 2,952 2,688
</TABLE>
Base Case (b) Per Fully Diluted Share (c)
<TABLE>
<CAPTION>
25% 30% 35% 40%
<S> <C> <C> <C> <C>
10x $23.16 $20.88 $19.06 $17.59
12x 25.37 22.70 20.57 18.85
14x 27.59 24.52 22.08 20.10
</TABLE>
Sensitivity Case I (b) Aggregate Equity Value
<TABLE>
<CAPTION>
25% 30% 35% 40%
<S> <C> <C> <C> <C>
10x $2,653 $2,419 $2,232 $2,082
12x 2,882 2,608 2,388 2,212
14x 3,112 2,796 2,544 2,342
</TABLE>
Sensitivity Case I (b) Per Fully Diluted Share (c)
<TABLE>
<CAPTION>
25% 30% 35% 40%
<S> <C> <C> <C> <C>
10x $19.84 $18.10 $16.70 $15.57
12x 21.56 19.50 17.86 16.54
14x 23.27 20.91 19.03 17.51
</TABLE>
Sensitivity Case II (b) Aggregate Equity Value
<TABLE>
<CAPTION>
25% 30% 35% 40%
<S> <C> <C> <C> <C>
10x $2,706 $2,465 $2,272 $2,116
12x 2,944 2,660 2,433 2,251
14x 3,181 2,855 2,595 2,385
</TABLE>
Sensitivity Case II (b) Per Fully Diluted Share (c)
<TABLE>
<CAPTION>
25% 30% 35% 40%
<S> <C> <C> <C> <C>
10x $20.24 $18.44 $16.99 $15.83
12x 22.02 19.90 18.20 16.83
14x 23.79 21.35 19.41 17.84
</TABLE>
-------
(a) The net present value of unlevered free cash flows + the PV of a range of
10 - 14x 1999 EBIT + net cash (debt). Unlevered free cash flow is equal to
the after-tax operating income (tax rate based on Company projections as of
April 28, 1995) + non-cash operating adjustments and capital expenditures.
(b) Adjusted for net cash of $1,233.1.
(c) Assumes fully-diluted shares of 133.701 million, including all outstanding
options and warrants.
(d) Sensitivity Case I: One Year Delay in revenue.
(e) Sensitivity Case II: Achieve 80% of plan.
<PAGE> 18
PRELIMINARY CALL OPTION VALUATION MODEL
<TABLE>
<CAPTION>
Spot Price: $60 $48 $40
--- --- ---
<S> <C> <C> <C>
Per Share (a)
25% Volatility $11.08 $5.22 $2.56
30% Volatility 13.42 7.10 3.95
40% Volatility 17.99 10.92 7.01
----- ----- ----
Average $14.16 $7.74 $4.51
Total (in $ million) (b)
25% Volatility $633.9 $298.6 $146.8
30% Volatility 767.7 406.1 226.3
40% Volatility 1,029.2 624.8 401.4
------- ----- -----
Average $810.3 $443.2 $258.1
</TABLE>
-------
(a) Using Black-Scholes valuation for call options with the following
variables: Risk Free rate 7%, Strike Price $82, 4 year maturity.
(b) Based on 57.225 million shares of RCS not owned by Roche as of 1/31/95 on a
fully-diluted basis. Excludes options and warrants.
<PAGE> 19
FLOAT ANALYSIS FOR SELECTED BIOTECH COMPANIES
Millions of Shares
<TABLE>
<CAPTION>
Stock Primary
Price Primary Shares Equity 5%
Company 4/28/95 Outstanding (a) Value Holders (b)
------- ------- --------------- ----- -----------
<S> <C> <C> <C> <C>
Amgen $72.69 139.5 $10,142 2.5
Genentech 50.38 117.6 5,923 79.4
Chiron 55.25 40.0 2,210 21.2
Biogen 39.25 33.0 1,296 0.5
Genzyme 42.75 26.4 1,127 0.1
Centocor 14.13 51.1 722 0.4
Genetics Institute 37.25 26.5 986 16.5
Immunex 12.00 39.3 471 21.8
</TABLE>
<TABLE>
<CAPTION>
Public Float 52 - Week Average Daily Volume (c)
------------ ----------------------------------
Company Shares $ Shares $
------- ------ - ------ -
<S> <C> <C> <C> <C>
Amgen 137.0 $9,957 1,292 $93,912
Genentech 38.1 1,919 227 11,435
Chiron 18.8 1,037 729 40,277
Biogen 32.5 1,276 909 35,678
Genzyme 26.3 1,124 366 15,647
Centocor 50.7 716 746 10,537
Genetics Institute 9.9 370 59 2,198
Immunex 17.5 210 200 2,400
</TABLE>
-------
(a) Source: Lehman Brothers, Bio-Performance Monthly, January 3, 1995.
(b) Source: Proxy Statements and Spectrum Reports.
(c) All companies, except Genentech (NYSE) are listed on NASDAQ.
<PAGE> 20
GENENTECH OWNERSHIP PROFILE
<TABLE>
<CAPTION>
Common Redeemable Common Total
------ ----------------- -----
Number % Number % Number %
------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C>
Roche (a) 67.1 100.0% 9.3 18.5% 76.5 65.0%
Corporate Insiders
ex Roche (a) 2.8 5.5% 2.8 2.4%
Major Institutions (a) 17.4 34.4% 17.4 14.8%
Retail and Unidentified 21.0 41.5% 21.0 17.8%
---- ------ ---- ------ ----- ------
Total (a) 67.1 100.0% 50.4 100.0% 117.6 100.0%
==== ====== ==== ====== ===== ======
</TABLE>
-------
(a) Source: Genentech as of March 31, 1995.
<PAGE> 21
GENENTECH INSTITUTIONAL SHAREHOLDER PROFILE
<TABLE>
<CAPTION>
Change
Institution Position from 12/94 Turnover Style
----------- -------- ---------- -------- -----
<S> <C> <C> <C> <C>
Fidelity Management & Research 2,474,400 1,732,000 High Growth
American Express Financial 2,157,740 (222,960)
BB Biotech AG 1,872,583 Low Specialty
Investors Research Corporation 1,600,000 High Momentum
Credit Suisse 897,245 Low Arbitrage
Sirach Capital Management 774,000 (310,960) High Growth
Putnam Companies 762,500 Mod Arbitrage
Capital Research & Management 662,500 (287,500) Low Growth
Van Kampen Amer Capital 614,400 (124,300)
RCM Capital Management 504,500 187,200 Mod Arbitrage
Wells Fargo Nikko Investment
Advisors 467,703 (32,200) Low Index
Oppenheimer Management Corporation 400,000 275,000 Mod Growth
Clay Finlay Inc. 369,900 (6,800) Low Arbitrage
New Jersey Division of Investment 367,000 (28,500) Mod Growth
Wellington Management Company 365,750 150 Mod Growth
Citicorp 365,000 65,000 Mod Market
Oriented
College Retirement Equities Fund 303,700 (56,000) Low Index
Essex Investment Management 280,000 (7,785) High Growth
Lubrizol Corporation 255,800 (575,100) Low Specialty
California Public Employees'
Retirement System 239,900 Low Index
Mellon Bank Corporation 216,600 (68,923) Low Index
Deutscher Auslanskassenverein Akt. 197,000 Low Market
Oriented
Guyerzeller Zurmont Bank AG 174,000 Low Growth
General Accident Insurance 147,000 147,000 Mod Growth
Bessemer Trust Company 132,000 132,000 Mod Growth
George D. Bjurman & Associates 131,100 131,075 High Growth
T. Rowe Price 126,650 37,300 Mod Arbitrage
Gabelli Funds, Inc. 122,500 (215,000) Low Growth
Franklin Resources 121,500 Mod Growth
WTG & Company LP 117,500 117,500
Rothschild Asset Management Ltd. 100,000 Low Growth
Comerica, Inc. 95,270 95,270 Mod Growth
</TABLE>
<PAGE> 22
GENENTECH INSTITUTIONAL SHAREHOLDER PROFILE (CONT'D)
<TABLE>
<CAPTION>
Change
Institution Position from 12/94 Turnover Style
----------- -------- ---------- -------- -----
<S> <C> <C> <C> <C>
Hudson Capital Advisors 80,000 Mod Growth
Mutual Life of Canada 75,000 High Growth
Pictet & Cie 71,900 Low Growth
Frank Russell Investment Management 60,100 54,400 Mod Model
Bankers Trust Co. 58,100 Low Index
Spears Benzak Salomon 57,250 (1,100)
PaineWebber Asset Management 51,165 32,000 High Growth
California State Teachers
Retirement 50,146
----------
Sub-total: 17,919,402
Other Institutions (Less than 50K) 2,843,036
----------
TOTAL (Institutional): 20,762,438
==========
</TABLE>
----------
Source: Provided by the Company as of March 31, 1995.
<PAGE> 23
<TABLE>
<CAPTION>
VALUATION OF PUT OPTION
<S> <C>
Strike Price: $60
Per Share(a)
25% Volatility $ 7.14
30% Volatility 8.94
35% Volatility 10.73
40% Volatility 12.48
------
Average $10.12
Total (in $ million)(b)
25% Volatility $408.5
30% Volatility 511.6
35% Volatility 613.7
40% Volatility 714.4
-------
Average $578.89
</TABLE>
----------
(a) Using Black-Scholes valuation with the following variables: Risk Free rate
7%, Spot Price $50.38, 4 year maturity.
(b) Based on 57.225 million shares of RCS not owned by Roche as of 3/31/95.
<PAGE> 24
GENENTECH PUBLIC MARKET VALUATION MODEL - BASE CASE (STAND-ALONE)
<TABLE>
<CAPTION>
June 30, June 30, June 30, June 30, June 30,
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Projected EPS(a) $ 1.35 $ 1.50 $ 1.64 $ 2.00 $ 2.48
Implied Stock Price Based On:
Forward P/E Ratio(b) $44.15 $49.05 $53.63 $65.40 $81.10
Forward P/E-to 5 yr
Growth Rate Model(c) $19.22 $24.00 $29.56 $44.04 $61.81
------ ------ ------ ------ ------
Average $31.68 $36.52 $41.59 $54.72 $71.45
--------------------------------------------------------------------------------
/ Discount to Extended /
/ Option Price 47.2% 43.8% 40.6% 28.0% 12.9% /
--------------------------------------------------------------------------------
</TABLE>
----------
(a) Source: Company projections as provided by Genentech management.
(b) 32.7x, based on mean forward P/E multiple of comparable companies (AMGN,
GENZ, CHIR).
(c) Based on growth-rate-adjusted forward P/E multiple (0.75x) derived from
comparable companies and applied to company projections. Used 5-yr growth
rate for 1995 (19.0%) and 1996 (21.3%), 4-yr growth rate for 1997 (24.0%)
and 1998 (29.4%), and 3-yr growth rate for 1999 (33.2%).
<PAGE> 25
GENENTECH PROJECTED STOCK PRICE TREND - BASE CASE
<TABLE>
<CAPTION>
June June June June
1995 1996 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Call Exercise Price $60.00 $65.00 $70.00 $76.00
Est. Stand-alone stock price(a) $31.68 $36.52 $41.59 $54.72
7% Discount to Put Price $45.77 $48.98 $52.41 $56.07
9% Discount to Put Price $42.51 $46.33 $50.50 $55.05
</TABLE>
<TABLE>
<CAPTION>
Sept Dec Mar June
1998 1998 1999 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Call Exercise Price $77.50 $79.00 $80.50 $82.00
--------
Est. Stand-alone stock price(a) $58.90 / $63.09 / $67.27 $71.45
/ /
7% Discount to Put Price $57.03 / $58.00 / $58.99 $60.00
/ /
9% Discount to Put Price $56.24 / $57.47 / $58.72 $60.00
--------
</TABLE>
----------
(a) Projected stock price based on blended average of forward PE ratio (32.7x)
and forward PE to 5 yr EPS growth rate (0.75x) of comparable companies.
Comparable mean PE as of 4/25/95.
<PAGE> 26
GENENTECH VALUATION MODEL - BASE CASE (STAND-ALONE) VS. RCS OPTION
EXERCISE PRICE
[Graph plotting Genentech Stand-alone Stock Price from 7/95 to 6/99 shown
annually against 7% Discount to Put Price from 7/95 to 6/99 shown annually and
against Roche Option Exercise Price starting at $61.25 and stepping $1.25
quarterly the first 7 quarters to $70 and stepping $1.50 the remaining
8 quarters to $82.]
<TABLE>
<CAPTION>
7% Discount to
Stand-alone Put Price
<S> <C> <C>
Jun-95 $31.68 $45.77
Jun-96 $36.52 $48.98
Jun-97 $41.59 $52.41
Jun-98 $54.72 $56.07
Jun-99 $71.45 $60.00
</TABLE>
<PAGE> 27
COMPARISON OF PROJECTIONS: BASE VS INTERNATIONAL COLLABORATION
<TABLE>
<CAPTION>
-----------
($ in millions, except / 5-Year /
per share data) 1994A 1995 1996 1997 1998 1999 / CAGR /
----- ---- ---- ---- ---- ---- /---------/
<S> <C> <C> <C> <C> <C> <C> / <C> /
/ /
BASE PROJECTION(I) / /
Total Revenues(a) $753 $874 $950 $1,101 $1,279 $1,490 / 14.6% /
Operating Income(b) 85 149 188 256 350 452 / 39.6% /
Net Income(c) 124 165 186 207 257 324 / 21.1% /
EPS $1.04 $1.35 $1.50 $1.64 $2.00 $2.48 / 19.0% /
/ /
WITH INTERNATIONAL / /
COLLABORATION(II) / /
Total Revenues(a) $753 $948 $985 $1,106 $1,193 $1,334 / 12.1% /
Operating Income(b) 85 223 267 325 359 409 / 36.8% /
Net Income 124 228 259 276 299 336 / 22.0% /
EPS $1.04 $1.87 $2.10 $2.19 $2.33 $2.57 / 19.8% /
-----------
% DIFFERENCE(II-I)
Total Revenues -- 8.5% 3.7% 0.5% -6.8% -10.5%
Operating Income -- 49.7% 42.2% 27.1% 2.7% -9.6%
Net Income -- 38.4% 39.5% 33.0% 16.5% 3.7%
EPS -- 38.4% 40.0% 33.0% 16.5% 3.4%
---------------
(a) Interest income is presented below the operating line.
(b) Before European profit sharing and net interest expense.
(c) Based on effective tax rates of: 1994 - 4%; 1995 - 15%; 1996 - 25%;
1997 to 1999 - 35%.
</TABLE>
<PAGE> 28
INTERNATIONAL COLLABORATION PUBLIC MARKET VALUATION MODEL (STAND-ALONE)
<TABLE>
<CAPTION>
June 30, June 30, June 30, June 30, June 30,
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
New Projected EPS(a) $ 1.87 $ 2.10 $ 2.19 $ 2.33 $ 2.57
Implied Stock Price Based
On:
Forward P/E Ratio(b) $61.15 $68.67 $71.61 $76.19 $84.04
Forward P/E-to 5 yr
Growth Rate Model(c) $27.82 $19.79 $20.75 $27.20 $39.40
------ ------ ------ ------ ------
Average $44.48 $44.23 $46.18 $51.69 $61.72
--------------------------------------------------------------------------------
/ Discount to Extended /
/ Option Price 25.9% 32.0% 34.0% 32.0% 24.7% /
--------------------------------------------------------------------------------
</TABLE>
----------
(a) Source: Company projections as provided by Genentech management.
(b) 32.7x, based on mean forward P/E multiple of comparable companies (AMGN,
GENZ, CHIR).
(c) Based on growth-rate-adjusted forward P/E multiple (0.75x) derived from
comparable companies and applied to company projections. Used 5-Yr growth
rate for 1995 and 1996, 4-yr growth rate for 1997 and 1998 and 3-yr growth
rate for 1999.
<PAGE> 29
INTERNATIONAL COLLABORATION PROJECTED STOCK PRICE TREND
<TABLE>
<CAPTION>
June June June June Sept Dec Mar June
1995 1996 1997 1998 1998 1998 1999 1999
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Call Exercise Price $60.00 $65.00 $70.00 $76.00 $77.50 $79.00 $80.50 $82.00
Est. Stand-alone stock ----------
price(a) $44.48 $44.23 $46.18 $51.69 $54.20 $56.71 / $59.21 / $61.72
/ /
7% Discount to Put Price $45.77 $48.98 $52.41 $56.07 $57.03 $58.00 / $58.99 / $60.00
/ /
9% Discount to Put Price $42.51 $46.33 $50.50 $55.05 $56.24 $57.47 / $58.72 / $60.00
----------
</TABLE>
---------------
(a) Projected stock price based on blended average of forward PE ratio (32.7x)
and forward PE to 5 yr EPS growth rate (0.75x) of comparable companies.
Comparable mean PE as of 4/25/95.
<PAGE> 30
COMPARISON OF INTERNATIONAL COLLABORATION AND OPTION EXTENSION VALUATION
[Graph plotting Stock Price of RCS with Extension from 7/95 to 6/98 shown
annually against International Collaboration from 7/95 to 6/99 shown annually
against 7% Discount to Put Price from 7/95 to 6/99 shown annually against Roche
Option Exercise Price starting at $61.25 and stepping $1.25 quarterly the first
7 quarters to $70 and stepping $1.50 the remaining 8 quarters to $82. Percent
difference between Stock Price of RCS with Extension and International
Collaboration is noted.]
<TABLE>
<CAPTION>
International RCS 7% Discount
Collaboration With Extension % Difference to Put Price
<S> <C> <C> <C> <C>
Jul-95 $44.48 $39.36 -11.5% $45.77
Jun-96 $44.23 $45.75 +3.4% $48.98
Jun-97 $46.18 $58.53 +26.7% $52.41
Jun-98 $51.69 $67.73 +31.0% $56.07
Jun-99 $61.72 -- -- $60.00
</TABLE>
<PAGE> 31
COMPARISON OF INTERNATIONAL COLLABORATION AND OPTION EXTENSION VALUATION
[Graph plotting International Collaboration from 7/95 to 6/99 shown annually
against 7% Discount to Put Price from 7/95 to 6/99 shown annually against Roche
Option Exercise Price starting at $61.25 and stepping $1.25 quarterly the first
7 quarters to $70 and stepping $1.50 the remaining 8 quarters to $82.]
<TABLE>
<CAPTION>
International Collaboration 7% Discount to Put Price
<S> <C> <C>
Jul-95 $44.48 $45.77
Jun-96 $44.23 $48.98
Jun-97 $46.18 $52.41
Jun-98 $51.69 $56.07
Jun-99 $61.72 $60.00
</TABLE>
<PAGE> 1
EXHIBIT B5
PROJECT ACTIVE
Presentation to the Board of Directors
July 7, 1995
PRELIMINARY DRAFT
<PAGE> 2
PROJECT ACTIVE
Presentation to the Board of Directors
Table of Contents
SECTION I MARKET REACTION TO PROPOSED TRANSACTION
1. Recent Share Price Performance
2. Research Analysts' Commentary
3. Analysis of Shareholdings
SECTION II VALUATION ANALYSIS
4. Summary of Valuation Analyses
5. Comparison of Projections
6. Comparable Company Analysis
7. Present Value of Future Share Prices
8. Precedent Transactions Analysis
9. Discounted Cash Flow Analysis
SECTION III ANALYSIS OF TRANSACTION - FUTURE SHARE PRICE ANALYSIS
10. Historical Trading Performance
11. Discount to Near Term Call Price
12. IRR to End Call Price
13. Unaffected Share Prices
14. Summary of Implied Future Share Price Analysis
<PAGE> 3
PROJECT ACTIVE
Presentation to the Board of Directors
Table of Contents
SECTION IV ANALYSIS OF TRANSACTION - RETURN ANALYSIS
15. Internal Rate of Return Analysis of Put and Final Call
16. Internal Rate of Return of Future Call Schedule
SECTION V ANALYSIS OF TRANSACTION - SENSITIVITY ANALYSIS
17. Premium of Put and Final Call to 6/30/95 Share Price
18. Illustrative Premium Analysis
19. Call Price Premium to Unaffected Share Prices
20. Put Price Implied Multiple and Breakeven Analysis
21. Call Price Implied Multiple and Breakeven Analysis
SECTION VI OTHER ANALYSIS
22. Analysis of Option Components
23. Analysis of Standstill Agreement
SECTION VII ANALYSIS OF COLLABORATION
24. Discounted Cash Flow Analysis
25. License Agreement
<PAGE> 4
PROJECT ACTIVE
Active Stock Price/Volume Analysis
01/01/95 - 06/30/95
<TABLE>
<CAPTION>
DATES ACTUAL VOLUME
SHARE PRICE
----------------------------------------
<S> <C> <C>
01/Jan/95 $45.625 90,900
01/Feb/95 48.125 109,100
01/Mar/95 50.125 114,900
01/Apr/95 49.500 750,100
01/May/95 47.875 3,801,500
01/Jun/95 48.875 206,700
30/Jun/95 48.625 66,700
</TABLE>
RELEVANT NEWS IDENTIFIED:
Roche continues to purchase in market: 1.3% over 4 months 01/10/95 to 04/28/95
Activase cleared by FDA 04/03/95
Proposed Transaction announced 05/01/95
<TABLE>
<CAPTION>
PERIOD VOLUME % OF PUBLIC FLOAT(1)
----------------------------------------------------------
<S> <C> <C>
05/01/95 3,801,500 9.3%
05/01/95 - 05/05/95 8,165,700 20.0
05/01/95 - 05/31/95 12,576,000 30.7
05/01/95 - 06/30/95 16,712,300 40.8
</TABLE>
Note: (1) Public Float is Non-Roche total shares outstanding on 06/30/95.
<PAGE> 5
PROJECT ACTIVE
Indexed Price Graph
01/01/95 - 06/30/95
<TABLE>
<CAPTION>
BIOTECH INDEX -
DATE ACTIVE COMPANY TIER 1(1) PARMA INDEX(2) S&P 400
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
01/Jan/95 100.00 100.00 100.00 100.00
01/Feb/95 105.48 96.02 104.93 101.39
01/Mar/95 109.86 99.13 107.01 104.92
03/Apr/95 108.49 95.33 110.67 109.22
01/May/95 104.93 96.51 113.28 111.84
01/Jun/95 107.12 95.38 115.42 115.66
30/Jun/95 106.58 104.02 119.67 118.66
</TABLE>
Notes: (1) Biotech Index - Tier 1 is market capitalization weighted and
includes Amgen, Biogen, Centocor, Chiron, Genetics Institute,
Genzyme and Immunex.
(2) Pharma Index is market capitalization weighted and includes Abbott
Laboratories, American Home Products, Bristol-Myers Squibb, Eli
Lilly, Johnson & Johnson, Merck, Pfizer, Rhone-Poulenc Rorer,
Schering Plough, Upjohn and Warner Lambert
<PAGE> 6
PROJECT ACTIVE
Active Company Stock Basis Analysis
<TABLE>
<CAPTION>
100% OF TOTAL 75% OF TOTAL 50% OF TOTAL 25% OF TOTAL 0% OF TOTAL
TRADED BELOW: TRADED BELOW: TRADED BELOW: TRADED BELOW: TRADED BELOW:
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1991 - 1994 $52.375 $47.625 $43.125 $33.875 $20.875
1995 YTD 51.875 49.125 48.125 47.375 45.125
</TABLE>
<TABLE>
<CAPTION>
1991-1994 1995 YTD
-------------------------------------------------
<S> <C> <C>
Shares traded as a % of
40,914,426 Non-Roche total
shares outstanding 06/30/95 387.5% 82.7%
-------------------------------------------------
129.2% Annual average 165.4% Annualized
</TABLE>
<PAGE> 7
PROJECT ACTIVE
Research Analysts' Consensus View of Proposed Transaction
- Active is expected to benefit from the Proposed Transaction
- Active can focus on research while Roche assists in development,
marketing and sales (esp. non-U.S.).
- Active's stock will trade less as a financial instrument (e.g.,
Roche bond) thereby relieving pressure on management to improve
short-term earnings through cuts in R & D spending and, instead,
pursue aggressively its R & D programs with its concomitant
long-term benefits to the Company.
- The licensing agreement enables Active to share the cost (and risk)
of product development with Roche, and to avoid the infrastructure
costs of developing, marketing and selling products outside the
U.S. while receiving favorable royalty rates; this should be
accretive to earnings in the short-term.
- The impact of the Proposed Transaction on Minority Shareholders is a
function of their respective orientation
- Active stock is expected to trade as a Roche four-year zero coupon
bond with upside potential bounded by the call prices, enhanced by
any dividends which may be paid
- Such returns, however, are not attractive to biotechnology
investors ("almost dead money to a biotechnology investor")
- The stock, leading up to the announcement of the Proposed
Transaction, was trading largely on the basis that Roche would
exercise its call option; such investors are likely to be
disappointed
<PAGE> 8
PROJECT ACTIVE
Research Analysts' Consensus View of Proposed Transaction
(Continued)
- The likelihood that Roche will buy-out the Minority Shareholders
pursuant to the call option or otherwise appears diminished since
(i) Roche passed once already; and (ii) Roche may have obtained,
pursuant to the licensing agreement, Active's most important asset
(its product pipeline) and may no longer have a need to acquire the
whole Company
- Roche is also expected to benefit from the Proposed Transaction
- The licensing agreement is believed to be of significant value to
Roche
- The ability to purchase stock in the open market up to 79.9% over
the next four years will likely reduce the blended cost to Roche of
buying-out the Minority Shareholders
- The new call option provides Roche with more time within which to
make its decision at a minimal cost
<PAGE> 9
PROJECT ACTIVE
Stock Ownership Profile - June 1995
<TABLE>
<S> <C>
----------------------------
| Total Shares Outstanding |
| 118.1 million |
----------------------------
| |
------------------- ------------------
| Common | | Special Common |
| 67.1 | | 50.9 |
| (Held by Roche) | ------------------
------------------- |
--------------------------------
| |
-------------------- ------------------
| Other Redeemable | | Roche Holdings |
| 41.4 | | 9.5 |
-------------------- ------------------
|
------------------------------------------------------------
| |
------------------ ------------------
| Record Holders | | Street Holders |
| 6.1 | | 35.3 |
| 14.8% | | 85.2% |
------------------ ------------------
| |
---------------------- --------------------------------
| | | | |
----------------------------- ------------------------ ------------------------ ----------- ----------
| Active Company | | Other Record Holders | |13F Institutions (156)| | Foreign | | Retail |
| Directors & Officers (37) | | 3.3 | | 17.4 | | 3.6 | | 14.3 |
| 2.8 | | 8.0% | | 41.9% | | 8.7% | | 34.6% |
| 6.8% | ------------------------ ------------------------ ----------- ----------
----------------------------- | | |
| | |
----------------------- ------------- --------------------------
| | | | | |
------------------------- -------------------- ------------- -------------- ------------------ -------------------------
| Other Record (19,746) | | Largest>100K (2) | | >50K (38) | | <50K (118) | | Active Company | | Other Retail (53,900) |
| 2.8 | | 0.5 | | 16.3 | | 1.1 | | Trip | | 14.2 |
| 6.8% | | 1.2% | | 39.2% | | 2.7% | | 2 | | 34.2% |
------------------------- -------------------- ------------- -------------- | 0.4% | ------------------------
------------------
</TABLE>
Source: Active Company
<PAGE> 10
PROJECT ACTIVE
13F INSTITUTIONS - June 1995
(Shares in Thousands)
<TABLE>
<S> <C>
Fidelity Mgmt. & Res. Corp. 2,071
American Express Fin'l. 1,696
Investors Research Corp. 1,600
Harvard University 1,260
Oppenheimer Mgmt. Corp. 1,040
Putnam Investment Mgmt. 762
T. Rowe Price Associates 707
Travelers 634
Mentor Partners 600
Capital Research & Mgmt. 500
Wells Fargo Inst. Tr NA 468
Smith Barney Shearson 413
Clay Finlay Inc. 397
Spears, Benzak & Salomon 378
New Jersey Div. Inv. 374
Wellington Management Co. 358
College Retire Equities 304
Citicorp 300
Essex Investment Mgmt. Co. 279
Calif. Public Emp. Ret. 240
Mellon Bank Corp. 217
CT Capital 175
Chancellor 152
Wilshire Asset 138
Bjurman George D & Assoc. 135
Gabelli Funds, Inc. 123
Franklin Resources Inc. 122
Salomon Brothers 105
Comerica Inc. 95
Hudson Capital Advisors 80
RCM Capital Mgmt. 80
Lyon, Stubbs & Tomkins 65
Frank Russell Co. Inc. 60
Calif. State Teachers Ret. 59
Bankers Trust NY Corp. 58
Lubrizol Corp. 56
PaineWebber Inc. 52
Sub-total (13F>50K) 16,270
Other institutions (<50K) 1,217
------
Total 17,487
41.9%
</TABLE>
Source: Active Company
<PAGE> 11
PROJECT ACTIVE
Major Changes in Ownership
<TABLE>
<CAPTION>
INSTITUTION ORIENTATION CURRENT CHANGE FROM
POSITION APRIL, 1995
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Harvard University Growth 1,260 +1,260
Oppenheimer Mgmt. Corp. Growth, Value 1,040 +640
Mentor Partners N/A 600 +600
T. Rowe Price Growth 707 +580
Spears, Benzak & Salomon N/A 378 +321
Salomon Brothers Growth 105 +105
Everest Capital N/A 100 +100
Sirach Capital N/A 0 -774
American Capital N/A 83 -531
American Express F.S. N/A 1,695 -462
RCM Capital Mgmt. Growth 82 -422
Fidelity Growth, Value, Income 2,071 -401
Lubrizol N/A 56 -200
Capital Research Value 500 -163
WTG & Co., LP N/A 0 -118
General Accident Value 40 -107
</TABLE>
Source: Active Company
<PAGE> 12
PROJECT ACTIVE
Summary of Valuation Analyses
Current Price 6/30/95: $48.63
Present Value of $60 7/99 Put at 6/30/95 (1): $46.97
<TABLE>
<CAPTION>
30.0% TO
60.0%
SHARE PRICE PV OF FUTURE PREMIUM TO THEORETICAL
52-WEEK UNAFFECTED UNAFFECTED UNAFFECTED STANDALONE VALUE OF
RANGE SHARE PRICES SHARE PRICES SHARE PRICES DCF VALUE PACKAGE (5)
----------- ------------ ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
$53.50 $45.00 $38.00 $64.00 $56.00 $51.50
42.13 35.00 32.00 52.00 41.00 47.00
</TABLE>
<TABLE>
<CAPTION>
30.0% TO
PV OF 60.0%
FUTURE PREMIUM TO THEORETICAL
SHARE PRICE UNAFFECTED UNAFFECTED UNAFFECTED STANDALONE VALUE OF
52-WEEK RANGE SHARE PRICES SHARE PRICES SHARE PRICES DCF VALUE PACKAGE (5)
------------- ------------- -------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Prem/(Disc) to Unaffected (2) 5.3% 33.8% -12.5% 12.5% -20.0% -5.0% 30.0% 60.0% 2.5% 40.0% 17.5% 28.8%
Prem/(Disc) to Current ($48.63) -13.4% 10.0% -28.0% -7.5% -34.2% -21.9% 6.9% 31.6% -15.7% 15.2% -3.3% 5.9%
Forward P/E Multiple (3) 28.1x 35.7x 23.3x 30.0x 21.3x 25.3x 34.7x 42.7x 27.3x 37.3x 31.3x 34.3x
LTM Revenues Multiple (4) 5.3x 6.9x 4.3x 5.7x 3.8x 4.7x 6.7x 8.4x 5.1x 7.2x 6.0x 6.6x
</TABLE>
Notes: (1) Present value of $60 7/99 Put based on a four year AA bond rate of
6.31% on 6/30/95.
(2) Assuming an Unaffected Share Price of $40 per share.
(3) Forward P/E multiple applied to 1996 EPS of $1.50 as per Management
Estimates.
(4) Assumes Aggregate Value based on 117.6 million shares as of March
31, 1995 and Net Debt of -$547.2 million. Latest Twelve-Month
Revenues were $835.5 million.
(5) Based on a Black-Scholes option calculation.
<PAGE> 13
PROJECT ACTIVE
Comparison of Active Company Projections
($MM, except per share data)
<TABLE>
<CAPTION>
PROJECTIONS CAGR
ACTUAL ----------------------------------------------------------- 1995-
REVENUES 1994 1995 1996 1997 1998 1999 2000 2000
--------------------------------------- ------ ------ ------ -------- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Projections(1) $752.6 $874.0 $950.0 $1,101.0 $1,279.0 $1,482.0 $1,817.0 15.8%
Average of "Street" Estimates(2) 752.6 885.2 959.3 1,127.0 1,330.8 1,355.0 N.A. 12.5% (3)
% DIFFERENCE FROM "STREET" 0.0% -1.3% -1.0% -2.3% -3.9% 9.4% N.M. N.M.
RESEARCH & DEVELOPMENT
---------------------------------------
Management Projections(1) $314.3 $364.0 $391.0 $414.0 $420.0 $423.0 $449.0 3.8%
Average of "Street" Estimates(2) 314.3 357.9 369.0 390.1 415.1 380.0 N.A. 2.4% (3)
% DIFFERENCE FROM "STREET" 0.0% 1.7% 6.0% 6.1% 1.2% 11.3% N.M. N.M.
EPS
---------------------------------------
Management Projections(1) $1.04 $1.35 $1.50 $1.64 $2.00 $2.48 $3.55 20.5%
Average of "Street" Estimates(2) 1.04 1.31 1.43 1.91 2.25 2.70 N.A. 20.9% (3)
% DIFFERENCE FROM "STREET" 0.0% 3.1% 4.9% -14.1% -11.1% -8.1% N.M. N.M.
I/B/E/S(4) $1.04 $1.30 $1.40 $1.75 $2.10 $2.52 $3.02 19.3%
% DIFFERENCE FROM "STREET" 0.0% 3.8% 7.1% -6.3% -4.8% -1.6% 17.4% N.M.
</TABLE>
NOTES:
(1) Based on Active Company Standalone projections for 1995 through 2000.
(2) "Street" Consensus reflects the average estimates of several research
analysts prior to May 1, 1995.
(3) CAGR represents five-year period from 1995 through 1999.
(4) Based on I/B/E/S estimates dated June 24, 1995.
<PAGE> 14
PROJECT ACTIVE
Comparison of Active Company Standalone vs. Collaboration
($MM, except per share data)
<TABLE>
<CAPTION>
PROJECTIONS CAGR
---------------------------------------------------------------- 1995-
REVENUES 1995 1996 1997 1998 1999 2000 2000
------------------------------------ ------ ------ -------- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Management Standalone(1) $874.0 $950.0 $1,101.0 $1,279.0 $1,482.0 $1,817.0 15.8%
Management with Collaboration(2) 948.0 985.0 1,106.0 1,193.0 1.334.0 1,585.0 9.1%
% DIFFERENCE FROM COLLABORATION -7.8% -3.6% -0.5% 7.2% 11.1% 14.6%
NET INCOME
------------------------------------
Management Standalone(1) $165.0 $185.0 $208.0 $255.0 $325.0 $469.0 22.6%
Management With Collaboration(2) 228.0 259.0 276.0 299.0 336.0 447.0 9.6%
% DIFFERENCE FROM COLLABORATION -27.6% -28.6% -24.6% -14.7% -3.3% 4.9%
EPS
------------------------------------
Management Standalone(1) $1.35 $1.50 $1.64 $2.00 $2.48 $3.55 20.5%
Management With Collaboration(2) 1.87 2.10 2.19 2.33 2.57 3.38 7.7%
% DIFFERENCE FROM COLLABORATION -27.8% -28.6% -25.1% -14.2% -3.5% 5.0%
I/B/E/S(3) $1.30 $1.40 $1.75 $2.10 $2.52 $3.02 19.3%
% DIFFERENCE FROM COLLABORATION 43.8% 50.0% 25.1% 11.0% 2.0% 11.8%
</TABLE>
NOTES:
(1) Based on Active Company Standalone projections for 1995 through 2000.
(2) Based on Active Company with Collaboration projections for 1995 through
2000.
(3) Based on I/B/E/S estimates dated June 24, 1995.
<PAGE> 15
PROJECT ACTIVE
Forward P/E to 5-Yr. EPS Growth Relationship
Biotech
<TABLE>
<CAPTION>
COMPANY NAME 5-YR. EPS GROWTH (1) 1996E PRICE/EARNINGS (2)
------------ -------------------- ------------------------
<S> <C> <C>
Active Company 20.0% 33.8x
Amgen 15.0 18.3
Biogen 35.0 38.0
Centocor 30.0 55.1
Chiron 30.0 52.0
Genzyme 20.0 17.0
Active Company @ $40 per share 20.0 28.6
S&P 500 7.0 15.0
Regression R(2)
Includes Active Company 57.7%
Excludes Active Company 62.4
</TABLE>
Notes: (1) Based on I/B/E/S estimates as of June 24, 1995.
(2) P/E based on I/B/E/S estimates as of June 24, 1995 and June 30, 1995
closing prices.
<PAGE> 16
PROJECT ACTIVE
Forward P/E to 5-Yr. EPS Growth Relationship
U.S. Pharma
<TABLE>
<CAPTION>
COMPANY NAME 5-YR. EPS GROWTH (1) 1996E PRICE/EARNINGS (2)
------------ ------------------- -----------------------
<S> <C> <C>
Abbott Laboratory 13.0% 16.9x
American Home Products 8.0 13.8
Amgen 15.0 18.3
Bristol Myers Squibb 7.0 12.9
Eli Lilly 9.0 15.4
Johnson & Johnson 12.0 16.5
Merck 11.0 16.4
Pfizer 14.0 16.2
Rhone-Poulenc Rorer 10.0 11.8
Schering-Plough 11.5 14.5
Upjohn 4.0 13.9
Warner Lambert 8.0 14.5
S&P 500 7.0 15.0
Regression R(2)=50.6%
</TABLE>
Notes: (1) Based on I/B/E/S estimates as of June 24, 1995.
(2) P/E based on I/B/E/S estimates as of June 24, 1995 and June 30,
1995 closing prices.
<PAGE> 17
PROJECT ACTIVE
U.S. Biotechnology Equity Market Trading Valuation (1)
<TABLE>
<CAPTION>
MARKET MARKET PRICE/EARNINGS
VALUE PRICE --------------------------------------------------------------
Company [MM] CURRENT L12M 1995E(2) 1996E(2) 1997E(2) 1998E(2) 1999E(2)
------- ------ ------- ---- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Amgen $10,646 $80.44 33.4 x 21.2 x 18.3 x 16.0 x 13.9 x 12.1 x
Biogen 1,483 44.50 N.M. 370.8 38.0 17.9 13.3 9.8
Centocor 833 14.31 N.M. N.M. 55.1 10.1 7.8 6.0
Chiron 2,603 65.00 N.M. N.M. 52.0 32.5 25.0 19.2
Genzyme 1,064 40.00 31.5 21.6 17.2 15.4 12.8 10.7
Immunex 515 13.00 N.M. N.M. N.M. 35.1 29.3 24.4
</TABLE>
<TABLE>
<CAPTION>
3-YEAR 3-YEAR 5-YEAR 1996E P/E/
AGGREGATE HISTORICAL HISTORICAL PROJECTED 5-YR.
TECHNOLOGY VALUE/ REVENUE EPS EPS PROJECTED
Company VALUE(3) REVENUES(4) GROWTH GROWTH GROWTH EPS GROWTH
------- ---------- ----------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Amgen 1.08 x 5.94 x 22.8 % N.M. % 15.0% 1.22 x
Biogen 1.24 9.31 7.6 N.M. 35.0 1.09
Centocor 1.26 13.49 -27.0 N.M. 30.0 1.84
Chiron 1.08 2.72 35.8 N.M. 30.0 1.73
Genzyme 1.03 3.63 19.2 N.M. 20.0 0.86
Immunex 1.04 3.51 42.7 N.M. 20.0 N.M.
</TABLE>
<TABLE>
---------------------------------------------------------------------------------
/ <S> <C> <C> <C> <C> <C> <C> /
/ Mean: 32.4 x 137.9 x 36.1 x 21.2 x 17.0 x 13.7 x /
/ Median: 0.0 10.6 28.2 17.0 13.6 11.4 /
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
/ <S> <C> <C> <C> <C> <C> <C> /
/ Mean: 1.12x 6.43 x 16.8% N.M.% 25.0% 1.35 x /
/ Median: 1.08 4.78 21.8 N.M. 25.0 1.15 /
---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET MARKET PRICE/EARNINGS
VALUE PRICE --------------------------------------------------------------
Company [MM] CURRENT L12M 1995E(2) 1996E(2) 1997E(2) 1998E(2) 1999E(2)
------- ------ ------- ---- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Active Company $5,717 $48.63 45.4 x 37.4 X 34.7 x 27.8 x 23.2 x 19.3 x
4,115 35.00 (5) 32.7 26.9 25.0 20.0 16.7 13.9
4,703 40.00 (5) 37.4 30.8 28.6 22.9 19.0 15.9
5,291 45.00 (5) 42.1 34.6 32.1 25.7 21.4 17.9
</TABLE>
<TABLE>
<CAPTION>
3-YEAR 3-YEAR 5-YEAR 1996E P/E/
AGGREGATE HISTORICAL HISTORICAL PROJECTED 5-YR.
TECHNOLOGY VALUE/ REVENUE EPS EPS PROJECTED
Company VALUE(3) REVENUES(4) GROWTH GROWTH GROWTH EPS GROWTH
------- ---------- ----------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Active Company 1.14 x 6.55 x 20.9 % 140.4% 22.0 % 1.74 x
1.21 6.35 20.9 140.4 20.0 1.25
1.18 7.10 20.9 140.4 20.0 1.43
1.16 7.84 20.9 140.4 20.0 1.61
</TABLE>
Notes:
------
(1) Based on closing prices as of June 30, 1995 and latest publicly available
annual and 10Q.
(2) Based on I/B/E/S estimates as of June 24, 1995.
(3) Technology Value equals Market Value divided by Market Value minus Cash.
(4) Revenues equals revenues minus interest income.
(5) Values represent unaffected share prices.
<PAGE> 18
PROJECT ACTIVE
U.S. Pharmaceutical Industry Equity Market Trading Valuation (1)
($MM)
<TABLE>
Market Price / Earnings
Market Price -------------------------- Agg Value/
Company Value Current 1994E 1995E(2) 1996(2) Revenues
---------------------- ------- ------- ----- -------- ------- ----------
($MM)
<S> <C> <C> <C> <C> <C> <C>
Merck $60,753 $49.13 20.4x 18.3x 16.4x 3.9x
Johnson & Johnson 45,561 67.50 20.5 18.7 16.5 2.7
Bristol-Myers Squibb 34,540 68.13 14.5 13.6 12.9 2.7
Abbott Laboratories 32,922 40.50 20.9 19.0 16.9 3.5
Pfizer 29,091 92.13 20.9 18.8 16.2 3.5
American Home Products 23,842 77.38 14.9 16.3 13.0 3.1
Eli Lilly 22,958 78.50 17.0 17.3 15.4 4.4
Schering-Plough 16,418 44.13 8.8 16.2 14.5 3.6
Warner-Lambert 11,645 86.38 16.5 15.7 14.5 1.9
Amgent 10,646 80.44 27.3 21.2 18.3 5.9
Upjohn 6,500 37.63 13.2 14.2 13.9 1.9
Rhone-Poulenc Rorer 5,483 40.88 14.9 12.8 11.8 1.5
-----------------------------------------------------------------------------------------------------------
/ Mean: 17.4x 16.8x 15.1% 3.2% /
/ Median: 16.7 16.8 15.0 3.9 /
-----------------------------------------------------------------------------------------------------------
3-Yr 3-Yr 5-Yr 1996E P/E/
Historical Historical Projected 5-Yr Dividend
Sales EPS EPS Projected Payout R&D/ EBIT
Company Growth Growth Growth(1) EPS Growth(2) Ratio Revenues Margin
---------------------- ---------- ---------- --------- ------------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Merck 24.5% 10.8% 11.0% 1.49x 48.5% 8.2% 28.8%
Johnson & Johnson 7.0 11.1 12.0 1.37 35.3 8.1 18.4
Bristol-Myers Squibb 3.6 22.5 7.0 1.84 62.4 9.1 26.7
Abbott Laboratories 8.0 12.2 13.0 1.30 39.3 10.4 23.3
Pfizer 7.0 32.2 14.0 1.16 45.0 13.8 23.9
American Home Products 6.7 17.5 8.0 1.73 56.8 9.4 22.1
Eli Lilly 7.3 7.5 9.0 1.71 54.5 14.7 30.6
Schering-Plough 7.2 13.2 11.5 1.26 40.9 13.2 27.3
Warner-Lambert 7.1 9.8 8.0 1.81 47.2 7.2 16.2
Amgent 22.8 12.5 15.0 1.22 0.0 21.1 42.7
Upjohn 0.9 (4.9) 4.0 3.48 53.2 17.5 19.0
Rhone-Poulenc Rorer 1.0 (4.4) 10.0 1.18 45.3 14.6 16.4
-----------------------------------------------------------------------------------------------------------
Mean: 8.6% 11.2% 10.2% 1.69x 44.0% 12.3% 24.6%
Median: (7.9) 5.7 10.5 1.43 46.3 11.8 23.6
-----------------------------------------------------------------------------------------------------------
</TABLE>
NOTES:
(1) Based on closing prices as of June 30, 1995 and latest publicly available
annual and 10-Q.
(2) Based on I/B/E/S estimates as of June 24, 1995.
<PAGE> 19
PROJECT ACTIVE
Preliminary Analysis of Unaffected Share Price
($MM)
<TABLE>
<CAPTION>
Price
Per Equity Agg. Prem/(Disc)
Share Value(1) Value(2) Current(3)
------ -------- -------- -----------
<S> <C> <C> <C> <C>
$5,717 $5,170 $48.63
$20.00 $2,352 $1,804 -58.9%
--------------------------------------------------------------------
Mean Pharma 1996 P/E 22.50 2,646 2,098 -53.7%
--------------------------------------------------------------------
25.00 2,940 2,392 -48.6%
--------------------------------------------------------------------
Amgen 1996 P/E 27.50 3,233 2,686 -43.4%
--------------------------------------------------------------------
30.00 3,527 2,980 -38.3%
32.50 3,821 3,274 -33.2%
--------------------------------------------------------------------
UNAFFECTED 35.00 4,115 3,568 -28.0%
SHARE PRICE 37.50 4,409 3,862 -22.9%
RANGE 40.00 4,703 4,156 -17.7%
42.50 4,997 4,450 -12.6%
45.00 5,291 4,744 -7.5%
--------------------------------------------------------------------
47.50 5,585 5,038 -2.3%
--------------------------------------------------------------------
Current Price (6/30/95) 48.63 5,717 5,170 0.0%
--------------------------------------------------------------------
50.00 5,879 5,332 2.8%
--------------------------------------------------------------------
Chiron 1997 P/E 52.50 6,173 5,626 8.0%
--------------------------------------------------------------------
55.00 6,467 5,920 13.1%
57.50 6,761 6.214 18.3%
60.00 7,055 6,508 23.4%
62.50 7,349 6,802 28.5%
65.00 7,643 7,096 33.7%
<CAPTION>
PRICE TO EARNINGS RATIO
-------------------------------------------------------------------------- AGGREGATE VALUE/
1995E(4)(5) 1996E(4)(5) 1996E P/E 1997E(4)(5) REVENUE
ACTUAL --------------- --------------- ---------- --------------- ----------------
LTM I/B/E/S Mgmnt I/B/E/S Mgmnt 5 Yr Grwth I/B/E/S Mgmnt LTM 1995E(5)
------ ------- ----- ------- ----- ---------- ------- ----- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$1.07 $1.30 $1.35 $1.40 $1.50 20.0% $1.75 $1.64 $835 $932
18.7x 15.4x 14.8x 14.3x 13.3x 0.7x 11.4x 12.2x 2.2x 1.9x
-----------------------------------------------------------------------------------------------------------------------
Mean Pharma 1996 P/E 21.0 17.3 16.7 16.1 15.0 0.8 12.9 13.7 2.5 2.3
-----------------------------------------------------------------------------------------------------------------------
23.4 19.2 18.5 17.9 16.7 0.8 14.3 15.2 2.9 2.6
-----------------------------------------------------------------------------------------------------------------------
Amgen 1996 P/E 25.7 21.2 20.4 19.6 18.3 0.9 15.7 16.8 3.2 2.9
-----------------------------------------------------------------------------------------------------------------------
28.0 23.1 22.2 21.4 20.0 1.0 17.1 18.3 3.6 3.2
30.4 25.0 24.1 23.2 21.7 1.1 18.6 19.8 3.9 3.5
-----------------------------------------------------------------------------------------------------------------------
UNAFFECTED 32.7 26.9 25.9 25.0 23.3 1.2 20.0 21.3 4.3 3.8
SHARE PRICE 35.0 28.8 27.8 26.8 25.0 1.3 21.4 22.9 4.6 4.1
RANGE 37.4 30.8 29.6 28.6 26.7 1.3 22.9 24.4 5.0 4.5
39.7 32.7 31.5 30.4 28.3 1.4 24.3 25.9 5.3 4.8
42.1 34.6 33.3 32.1 30.0 1.5 25.7 27.4 5.7 5.1
-----------------------------------------------------------------------------------------------------------------------
44.4 36.5 35.2 33.9 31.7 1.6 27.1 29.0 6.0 5.4
-----------------------------------------------------------------------------------------------------------------------
Current Price (6/30/95) 45.4 37.4 36.0 34.7 32.4 1.6 27.8 29.6 6.2 5.5
-----------------------------------------------------------------------------------------------------------------------
46.7 38.5 37.0 35.7 33.3 1.7 28.6 30.5 6.4 5.7
-----------------------------------------------------------------------------------------------------------------------
Chiron 1997 P/E 49.1 40.4 38.9 37.5 35.0 1.8 30.0 32.0 6.7 6.0
----------------------------------------------------------------------------------------------------------------------
51.4 42.3 40.7 39.3 36.7 1.8 31.4 33.5 7.1 6.4
53.7 44.2 42.6 41.1 38.3 1.9 32.9 35.1 7.4 6.7
56.1 46.2 44.4 42.9 40.0 2.0 34.3 36.6 7.8 7.0
58.4 48.1 46.3 44.6 41.7 2.1 35.7 38.1 8.1 7.3
60.7 50.0 48.1 46.4 43.3 2.2 37.1 39.6 8.5 7.6
</TABLE>
NOTES:
(1) Assumes 117.6 million shares outstanding as of March 31, 1995.
(2) Aggregate Value is equal to Equity Value plus Net Debt of -$547.2 million
as per the 10-Q dated March 31, 1995.
(3) Assumes an Active Company share price of $48.63 on June 30, 1995.
(4) Based on June 24, 1995 I/B/E/S estimates for EPS of $1.30, $1.40, and $1.75
for 1995, 1996, and 1997, respectively.
(5) Management estimates are projections by Active Company Management.
<PAGE> 20
PROJECT ACTIVE
Present Value of Future Share Prices
Standalone
<TABLE>
<CAPTION>
MANAGEMENT'S EARNINGS PER SHARE PROJECTIONS/YTY% GROWTH
----------------------------------------------------------
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$1.35 $1.50 $1.64 $2.00 $2.48 $3.55
29.8% 11.1% 9.3% 22.0% 24.0% 43.1%
<CAPTION>
AVERAGE OF "STREET" EARNINGS PER SHARE ESTIMATES/YTY% GROWTH
------------------------------------------------------------
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$1.31 $1.43 $1.91 $2.25 $2.70 N/A
26.0% 5.9% 33.6% 17.8% 20.0% NM
</TABLE>
<TABLE>
<CAPTION>
PRESENT VALUE AT 6/30/95 PRESENT VALUE OF 1996 SHARE PRICE PRESENT VALUE OF 1997 SHARE PRICE
------------------------ --------------------------------- ---------------------------------
FORWARD DISCOUNT DOWN 10% 1997 EPS UP 10% DOWN 10% 1998 EPS UP 10%
P/E RATE -------- -------- ------ -------- -------- ------
-------- -------- $1.48 $1.64 $1.80 $1.80 $2.00 $2.20
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
0.0% $21 $23 $25 $25 $28 $31
14 x 17.0% 18 20 22 18 20 22
25.0% 17 18 20 16 18 20
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
0.0% $24 $26 $29 $29 $32 $35
16 x 17.0% 20 22 25 21 23 26
25.0% 19 21 23 18 20 23
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
0.0% $27 $30 $32 $32 $36 $40
18 x 17.0% 23 25 28 24 26 29
25.5% 21 24 26 21 23 25
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
0.0% $30 $33 $36 $36 $40 $44
20 x 17.0% 25 28 31 26 29 32
25.0% 24 26 29 23 26 28
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
0.0% $32 $36 $40 $40 $44 $48
22 x 17.0% 28 31 34 29 32 35
25.0% 26 29 32 25 28 31
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
0.0% $35 $39 $43 $43 $48 $53
24 x 17.0% 30 34 37 32 35 39
25.0% 28 31 35 28 31 34
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
0.0% $38 $43 $47 $47 $52 $57
26 x 17.0% 33 36 40 34 38 42
25.0% 31 34 38 30 33 37
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
0.0% $41 $46 $51 $50 $56 $62
28 x 17.0% 35 39 43 37 41 45
25.0% 33 37 40 32 36 39
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
0.0% $44 $49 $54 $54 $60 $66
30 x 17.0% 38 42 46 39 44 48
25.0% 35 39 43 35 38 42
---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PRESENT VALUE AT 6/30/95 PRESENT VALUE OF 1998 SHARE PRICE PRESENT VALUE OF 1999 SHARE PRICE
------------------------ --------------------------------- ---------------------------------
FORWARD DISCOUNT DOWN 10% 1999 EPS UP 10% DOWN 10% 2000 EPS UP 10%
P/E RATE -------- -------- ------ -------- -------- ------
-------- -------- $2.23 $2.48 $2.73 $3.20 $3.55 $3.91
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
0.0% $31 $35 $38 $45 $50 $55
14 x 17.0% 20 22 24 24 27 29
25.0% 16 18 20 18 20 22
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
0.0% $36 $40 $44 $51 $57 $62
16 x 17.0% 22 25 27 27 30 33
25.0% 18 20 22 21 23 26
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
0.0% $40 $45 $49 $58 $64 $70
18 x 17.0% 25 28 31 31 34 38
25.5% 21 23 25 24 25 29
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
0.0% $45 $50 $55 $64 $71 $78
20 x 17.0% 28 31 34 34 38 42
25.0% 23 25 28 26 29 32
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
0.0% $49 $55 $60 $70 $78 $86
22 x 17.0% 31 34 37 38 42 46
25.0% 25 28 31 29 32 35
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
0.0% $54 $60 $65 $77 $85 $94
24 x 17.0% 33 37 41 41 45 50
25.0% 27 30 34 31 35 38
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
0.0% $58 $64 $71 $83 $92 $102
26 x 17.0% 36 40 44 44 49 54
25.0% 30 33 36 34 38 42
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
0.0% $62 $69 $76 $89 $99 $109
28 x 17.0% 39 43 48 48 53 58
25.0% 32 36 39 37 41 45
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
0.0% $67 $74 $82 $96 $107 $117
30 x 17.0% 42 46 51 51 57 63
25.0% 34 38 42 39 44 48
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 21
PROJECT ACTIVE
Summary of Premia Paid in Selected Precedent Transactions
Partial Sale Transactions -- Cash Tender
<TABLE>
<CAPTION>
PREMIA PAID AVERAGE
----------------------------------------------------------------------------- -------------
APPLIED GENETICS
PERIOD (1) ACTIVE COMPANY CHIRON IMMUNE SCI. INSTITUTE SYSTEMIX
------------------------ -------------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
12 Month Average 82.6% 68.3% 83.9% 34.5% -- % 67.3%
6 Month Average 73.7 87.9 76.1 46.5 -- 71.0
3 Month Average 69.5 81.6 81.8 52.0 97.7 76.5
1 Month Average 69.5 88.0 76.7 39.4 99.1 74.5
One Month Prior 64.6 91.8 100.0 50.4 101.4 81.6
1 Day Prior 65.5 95.8 57.9 31.6 110.5 72.3
LTM High Close 56.5 23.0 39.5 (19.4) 27.3 25.4
LTM Low Close 110.2 125.5 166.7 75.4 268.4 149.3
-----------------------------------------------------------------------------------------------------------------------------
AVERAGE IMPLIED
PREMIUM 74.0% 82.7% 85.3% 38.8% 117.4% 79.7%
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: (1) Period ends one day prior to announcement date of transaction.
(2) Period ends 5/1/95.
<PAGE> 22
PROJECT ACTIVE
Summary of Premia Paid in Selected Precedent Transactions
Partial Sale Transactions -- Blended Value
<TABLE>
<CAPTION>
BLENDED VALUE AS A PREMIUM AVERAGE
----------------------------------------------------------------------------- -------------
APPLIED GENETICS
PERIOD (1) ACTIVE COMPANY CHIRON IMMUNE SCI. INSTITUTE SYSTEMIX
------------------------ -------------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
12 Month Average 47.1% 13.8% 21.4% 1.9% -- % 21.1%
6 Month Average 39.9 27.0 16.2 11.0 -- 23.5
3 Month Average 36.5 22.8 20.0 15.1 56.1 30.1
1 Month Average 36.5 27.1 16.6 5.6 57.1 28.6
One Month Prior 32.6 29.7 32.0 13.9 59.0 33.4
1 Day Prior 33.3 32.4 4.2 (0.3) 66.2 27.2
LTM High Close 26.1 (16.8) (7.9) (38.9) 0.5 (7.4)
LTM Low Close 69.3 52.5 76.0 32.9 190.8 84.3
-----------------------------------------------------------------------------------------------------------------------------
AVERAGE IMPLIED 40.2% 23.6% 22.3% 5.1% 53.7% 29.0%
PREMIUM
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: (1) Period ends one day prior to announcement date of transaction.
(2) Period ends 5/1/95.
<PAGE> 23
PROJECT ACTIVE
Summary of Premia Paid in Selected Precedent Transactions
100% Sale Transactions
<TABLE>
<CAPTION>
PREMIA PAID AVERAGE
----------------------------------------------------------------------------- -------------
PERIOD (1) VIAGENE AFFYMAX SYNERGEN SPHINX GLYCOMED VESTAR
----------------- ----------- ------------ -------------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
12 Month Average 91.5% 93.6% 3.0% 76.9% 29.9% 4.5% 49.9%
6 Month Average 85.7 83.3 47.2 105.0 66.7 10.9 66.5
3 Month Average 52.8 73.7 81.6 113.8 53.9 18.4 65.7
1 Month Average 50.2 72.1 77.0 118.7 43.6 28.7 65.0
One Month Prior 44.7 62.2 72.1 100.0 50.7 21.2 58.5
1 Day Prior 64.8 66.7 72.1 108.7 30.5 28.8 61.9
LTM High Close 20.1 57.9 (35.7) 10.3 (45.3) (17.3) -1.7
LTM Low Close 162.5 160.9 120.9 140.0 126.1 43.6 125.7
-----------------------------------------------------------------------------------------------------------------------------
AVERAGE IMPLIED 71.5% 83.8% 54.8% 96.7% 44.5% 17.3% 61.4%
PREMIUM
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: (1) Period ends one day prior to announcement date of transaction.
(2) Period ends 5/1/95.
<PAGE> 24
PROJECT ACTIVE
Selected Transactions in the Biotechnology Sector
<TABLE>
<CAPTION>
Applied
Immune
Viagene/ Glycomed/ Affymax/ Chiron/ Synergen/ Vestar/ Sphinx/ Eli Sciences/
Chiron(2) Ligand Glaxo Ciba(3) Amgen NeXagen Lilly RPR(3) Nova/
4/95 2/95 1/95 11/94 11/94 10/94 3/94 6/93 Scios 5/92
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
% Premiums to 54% 51% 62% 30% 72% 21% 100% 32% (22%)
Unaffected 92 100
Market Price(1)
MEDIAN 62%(5)
MEDIAN 47%(6)
</TABLE>
<TABLE>
<CAPTION>
Genetics
SyStemix/ Institute/ Cetus/ Genetech/
Sandoz(3) AHP(3) Chiron(4) Roche(3)
12/91 9/91 7/91 2/90
<S> <C> <C> <C> <C>
% Premiums to 59% 14% 47% 33%
Unaffected 101 50 65
Market Price(1)
</TABLE>
Notes: (1) Premium represents offer price over unaffected market price.
Unaffected market price defined as the closing market price one
month prior to announcement.
(2) Premium to unaffected 2 months prior to transaction announcement
to factor out acquisition in Viagene share price.
(3) In less than 100% purchased transactions, premium represent cash
offer price over unaffected market price. Lower premium
represents "blended value" over unaffected market price. "Blended
value" defined as market price one week prior to closing.
(4) Premium to unaffected 6 months prior to transaction to factor out
acquisition speculation in Cetus share price.
(5) Median of all premiums using premium paid and cash tender for
partial deals.
(6) Median of all premiums using premium of blended value for
partial deals.
<PAGE> 25
PROJECT ACTIVE
Premiums Paid in Selected Pharmaceutical M&A Transactions (1)
<TABLE>
<CAPTION>
Premium Paid Multiples
Over -------------------------------------
Announcement Equity Unaffected LTM LTM Forward Net
Date Acquiree Acquiror Value Price(2) Sales Net Income Income(3)
------------ --------------- -------------- --------- ---------- ------------ ---------- -----------
($Bn)
<S> <C> <C> <C> <C> <C> <C> <C>
02/28/95 Marion Merrell Hoechst AG $ 7.2 51%(5) 2.3x 16.4x 19.8x
Dow
01/23/95 Wellcome plc(4) Glaxo plc 15.2 51 4.2 23.2 21.0
08/01/94 American American Home 9.4 84 2.1 24.9 20.9
Cyanamid Products
05/02/94 Syntex Roche Holdings 5.3 73 2.5 10.5 20.3
01/15/90 Rorer Rhone-Poulenc 3.4 63 3.2 42.4 N.A.
07/27/89 Squibb Bristol-Myers 12.2 56 4.7 27.9 20.8
07/17/89 Marion Labs Dow Chemical 5.9 52 6.1 26.0 N.A.
04/17/89 SmithKline Beecham Group 8.9 37 2.1 18.0 16.9
Beckman
01/22/88 Sterling Drug Eastman Kodak 5.2 95 2.4 27.7 23.2
---------------------------------------------------------
Mean: 62 3.3x 24.1x 20.4x
Median: 56 2.5 24.9 20.3
---------------------------------------------------------
</TABLE>
Notes: (1) Excludes transactions involving pharmaceutical benefit
management, clinical diagnostic and generic drug companies.
(2) Defined as the price one month prior to announcement.
(3) Forward Net Income multiples based on I/B/E/S estimates for
forward year earnings at time of deal announcement.
(4) Announced, not closed.
(5) Based on assumed unaffected price of $17.00 per share, based on
prices prevailing in February - March 1994.
<PAGE> 26
PROJECT ACTIVE
Acquisition Multiple Matrix
($MM)
<TABLE>
<CAPTION>
PRICE TO EARNINGS RATIO
-------------------------------------------------------
PRICE PREMIUM TO 1995E(3)(4) 1996E(3)(4)
PER EQUITY AGG. UNAFFECTED ACTUAL ------------------ ----------------------
SHARE VALUE(1) VALUE(2) SHARE PRICE LTM I/B/E/S MGMNT I/B/E/S MGMNT
--------- ---------- --------- ----------- ------ ------- -------- ---------- ---------
--------------------------------------------------------------------------------------------------------
$40.00 $1.07 $1.30 $1.35 $1.40 $1.50
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$45.00 $5,373 $4,826 12.5% 42.1 x 34.6 x 33.3 x 32.1 x 30.0 x
47.50 5,707 5,160 18.8% 44.4 36.5 35.2 33.9 31.7
-----------------------------------------------------------------------------------------------------------------------------------
Current Price (6/30/95) 48.63 5,858 5,310 21.6% 45.4 37.4 36.0 34.7 32.4
------------------------------------------------------------------------------------------------------------------------------------
50.00 6,042 5,494 25.0% 46.7 38.5 37.0 35.7 33.3
========================================================================================================
52.00 6,309 5,762 30.0% 48.6 40.0 38.5 37.1 34.7
========
52.50 6,376 5,829 31.3% 49.1 40.4 38.9 37.5 35.0
55.00 6,710 6,163 37.5% 51.4 42.3 40.7 39.3 36.7
57.50 7,044 6,497 43.8% 53.7 44.2 42.6 41.1 38.3
60.00 7,379 6,831 50.0% 56.1 46.2 44.4 42.9 40.0
62.50 7,713 7,166 56.3% 58.4 48.1 46.3 44.6 41.7
========
64.00 7,913 7,366 60.0% 59.8 49.2 47.4 45.7 42.7
========================================================================================================
65.00 8,047 7,500 62.5% 60.7 50.0 48.1 46.4 43.3
67.50 8,381 7,834 68.8% 63.1 51.9 50.0 48.2 45.0
70.00 8,716 8,168 75.0% 65.4 53.8 51.9 50.0 46.7
72.50 9,050 8,503 81.3% 67.8 55.8 53.7 51.8 48.3
75.00 9,384 8,837 87.5% 70.1 57.7 55.6 53.6 50.0
77.50 9,718 9,171 93.8% 72.4 59.6 57.4 55.4 51.7
80.00 10,053 9,505 100.0% 74.8 61.5 59.3 57.1 53.3
82.50 10,387 9,840 106.3% 77.1 63.5 61.1 58.9 55.0
85.00 10,721 10,174 112.5% 79.4 65.4 63.0 60.7 56.7
87.50 11,055 10,508 118.8% 81.8 67.3 64.8 62.5 58.3
90.00 11,390 10,842 125.0% 84.1 69.2 66.7 64.3 60.0
</TABLE>
<TABLE>
<CAPTION>
PRICE TO EARNINGS RATIO AGGREGATE VALUE/
---------------------------------- -----------------------------
1997E(3)(4) REVENUE
---------------------------------- -----------------------------
I/B/E/S MGMNT LTM 1995E(4)
-------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
$1.75 $1.64 $835 $932
25.7 x 27.4 x 5.8 x 5.2 x
27.1 29.0 6.2 5.5
Current Price (6/30/95) 27.8 29.6 6.4 5.7
28.6 30.5 6.6 5.9
=========================================================================
29.7 31.7 6.9 6.2
30.0 32.0 7.0 6.3
31.4 33.5 7.4 6.6
32.9 35.1 7.8 7.0
34.3 36.6 8.2 7.3
35.7 38.1 8.6 7.7
36.6 39.0 8.8 7.9
=========================================================================
37.1 39.6 9.0 8.0
38.6 41.2 9.4 8.4
40.0 42.7 9.8 8.8
41.4 44.2 10.2 9.1
42.9 45.7 10.6 9.5
44.3 47.3 11.0 9.8
45.7 48.8 11.4 10.2
47.1 50.3 11.8 10.6
48.6 51.8 12.2 10.9
50.0 53.4 12.6 11.3
51.4 54.9 13.0 11.6
</TABLE>
NOTES:
(1) Uses the Treasury Stock method. Assumes 117.6 million shares
outstanding as of March 31, 1995 and 16.1 million options and
warrants at an average exercise price of $39.92.
(2) Aggregate Value is equal to Equity Value plus Net Debt of -$547.2
million as per the 10-Q dated March 31, 1995.
(3) Based on June 24, 1995 I/B/E/S estimates for EPS of $1.30, $1.40,
and $1.75 for 1995, 1996, and 1997, respectively.
(4) Management estimates are projections by Active Company Management.
<PAGE> 27
PROJECT ACTIVE
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
DISCOUNTED CASH FLOW VALUE
-------------------------------------------------------------------------------------------------
LTM P/E TERMINAL MULTIPLE
-------------------------------------------------------------------------------------------------
18.0 20.0 22.5 25.0 27.5 28.0 30.0
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
15.0% $44.20 $47.46 $51.52 $55.59 $59.66 $60.47 $63.73
DISCOUNT RATE 17.0% 41.30 44.26 47.96 51.66 55.36 56.10 59.06
-----
19.0% 38.53 41.39 44.76 48.13 51.50 52.18 54.88
--------------------------------
21.0% 35.87 38.66 41.89 44.97 48.04 48.66 51.12
23.0% 33.47 36.03 39.22 42.12 44.93 45.49 47.74
</TABLE>
<TABLE>
<CAPTION>
CHANGE IN DISCOUNTED CASH FLOW VALUE FROM 22.5x LTM P/E @ 17% DISCOUNT RATE
-------------------------------------------------------------------------------------------------
% IMPROVEMENT IN ANNUAL REVENUE (1997-2000)
-------------------------------------------------------------------------------------------------
-15% -10% -5% -0% 5% 10% 15%
---- ---- --- --- -- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-6.0% ($12.53) ($10.25) ($7.98) ($5.97) ($3.96) ($1.95) $0.05
-4.0% (10.61) (8.22) (6.09) (3.98) (1.87) 0.24 2.34
EBIT
MARGIN -2.0% (8.69) (6.40) (4.20) (1.99) 0.22 2.42 4.63
IMPROVEMENT
(1997-2000) 0.0% (6.92) (4.61) (2.31) 0.00 2.31 4.61 6.92
2.0% (5.23) (2.82) (0.42) 1.99 4.40 6.80 9.21
4.0% (3.54) (1.03) 1.47 3.98 6.48 8.99 11.49
6.0% (1.85) 0.76 3.36 5.97 8.57 11.18 13.78
</TABLE>
<PAGE> 28
PROJECT ACTIVE
Historical Trading Performance Since 1990
09/10/90-06/30/95
<TABLE>
<CAPTION>
ACTUAL
DATES SHARE PRICE VOLUME CALL PRICE
------------------------------------------------------------------
<S> <C> <C> <C>
10-Sep-90 $23.88 507,500 $38.00
-----------------------------------------------------------------
01-Oct-90 24.75 158,600 38.00
-----------------------------------------------------------------
01-Jan-91 22.50 75,500 39.00
-----------------------------------------------------------------
01-Apr-91 25.50 111,400 40.00
-----------------------------------------------------------------
01-Jul-91 27.38 168,000 41.25
-----------------------------------------------------------------
01-Oct-91 28.50 64,800 42.50
-----------------------------------------------------------------
01-Jan-92 32.25 149,000 43.75
-----------------------------------------------------------------
01-Apr-92 28.00 149,800 45.00
-----------------------------------------------------------------
01-Jul-92 32.13 121,900 46.25
-----------------------------------------------------------------
01-Oct-92 34.88 64,900 47.50
-----------------------------------------------------------------
01-Jan-93 37.38 147,600 48.75
-----------------------------------------------------------------
01-Apr-93 35.88 60,700 50.00
-----------------------------------------------------------------
01-Jul-93 44.00 127,000 51.25
-----------------------------------------------------------------
01-Oct-93 43.13 68,900 52.50
-----------------------------------------------------------------
01-Jan-94 49.63 201,500 53.75
-----------------------------------------------------------------
01-Apr-94 44.00 541,800 55.00
-----------------------------------------------------------------
01-Jul-94 48.38 140,400 56.25
-----------------------------------------------------------------
01-Oct-94 51.75 55,100 57.50
-----------------------------------------------------------------
01-Jan-95 45.63 90,900 58.75
-----------------------------------------------------------------
01-Apr-95 49.50 750,100 60.00
-----------------------------------------------------------------
30-Jun-95 48.63 66,700 60.00
-----------------------------------------------------------------
</TABLE>
<PAGE> 29
PROJECT ACTIVE
Indexed Price Graph
01/01/90 -- 06/30/95
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
BIOTECH INDEX --
DATE ACTIVE COMPANY TIER 1(1) PHARMA INDEX(2) S & P 400
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
01-Jan-90 N.A. 100.00 100.00 100.00
---------------------------------------------------------------------------------------------------------------------
02-Apr-90 N.A. 108.21 96.66 97.36
---------------------------------------------------------------------------------------------------------------------
02-Jul-90 N.A. 145.03 114.00 104.71
---------------------------------------------------------------------------------------------------------------------
01-Oct-90 103.66 141.76 106.01 91.83
---------------------------------------------------------------------------------------------------------------------
01-Jan-91 94.24 179.84 113.41 96.02
---------------------------------------------------------------------------------------------------------------------
01-Apr-91 106.81 260.88 129.80 108.96
---------------------------------------------------------------------------------------------------------------------
01-Jul-91 114.66 228.65 131.12 111.62
---------------------------------------------------------------------------------------------------------------------
01-Oct-91 119.37 324.40 140.34 113.97
---------------------------------------------------------------------------------------------------------------------
01-Jan-92 135.08 370.26 161.73 122.11
---------------------------------------------------------------------------------------------------------------------
01-Apr-92 117.28 241.71 141.07 119.28
---------------------------------------------------------------------------------------------------------------------
01-Jul-92 134.55 241.19 133.84 120.45
---------------------------------------------------------------------------------------------------------------------
01-Oct-92 146.07 222.54 126.71 120.94
---------------------------------------------------------------------------------------------------------------------
01-Jan-93 156.54 277.59 131.00 125.77
---------------------------------------------------------------------------------------------------------------------
01-Apr-93 150.26 187.43 116.77 127.76
---------------------------------------------------------------------------------------------------------------------
01-Jul-93 184.29 211.84 117.51 126.81
---------------------------------------------------------------------------------------------------------------------
01-Oct-93 180.63 227.83 114.81 128.77
---------------------------------------------------------------------------------------------------------------------
03-Jan-94 207.85 245.71 120.19 133.85
---------------------------------------------------------------------------------------------------------------------
01-Apr-94 184.29 206.96 105.07 129.16
---------------------------------------------------------------------------------------------------------------------
01-Jul-94 202.62 193.52 111.90 128.54
---------------------------------------------------------------------------------------------------------------------
03-Oct-94 216.75 251.70 127.10 135.76
---------------------------------------------------------------------------------------------------------------------
02-Jan-95 191.10 248.48 129.92 135.69
---------------------------------------------------------------------------------------------------------------------
03-Apr-95 207.33 236.88 143.78 148.21
---------------------------------------------------------------------------------------------------------------------
30-Jun-95 203.66 258.48 155.47 161.01
---------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) Biotech Index -- Tier 1 is market capitalization weighted and
includes Amgen, Biogen, Centocor, Chiron, Genetics Institute,
Genzyme and Immunex.
(2) Pharma Index is market capitalization weighted and includes Abbott
Laboratories, American Home Products, Bristol-Myers Squibb, Eli
Lilly, Johnson & Johnson, Merck, Pfizer, Rhone-Poulenc Rorer,
Schering Plough, Upjohn and Warner Lambert.
<PAGE> 30
PROJECT ACTIVE
Historical Discounts of Actual Share
Prices to Near Term Call Price
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
% DISCOUNT OF ACTUAL
SHARE PRICE TO
DATE ACTUAL SHARE PRICE CALL PRICE NEAR TERM CALL
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
01/Jan/91 22.50 39.00 42.3%
-------------------------------------------------------------------------------------------
31/Mar/91 25.50 39.00 34.6
-------------------------------------------------------------------------------------------
30/Jun/91 27.50 40.00 31.3
-------------------------------------------------------------------------------------------
30/Sep/91 28.38 41.25 31.2
-------------------------------------------------------------------------------------------
31/Dec/91 32.25 42.50 24.1
-------------------------------------------------------------------------------------------
31/Mar/92 27.38 43.75 37.4
-------------------------------------------------------------------------------------------
30/Jun/92 31.75 45.00 29.4
-------------------------------------------------------------------------------------------
30/Sep/92 34.00 46.25 26.5
-------------------------------------------------------------------------------------------
31/Dec/92 37.38 47.50 21.8
-------------------------------------------------------------------------------------------
31/Mar/93 36.13 48.75 25.9
-------------------------------------------------------------------------------------------
30/Jun/93 44.00 50.00 12.0
-------------------------------------------------------------------------------------------
30/Sep/93 42.88 51.25 16.3
-------------------------------------------------------------------------------------------
31/Dec/93 50.50 52.50 3.8
-------------------------------------------------------------------------------------------
31/Mar/94 44.00 53.75 18.1
-------------------------------------------------------------------------------------------
30/Jun/94 49.25 55.00 10.5
-------------------------------------------------------------------------------------------
30/Sep/94 52.50 56.25 6.7
-------------------------------------------------------------------------------------------
31/Dec/94 45.63 57.50 20.7
-------------------------------------------------------------------------------------------
31/Mar/95 46.88 58.75 20.2
-------------------------------------------------------------------------------------------
30/Jun/95 48.63 60.00 18.5
-------------------------------------------------------------------------------------------
Mean 22.7
-------------------------------------------------------------------------------------------
Median 21.8
-------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 31
PROJECT ACTIVE
Implied Future Share Prices
Methodology: Historical Discount to Near Term Call Price
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
HISTORICAL
IMPLIED FUTURE DISCOUNT AS A %
DATE CALL PRICE PV OF PUT PRICE(1) SHARE PRICE OF CALL PRICE
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
07/01/95 $61.25 $46.97 $42.11 31.3%
---------------------------------------------------------------------------------------------------------------------
09/30/95 61.25 47.70 42.13 31.2
---------------------------------------------------------------------------------------------------------------------
12/31/95 62.50 48.43 47.43 24.1
---------------------------------------------------------------------------------------------------------------------
03/31/96 63.75 49.18 39.89 37.4
---------------------------------------------------------------------------------------------------------------------
06/30/96 65.00 49.94 45.86 29.4
---------------------------------------------------------------------------------------------------------------------
09/30/96 66.25 50.71 48.70 26.5
---------------------------------------------------------------------------------------------------------------------
12/31/96 67.50 51.49 52.76 21.8
---------------------------------------------------------------------------------------------------------------------
03/31/97 68.75 52.28 50.95 25.9
---------------------------------------------------------------------------------------------------------------------
06/30/97 70.00 53.09 61.60 12.0
---------------------------------------------------------------------------------------------------------------------
09/30/97 71.50 53.91 59.82 16.3
---------------------------------------------------------------------------------------------------------------------
12/31/97 73.00 54.74 70.22 3.8
---------------------------------------------------------------------------------------------------------------------
03/31/98 74.50 55.58 60.99 18.1
---------------------------------------------------------------------------------------------------------------------
06/30/98 76.00 56.44 68.05 10.5
---------------------------------------------------------------------------------------------------------------------
09/30/98 77.50 57.31 72.33 6.7
---------------------------------------------------------------------------------------------------------------------
12/31/98 79.00 58.19 62.68 20.7
---------------------------------------------------------------------------------------------------------------------
03/31/99 80.50 59.09 64.23 20.2
---------------------------------------------------------------------------------------------------------------------
06/30/99 82.00 60.00 66.80 18.5
---------------------------------------------------------------------------------------------------------------------
Mean 20.9
---------------------------------------------------------------------------------------------------------------------
Median 20.7
---------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: (1) Based on a four year AA bond rate of 6.31% on 06/30/95.
<PAGE> 32
PROJECT ACTIVE
Historical IRR of Actual Share Prices to 06/30/95 Call Price
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
DATE ACTUAL SHARE PRICE CALL PRICE % IRR TO END CALL PRICE
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
01/01/91 $22.50 $39.00 $24.4%
-------------------------------------------------------------------------------------------
03/31/91 25.50 39.00 22.3
-------------------------------------------------------------------------------------------
06/30/91 27.50 40.00 21.5
-------------------------------------------------------------------------------------------
09/30/91 28.38 41.25 22.1
-------------------------------------------------------------------------------------------
12/31/91 32.25 42.50 19.4
-------------------------------------------------------------------------------------------
03/31/92 27.38 43.75 27.3
-------------------------------------------------------------------------------------------
06/30/92 31.75 45.00 23.6
-------------------------------------------------------------------------------------------
09/30/92 34.00 46.25 22.9
-------------------------------------------------------------------------------------------
12/31/92 37.13 47.50 21.2
-------------------------------------------------------------------------------------------
03/31/93 36.13 48.75 25.3
-------------------------------------------------------------------------------------------
06/30/93 44.00 50.00 16.8
-------------------------------------------------------------------------------------------
09/30/93 42.88 51.25 21.2
-------------------------------------------------------------------------------------------
12/31/93 50.50 52.50 12.2
-------------------------------------------------------------------------------------------
03/31/94 44.00 53.75 28.2
-------------------------------------------------------------------------------------------
06/30/94 49.25 55.00 21.8
-------------------------------------------------------------------------------------------
09/30/94 52.50 56.25 19.5
-------------------------------------------------------------------------------------------
12/31/94 45.63 57.50 72.9
-------------------------------------------------------------------------------------------
03/31/95 46.88 58.75 168.4
-------------------------------------------------------------------------------------------
06/30/95 48.63 60.00 N.M.
-------------------------------------------------------------------------------------------
Mean(1) 21.9
-------------------------------------------------------------------------------------------
Median 22.0
-------------------------------------------------------------------------------------------
</TABLE>
End Call Price 6/30/95 $60
Note: (1) Mean IRR to End Call Price calculated from 01/01/91 to 09/30/94.
<PAGE> 33
PROJECT ACTIVE
Implied Future Share Prices
Methodology: Historical IRR to End Call Price
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
IMPLIED FUTURE IMPLIED FUTURE SHARE PRICE
CALL SHARE PRICE BASED BASED ON AVERAGE OF 21.6%
DATE PRICE PV OF PUT PRICE(1) ON HISTORICAL IRR HISTORICAL IRR TO END CALL(2)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
07/01/95 $61.25 $46.97 $37.58 $37.45
------------------------------------------------------------------------------------------------------------------------
09/30/95 61.25 47.70 38.78 39.33
------------------------------------------------------------------------------------------------------------------------
12/31/95 62.50 48.43 44.08 41.31
------------------------------------------------------------------------------------------------------------------------
03/31/96 63.75 49.18 37.41 43.38
------------------------------------------------------------------------------------------------------------------------
06/30/96 65.00 49.94 43.39 45.56
------------------------------------------------------------------------------------------------------------------------
09/30/96 66.25 50.71 46.47 47.84
------------------------------------------------------------------------------------------------------------------------
12/31/96 67.50 51.49 50.74 50.25
------------------------------------------------------------------------------------------------------------------------
03/31/97 68.75 52.28 49.37 52.77
------------------------------------------------------------------------------------------------------------------------
06/30/97 70.00 53.09 60.13 55.42
------------------------------------------------------------------------------------------------------------------------
09/30/97 71.50 53.91 58.60 58.20
------------------------------------------------------------------------------------------------------------------------
12/31/97 73.00 54.74 69.02 61.12
------------------------------------------------------------------------------------------------------------------------
03/31/98 74.50 55.58 60.13 64.19
------------------------------------------------------------------------------------------------------------------------
06/30/98 76.00 56.44 67.31 67.41
------------------------------------------------------------------------------------------------------------------------
09/30/98 77.50 57.31 71.75 70.79
------------------------------------------------------------------------------------------------------------------------
12/31/98 79.00 58.19 62.35 74.35
------------------------------------------------------------------------------------------------------------------------
03/31/99 80.50 59.09 64.06 78.08
------------------------------------------------------------------------------------------------------------------------
06/30/99 82.00 60.00 N.M. 82.00
------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) Based on a four year AA bond rate of 6.31% on 06/30/95.
(2) Mean IRR to End Call Price calculated from 07/01/95 to 09/30/98.
<PAGE> 34
PROJECT ACTIVE
Comparison of Historical Share Prices to Implied P/E Multiples
<TABLE>
<CAPTION>
06/30/91 06/30/92 06/30/93 06/30/94 06/30/95
<S> <C> <C> <C> <C> <C>
Actual Share Price(1) $25.50 - $30.50 $26.13 - $35.38 $31.50 - $44.50 $44.00 - $52.50 $45.88 - $51.88(2)
Active Forward $.70 $0.20 $0.64 $1.25 $1.40
Calendar Year EPS(3)
Implied Forward P/E 36.4x - 43.6x 130.6x - 176.9x 49.2x - 69.5x 35.2x - 42.0x 33.5x - 37.1x
Multiple
Comparable Average 33.4x 45.8x 27.5x 28.9x 31.7x
Forward P/E(4)
</TABLE>
Notes: (1) Trading Value closing prices for the period from 03/31 to 09/30
in the corresponding year.
(2) Trading Value closing prices for the period from 03/31 to 06/30
in the corresponding year.
(3) Median I/B/E/S forward estimate as of June 30 of the
corresponding year.
(4) Average 1-year forward P/E multiples for comparables (AMGN, BGEN,
CPIR, GENZ).
<PAGE> 35
PROJECT ACTIVE
Implied Unaffected Future Share Prices
Methodology: Forward P/E Multiple
Standalone(1)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
IMPLIED FUTURE
DATES CALL PRICE PUT PRICE(2) SHARE PRICE RANGE
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
07/01/95 $61.25 $46.97 $39.00 $42.00
---------------------------------------------------------------------------------------------------------------------
09/30/95 61.25 47.70 39.00 42.00
---------------------------------------------------------------------------------------------------------------------
12/31/95 62.50 48.43 39.00 42.00
---------------------------------------------------------------------------------------------------------------------
03/31/96 63.75 49.18 39.36 42.64
---------------------------------------------------------------------------------------------------------------------
06/30/96 65.00 49.94 39.36 42.64
---------------------------------------------------------------------------------------------------------------------
09/30/96 66.25 50.71 39.36 42.64
---------------------------------------------------------------------------------------------------------------------
12/31/96 67.50 51.49 39.36 42.64
---------------------------------------------------------------------------------------------------------------------
03/31/97 68.75 52.28 44.00 48.00
---------------------------------------------------------------------------------------------------------------------
06/30/97 70.00 53.09 44.00 48.00
---------------------------------------------------------------------------------------------------------------------
09/30/97 71.50 53.91 44.00 48.00
---------------------------------------------------------------------------------------------------------------------
12/31/97 73.00 54.74 44.00 48.00
---------------------------------------------------------------------------------------------------------------------
03/31/98 74.50 55.58 49.60 54.56
---------------------------------------------------------------------------------------------------------------------
06/30/98 76.00 56.44 49.60 54.56
---------------------------------------------------------------------------------------------------------------------
09/30/98 77.50 57.31 49.60 54.56
---------------------------------------------------------------------------------------------------------------------
12/31/98 79.00 58.19 49.60 54.56
---------------------------------------------------------------------------------------------------------------------
03/31/99 80.50 59.09 63.90 71.00
---------------------------------------------------------------------------------------------------------------------
06/30/99 82.00 60.00 63.90 71.00
---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
07/01/95 09/30/95 12/31/95 03/31/96 06/30/96 09/30/96 12/31/96 03/31/97 06/30/97 09/30/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Forward EPS Estimate $1.50 $1.50 $1.50 $1.64 $1.64 $1.64 $1.64 $2.00 $2.00 $2.00
Unaffected 18 27.00 27.00 27.00 29.52 29.52 29.52 29.52 36.00 36.00 36.00
P/E Multiple
20 30.00 30.00 30.00 32.80 32.80 32.80 32.80 40.00 40.00 40.00
---------------------------
22 33.00 33.00 33.00 36.08 36.08 36.08 36.08 44.00 44.00 44.00
--------------------------------------
24 36.00 36.00 36.00 39.36 39.36 39.36 39.36 48.00 48.00 48.00
-------------------------- ---------------------------
26 39.00 39.00 39.00 42.64 42.64 42.64 42.64 52.00 52.00 52.00
--------------------------------------
28 42.00 42.00 42.00 45.92 45.92 45.92 45.92 56.00 56.00 56.00
--------------------------
30 45.00 45.00 45.00 49.20 49.20 49.20 49.20 60.00 60.00 60.00
<CAPTION>
12/31/97 03/31/98 06/30/98 09/30/98 12/31/98 03/31/99 06/30/99
<S> <C> <C> <C> <C> <C> <C> <C>
Forward EPS Estimate $2.00 $2.48 $2.48 $2.48 $2.48 $3.55 $3.55
----------------
Unaffected 18 36.00 44.64 44.64 44.64 44.64 63.90 63.90
P/E Multiple --------------------------------------
20 40.00 49.60 49.60 49.60 49.60 71.00 71.00
----- ----------------
22 44.00 54.56 54.56 54.56 54.56 78.10 78.10
--------------------------------------
24 48.00 59.52 59.52 59.52 59.52 85.20 85.20
-----
26 52.00 64.48 64.48 64.48 64.48 92.30 92.30
28 56.00 69.44 69.44 69.44 69.44 99.40 99.40
30 60.00 74.40 74.40 74.40 74.40 106.50 106.50
</TABLE>
Notes: (1) Management numbers with no collaboration.
(2) Based on a four year AA bond rate of 6.31% on 06/30/95.
<PAGE> 36
PROJECT ACTIVE
Implied Unaffected Future Share Prices
Methodology: Forward P/E Multiple
With Collaboration(1)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
IMPLIED FUTURE
DATE CALL PRICE PUT PRICE(2) SHARE PRICE RANGE
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
07/01/95 $61.25 $46.97 $54.60 $58.80
---------------------------------------------------------------------------------------------------------------------
09/30/95 61.25 47.70 54.60 58.80
---------------------------------------------------------------------------------------------------------------------
12/31/95 62.50 48.43 54.60 58.80
---------------------------------------------------------------------------------------------------------------------
03/31/96 63.75 49.18 52.56 56.94
---------------------------------------------------------------------------------------------------------------------
06/30/96 65.00 49.94 52.56 56.94
---------------------------------------------------------------------------------------------------------------------
09/30/96 66.25 50.71 52.56 56.94
---------------------------------------------------------------------------------------------------------------------
12/31/96 67.50 51.49 52.56 56.94
---------------------------------------------------------------------------------------------------------------------
03/31/97 68.75 52.28 51.26 55.92
---------------------------------------------------------------------------------------------------------------------
06/30/97 70.00 53.09 51.26 55.92
---------------------------------------------------------------------------------------------------------------------
09/30/97 71.50 53.91 51.26 55.92
---------------------------------------------------------------------------------------------------------------------
12/31/97 73.00 54.74 51.26 55.92
---------------------------------------------------------------------------------------------------------------------
03/31/98 74.50 55.58 51.40 56.54
---------------------------------------------------------------------------------------------------------------------
06/30/98 76.00 56.44 51.40 56.54
---------------------------------------------------------------------------------------------------------------------
09/30/98 77.50 57.31 51.40 56.54
---------------------------------------------------------------------------------------------------------------------
12/31/98 79.00 58.19 51.40 56.54
---------------------------------------------------------------------------------------------------------------------
03/31/99 80.50 59.09 60.84 67.60
---------------------------------------------------------------------------------------------------------------------
06/30/99 82.00 60.00 60.84 67.60
---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
07/01/95 09/30/95 12/31/95 03/31/96 06/30/96 09/30/96 12/31/96 03/31/97 06/30/97 09/30/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Forward EPS Estimate $2.10 $2.10 $2.10 $2.19 $2.19 $2.19 $2.19 $2.33 $2.33 $2.33
Unaffected
P/E Multiple 18 37.80 37.80 37.80 39.42 39.42 39.42 39.42 41.94 41.94 41.94
20 42.00 42.00 42.00 43.80 43.80 43.80 43.80 46.60 46.60 46.60
---------------------------
22 46.20 46.20 46.20 48.18 48.18 48.18 48.18 51.26 51.26 51.26
--------------------------------------
24 50.40 50.40 50.40 52.56 52.56 52.56 52.56 55.92 55.92 55.92
-------------------------- ---------------------------
26 54.60 54.60 54.60 56.94 56.94 56.94 56.94 60.58 60.58 60.58
--------------------------------------
28 58.80 58.80 58.80 61.32 61.32 61.32 61.32 65.24 65.24 65.24
--------------------------
30 63.00 63.00 63.00 65.70 65.70 65.70 65.70 69.90 69.90 69.90
<CAPTION>
12/31/97 03/31/98 06/30/98 09/30/98 12/31/98 03/31/99 06/30/99
<S> <C> <C> <C> <C> <C> <C> <C>
Forward EPS Estimate $2.33 $2.57 $2.57 $2.57 $2.57 $3.38 $3.38
----------------
Unaffected
P/E Multiple 18 41.94 46.26 46.26 46.26 46.26 60.84 60.84
--------------------------------------
20 46.60 51.40 51.40 51.40 51.40 67.60 67.60
----- ----------------
22 51.26 56.54 56.54 56.54 56.54 74.36 74.36
--------------------------------------
24 55.92 61.68 61.68 61.68 61.68 81.12 81.12
-----
26 60.58 66.82 66.82 66.82 66.82 87.88 87.88
28 65.24 71.96 71.96 71.96 71.96 94.64 94.64
30 69.90 77.10 77.10 77.10 77.10 101.40 101.40
</TABLE>
Notes: (1) Management numbers with Collaboration.
(2) Based on a four year AA bond rate of 6.31% on 06/30/95.
<PAGE> 37
PROJECT ACTIVE
Summary Implied Future Share Prices
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
HISTORICAL
HISTORICAL IRR AVERAGE IRR HISTORICAL
CALL PV OF PUT TO END CALL TO END CALL DISCOUNT TO NEAR UNAFFECTED
DATE PRICE PRICE(1) PRICE PRICE TERM CALL STANDALONE(2)
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
07/01/95 $61.25 $46.97 $37.58 $37.45 $42.11 $40.50
-------------------------------------------------------------------------------------------------------------------------------
09/30/95 61.25 47.70 38.78 39.33 42.13 40.50
-------------------------------------------------------------------------------------------------------------------------------
12/31/95 62.50 48.43 44.08 41.31 47.43 40.50
-------------------------------------------------------------------------------------------------------------------------------
03/31/96 63.75 49.18 37.41 43.38 39.89 41.00
-------------------------------------------------------------------------------------------------------------------------------
06/30/96 65.00 49.94 43.39 45.56 45.86 41.00
-------------------------------------------------------------------------------------------------------------------------------
09/30/96 66.25 50.71 46.47 47.84 48.70 41.00
-------------------------------------------------------------------------------------------------------------------------------
12/31/96 67.50 51.49 50.74 50.25 52.76 41.00
-------------------------------------------------------------------------------------------------------------------------------
03/31/97 68.75 52.28 49.37 52.77 50.95 46.00
-------------------------------------------------------------------------------------------------------------------------------
06/30/97 70.00 53.09 60.13 55.42 61.60 46.00
-------------------------------------------------------------------------------------------------------------------------------
09/30/97 71.50 53.91 58.60 58.20 59.82 46.00
-------------------------------------------------------------------------------------------------------------------------------
12/31/97 73.00 54.74 69.02 61.12 70.22 46.00
-------------------------------------------------------------------------------------------------------------------------------
03/31/98 74.50 55.58 60.13 64.19 60.99 52.08
-------------------------------------------------------------------------------------------------------------------------------
06/30/98 76.00 56.44 67.31 67.41 68.05 52.08
-------------------------------------------------------------------------------------------------------------------------------
09/30/98 77.50 57.31 71.75 70.79 72.33 52.08
-------------------------------------------------------------------------------------------------------------------------------
12/31/98 79.00 58.19 62.35 74.35 62.68 52.08
-------------------------------------------------------------------------------------------------------------------------------
03/31/99 80.50 59.09 64.06 78.08 64.23 67.45
-------------------------------------------------------------------------------------------------------------------------------
06/30/99 82.00 60.00 N.M. 82.00 66.80 67.45
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) Based on a four year AA bond rate of 6.31% on 06/30/95.
(2) Based on unaffected P/E multiples ranging from 28x in 1995 to
18x in 1999.
<PAGE> 38
PROJECT ACTIVE
Internal Rate of Return Analysis of Put and Final Call
<TABLE>
<CAPTION>
IMPLIED INTERNAL RATE OF RETURN AT 6/30/95
------------------------------------------
7/01/99 6/30/99
$60.00 $82.00
PUT PRICE CALL PRICE
--------------- --------------
<S> <C> <C> <C> <C>
$30.00 18.9% 28.6%
32.50 16.6% 26.0%
35.00 14.4% 23.7%
ILLUSTRATIVE 37.50 12.5% 21.6%
SHARE PRICES 40.00 10.7% 19.7%
42.50 9.0% 17.9%
--------------------------------------------------------------------------------------------
43.76 8.2% 17.0% PV OF 6/30/99 CALL AT ACTIVE COST OF EQUITY
--------------------------------------------------------------------------------------------
45.00 7.5% 16.2%
--------------------------------------------------------------------------------
PV OF PUT AT 4 YR. AA BOND RATE 46.97 6.3% 14.9%
--------------------------------------------------------------------------------
47.50 6.0% 14.6%
--------------------------------------------------------------------------------
CURRENT 6/30/95 48.63 5.4% 14.0%
--------------------------------------------------------------------------------
50.00 4.7% 13.2%
</TABLE>
<TABLE>
<CAPTION>
ILLUSTRATIVE SHARE PRICE AT 6/30/95
------------------------------------------
7/01/99 6/30/99
$60.00 $82.00
PUT PRICE CALL PRICE
--------------- --------------
<S> <C> <C> <C> <C>
4.0% $51.29 $70.09
5.0% 49.36 67.46
6.0% 47.53 64.95
--------------------------------------------------------------------------------
4 YR. AA BOND RATE 6.3% 46.97 64.20
--------------------------------------------------------------------------------
7.0% 45.77 62.56
8.0% 44.10 60.27
9.0% 42.51 58.09
10.0% 40.98 56.01
11.0% 39.52 54.02
ILLUSTRATIVE RANGE OF 12.0% 38.13 52.11
REQUIRED RETURNS 13.0% 36.80 50.29
-----------------------------------------------------------------------
14.0% 35.68 48.63 CURRENT 6/30/95
-----------------------------------------------------------------------
15.0% 34.31 46.88
16.0% 33.14 45.29
-----------------------------------------------------------------------
17.0% 32.02 43.76 ACTIVE COST OF EQUITY
-----------------------------------------------------------------------
18.0% 30.95 42.29
19.0% 29.92 40.89
20.0% 28.94 39.54
</TABLE>
<PAGE> 39
PROJECT ACTIVE
Internal Rate of Return Analysis of Future Call Schedule
<TABLE>
<CAPTION>
Special Common Stock Redemption Dates
------------------------------------------------------------------------------------------------------------
07/01/95 09/30/95 12/31/95 03/31/96 06/30/96 09/30/96 12/31/96 03/31/97 06/30/97 09/30/97
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Call Price $61.25 $61.25 $62.50 $63.75 $65.00 $66.25 $67.50 $68.75 $70.00 $71.50
<CAPTION>
Special Common Stock Redemption Dates
---------------------------------------------------------------------------
12/31/97 03/31/98 06/30/98 09/30/98 12/31/98 03/31/99 06/30/99
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Call Price $73.00 $74.50 $76.00 $77.50 $79.00 $80.50 $82.00
</TABLE>
<TABLE>
<CAPTION>
IMPLIED INTERNAL RATE OF RETURN OF SHARE PRICES
TO INTERIM CALL PRICES
===========================================================================
SHARE PRICES 12/31/95 03/31/96 06/30/96 09/30/96 12/31/96 03/31/97 06/30/97
=============== -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$30.00 NM NM NM 88.5% 71.7% 60.6% 52.8%
32.50 NM NM NM 76.8% 62.8% 53.4% 46.8%
35.00 NM NM 85.7% 66.6% 54.9% 47.1% 41.4%
37.50 NM NM 73.3% 57.7% 48.0% 41.4% 36.6%
40.00 NM 86.2% 62.5% 49.7% 41.7% 36.3% 32.3%
42.50 NM 71.7% 52.9% 42.6% 36.1% 31.6% 28.3%
-------------------------------------------------------------------------------------------------------------------------
PV of 6/30/99 Call @ 17.0% 43.76 NM 65.2% 48.5% 39.3% 33.5% 29.5% 26.5%
-------------------------------------------------------------------------------------------------------------------------
45.00 92.9% 59.1% 44.4% 36.3% 31.0% 27.4% 24.7%
-------------------------------------------------------------------------------------------------------------------------
PV of 7/99 Put @ 6.3% 46.97 77.0% 50.3% 38.4% 31.7% 27.3% 24.3% 22.1%
-------------------------------------------------------------------------------------------------------------------------
47.50 73.1% 48.0% 36.8% 30.5% 26.4% 23.5% 21.4%
-------------------------------------------------------------------------------------------------------------------------
Current Price (6/30/95) 48.63 65.2% 43.5% 33.7% 28.1% 24.4% 21.9% 20.0%
-------------------------------------------------------------------------------------------------------------------------
50.00 56.3% 38.3% 30.0% 25.2% 22.1% 20.0% 18.3%
======== ========
<CAPTION>
IMPLIED INTERNAL RATE OF RETURN OF SHARE PRICES
TO INTERIM CALL PRICES
======================================================================================
SHARE PRICES 09/30/97 12/31/97 03/31/98 06/30/98 09/30/98 12/31/98 03/31/99 06/30/99
=============== -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$30.00 47.1% 42.7% 39.2% 36.3% 33.9% 31.9% 30.1% 28.6%
32.50 42.0% 38.2% 35.2% 32.7% 30.7% 28.9% 27.4% 26.0%
35.00 37.4% 34.2% 31.6% 29.5% 27.7% 26.2% 24.9% 23.7%
37.50 33.2% 30.5% 28.4% 26.5% 25.0% 23.7% 22.6% 21.6%
40.00 29.5% 27.2% 25.4% 23.9% 22.6% 21.5% 20.5% 19.7%
42.50 26.0% 24.2% 22.6% 21.4% 20.3% 19.4% 18.6% 17.9%
----------------------------------------------------------------------------------------------------------------------------------
PV of 6/30/99 Call @ 17.0% 43.76 24.4% 22.7% 21.3% 20.2% 19.2% 18.4% 17.7% 17.0%
----------------------------------------------------------------------------------------------------------------------------------
45.00 22.8% 21.4% 20.1% 19.1% 18.2% 17.4% 16.8% 16.2%
----------------------------------------------------------------------------------------------------------------------------------
PV of 7/99 Put @ 6.3% 46.97 20.5% 19.3% 18.3% 17.4% 16.7% 16.0% 15.4% 14.9%
----------------------------------------------------------------------------------------------------------------------------------
47.50 19.9% 18.8% 17.8% 17.0% 16.3% 15.6% 15.1% 14.6%
----------------------------------------------------------------------------------------------------------------------------------
Current Price (6/30/95) 48.63 18.7% 17.6% 16.8% 16.1% 15.4% 14.9% 14.4% 14.0%
----------------------------------------------------------------------------------------------------------------------------------
50.00 17.2% 16.3% 15.6% 15.0% 14.4% 14.0% 13.5% 13.2%
======== ========
</TABLE>
<PAGE> 40
PROJECT ACTIVE
Premium of Present Value of Put and Final Call to 06/30/95 Share Price
7/01/99
=======
Put Price: $60.00
<TABLE>
<CAPTION>
PREMIUM/(DISCOUNT) OF 7/01/99 $60 PUT (PV AT 6/30/95)
================================================================
RANGE OF DISCOUNT RATES
================================================================
<S> <C> <C> <C> <C>
Discount Rates: 6.3% 13.0% 15.0% 17.0%
========= ========= ========= =========
PV of Put Price: $46.97 $36.80 $34.31 $32.02
========= ========= ========= =========
$30.00 56.6% 22.7% 14.4% 6.7%
=========
32.50 44.5% 13.2% 5.6% -1.5%
-------------------------------------------------------=========-------------------
35.00 34.2% 5.1% -2.0% -8.5%
=========
Illustrative 37.50 25.3% -1.9% -8.5% -14.6%
Share Prices 40.00 17.4% -8.0% -14.2% -20.0%
(6/30/99) 42.50 10.5% -13.4% -19.3% -24.7%
45.00 4.4% -18.2% -23.8% -28.8%
-------------------=========-------------------------------------------------------
47.50 -1.1% -22.5% -27.8% -32.6%
----------------------------------------------------------------------------------------------------------------
Current Price (6/30/95) 48.63 -3.4% -24.3% -29.4% -34.2%
----------------------------------------------------------------------------------------------------------------
50.00 -6.1% -26.4% -31.4% -36.0%
</TABLE>
6/30/99
=======
Put Price: $82.00
<TABLE>
<CAPTION>
PREMIUM/(DISCOUNT) OF 6/30/99 $82 CALL (PV AT 6/30/95)
================================================================
RANGE OF DISCOUNT RATES
================================================================
<S> <C> <C> <C> <C>
Discount Rates: 6.3% 13.0% 15.0% 17.0%
========= ========= ========= =========
PV of Call Price: $64.20 $50.29 $46.88 $43.76
========= ========= ========= =========
$30.00 114.0% 67.6% 56.3% 45.9%
32.50 97.5% 54.7% 44.3% 34.6%
-----------------------------------------------------------------------------------
35.00 83.4% 43.7% 34.0% 25.0%
Illustrative 37.50 71.2% 34.1% 25.0% 16.7%
Share Prices 40.00 60.5% 25.7% 17.2% 9.4%
=========
(6/30/99) 42.50 51.1% 18.3% 10.3% 3.0%
45.00 42.7% 11.8% 4.2% -2.8%
-------------------------------------------------------=========-------------------
47.50 35.2% 5.9% -1.3% -7.9%
----------------------------------------------------------------------------------------------------------------
Current Price (6/30/95) 48.63 32.0% 3.4% -3.6% -10.0%
----------------------------------------------------------------------------------------------------------------
50.00 28.4% 0.6% -6.2% -12.5%
=========-------------------------------------
</TABLE>
<PAGE> 41
PROJECT ACTIVE
Illustrative Premium Analysis
Management Projected EPS
Standalone
<TABLE>
<CAPTION>
-----------
FORWARD P/E MULTIPLES APPLIED TO 2000 EPS OF: $3.55
-----------
IMPLIED 6/30/99 SHARE VALUE
FINAL CALL PRICE AS A PREMIUM/(DISCOUNT) TO UNAFFECTED SHARE PRICE
ILLUSTRATIVE INCREASE/DECREASE IN EPS
---------------------------------------------------------------------------------------------------
-20% -10% 0% 10% 20%
------ ----- --- ----- -----
$2.84 $3.20 $3.55 $3.91 $4.26
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
15.0x $42.60 $47.93 $53.25 $58.58 $63.90
92% 71% 54% 40% 28%
Illustrative 17.5 49.70 55.91 62.13 68.34 74.55
65% 47% 32% 20% 10%
=============
Forward P/E 20.0 56.80 63.90 71.00 78.10 85.20
44% 28% 15% 5% -4%
=============
Multiples 22.5 63.90 71.89 79.88 87.86 95.85
28% 14% 3% -7% -14%
=============
25.0 71.00 79.88 88.75 97.63 106.50
15% 3% -8% -16% -23%
=============
27.5 78.10 87.86 97.63 107.39 117.15
5% -7% -16% -24% -30%
=============
30.0 85.20 95.85 106.50 117.15 127.80
-4% -14% -23% -30% -36%
</TABLE>
<TABLE>
<CAPTION>
-----------
6/30/99 CALL PRICE: $82.00
-----------
REQUIRED EPS IN 2000 TO ACHIEVE ACQUISITION VALUE EQUAL TO CALL PRICE
PICKUP/(DILUTION) TO MANAGEMENT ESTIMATE EPS
ILLUSTRATIVE PREMIUMS TO UNAFFECTED SHARE PRICE
---------------------------------------------------------------------------------------------------------
0% 10% 20% 30% 40% 50% 60% 70% 80%
-- --- --- --- --- --- --- --- ---
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
15.0x $5.47 $4.97 $4.56 $4.21 3.90 3.64 $3.42 $3.22 $3.04
54% 40% 28% 18% 10% 3% -4% -9% -14%
===================
Illustrative 17.5 4.69 4.26 3.90 3.60 3.35 3.12 2.93 2.76 2.60
32% 20% 10% 2% -6% -12% -18% -22% -27%
========================
Forward P/E 20.0 4.10 3.73 3.42 3.15 2.93 2.73 2.56 2.41 2.28
15% 5% -4% -11% -18% -23% -28% -32% -36%
=========
Multiples 22.5 3.64 3.31 3.04 2.80 2.60 2.43 2.28 2.14 2.02
3% -7% -14% -21% -27% -32% -36% -40% -43%
===========
25.0 3.28 2.98 2.73 2.52 2.34 2.19 2.05 1.93 1.82
-8% -16% -23% -29% -34% -38% -42% -46% -49%
27.5 2.98 2.71 2.48 2.29 2.13 1.99 1.86 1.75 1.66
-16% -24% -30% -35% -40% -44% -48% -51% -53%
30.0 2.73 2.48 2.28 2.10 1.95 1.82 1.71 1.61 1.52
-23% -30% -36% -41% -45% -49% -52% -55% -57%
</TABLE>
<PAGE> 42
PROJECT ACTIVE
Illustrative Premium Analysis
Management Projected EPS
With Collaboration
<TABLE>
<CAPTION>
---------
FORWARD P/E MULTIPLES APPLIED TO 2000 EPS OF: $3.38
---------
IMPLIED 6/30/99 SHARE VALUE
FINAL CALL PRICE AS A PREMIUM/(DISCOUNT) TO UNAFFECTED SHARE PRICE
ILLUSTRATIVE INCREASE/DECREASE IN EPS
---------------------------------------------------------------------------------------------------
-20% -10% 0% 10% 20%
------ ----- --- ----- -----
$2.70 $3.04 $3.38 $3.72 $4.06
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
15.0x $40.56 $45.63 $50.70 $55.77 $60.84
102% 80% 62% 47% 35%
Illustrative 17.5 47.32 53.24 59.15 65.07 70.98
73% 54% 39% 26% 16%
Forward P/E 20.0 54.08 60.84 67.00 74.36 81.12
52% 35% 21% 10% 1%
===================================
Multiples 22.5 60.84 68.45 76.05 83.66 91.26
35% 20% 8% -2% -10%
=============
25.0 67.60 76.05 84.50 92.95 101.40
21% 8% -3% -12% -19%
=============
27.5 74.36 83.66 92.95 102.25 111.54
10% -2% -12% -20% -26%
30.0 81.12 91.26 101.40 111.54 121.68
1% -10% -19% -26% -33%
-------------
</TABLE>
<TABLE>
<CAPTION>
---------
6/30/99 CALL PRICE: $82.00
---------
REQUIRED EPS IN 2000 TO ACHIEVE ACQUISITION VALUE EQUAL TO CALL PRICE
PICKUP/(DILUTION) TO MANAGEMENT ESTIMATE EPS
ILLUSTRATIVE PREMIUMS TO UNAFFECTED SHARE PRICE
---------------------------------------------------------------------------------------------------------
0% 10% 20% 30% 40% 50% 60% 70% 80%
--- ---- ---- ---- ---- ---- ---- ---- ----
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
15.0x $5.47 $4.97 $4.56 $4.21 $3.90 $3.64 $3.42 $3.22 $3.04
62% 47% 35% 24% 16% 8% 1% -5% -10%
===============================
Illustrative 17.5 $4.69 $4.26 $3.90 $3.60 $3.35 $3.12 $2.93 $2.76 $2.60
39% 26% 16% 7% -1% -8% -13% -18% -23%
===========
Forward P/E 20.0 $4.10 $3.73 $3.42 $3.15 $2.93 $2.73 $2.56 $2.41 $2.28
21% 10% 1% -7% -13% -19% -24% -29% -33%
=====================
Multiples 22.5 $3.64 $3.31 $3.04 $2.80 $2.60 $2.43 $2.28 $2.14 $2.02
8% -2% -10% -17% -23% -28% -33% -37% -40%
===========
25.0 $3.28 $2.98 $2.73 $2.52 $2.34 $2.19 $2.05 $1.93 $1.82
-3% -12% -19% -25% -31% -35% -39% -43% -46%
27.5 $2.98 $2.71 $2.48 $2.29 $2.13 $1.99 $1.86 $1.75 $1.66
-12% -20% -26% -32% -37% -41% -45% -48% -51%
30.0 $2.73 $2.48 $2.28 $2.10 $1.95 $1.82 $1.71 $1.61 $1.52
-19% -26% -33% -38% -42% -46% -49% -52% -55%
</TABLE>
<PAGE> 43
PROJECT ACTIVE
Call Price Premium to Unaffected Share Prices
Standalone(1)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Call Price as Premium/ Call Price as Premium/
Date (Discount) to Lower Price (Discount) to Higher Price
---------------------------------------------------------------------------
<S> <C> <C>
07/01/95 57.1% 45.8%
---------------------------------------------------------------------------
09/30/95 57.1 45.8
---------------------------------------------------------------------------
12/31/95 60.3 48.8
---------------------------------------------------------------------------
03/31/96 62.0 49.5
---------------------------------------------------------------------------
06/30/96 65.1 52.4
---------------------------------------------------------------------------
09/30/96 68.3 55.4
---------------------------------------------------------------------------
12/31/96 71.5 58.3
---------------------------------------------------------------------------
03/31/97 56.3 43.2
---------------------------------------------------------------------------
06/30/97 59.1 45.8
---------------------------------------------------------------------------
09/30/97 62.5 49.0
---------------------------------------------------------------------------
12/31/97 65.9 52.1
---------------------------------------------------------------------------
03/31/98 50.2 36.5
---------------------------------------------------------------------------
06/30/98 53.2 39.3
---------------------------------------------------------------------------
09/30/98 56.3 42.0
---------------------------------------------------------------------------
12/31/98 59.3 44.8
---------------------------------------------------------------------------
03/31/99 26.0 13.4
---------------------------------------------------------------------------
06/30/99 28.3 15.5
---------------------------------------------------------------------------
Mean 56.4 43.4
---------------------------------------------------------------------------
Median 59.1 45.8
---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
07/01/95 09/30/95 12/31/95 03/31/96 06/30/96 09/30/96 12/31/96 03/31/97 06/30/97 09/30/97
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lower Price $39.00 $39.00 $39.00 $39.36 $39.36 $39.36 $39.36 $44.00 $44.00 $44.00
Higher Price $42.00 $42.00 $42.00 $42.64 $42.64 $42.64 $42.64 $48.00 $48.00 $48.00
Call Price as Premium/
(Discount) to Lower Price 57.1% 57.1% 60.3% 62.0% 65.1% 68.3% 71.5% 56.3% 59.1% 62.5%
Call Price as Premium/
(Discount) to Higher Price 45.8% 45.8% 48.8% 49.5% 52.4% 55.4% 58.3% 43.2% 45.8% 49.0%
</TABLE>
<TABLE>
<CAPTION>
12/31/97 03/31/98 06/30/98 09/30/98 12/31/98 03/31/99 06/30/99
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Lower Price $44.00 $49.60 $49.60 $49.60 $49.60 $63.90 $63.90
Higher Price $48.00 $54.56 $54.56 $54.56 $54.56 $71.00 $71.00
Mean Median
---- ------
<C> <C>
Call Price as Premium/
(Discount) to Lower Price 65.9% 50.2% 53.2% 56.3% 59.3% 26.0% 28.3% 56.4% 59.1%
Call Price as Premium/
(Discount) to Higher Price 52.1% 36.5% 39.3% 42.0% 44.8% 13.4% 15.5% 43.4% 45.8%
</TABLE>
Note: (1) Management numbers with no collaboration.
<PAGE> 44
PROJECT ACTIVE
Put Price Implied Multiple and Breakeven Analysis
Standalone
<TABLE>
<CAPTION>
07/01/95 06/30/96 06/30/97 06/30/98 06/30/99
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Present Value of Put $46.97 $49.94 $53.09 $56.44 $60.00
<CAPTION>
Management Projection 1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Forward EPS-Standalone $1.50 $1.64 $2.00 $2.48 $3.55
% growth 11.1% 9.3% 22.0% 24.0% 43.1%
Required Forward P/E Multiple for Breakeven 31.3 x 30.4 x 26.5 x 22.8 x 16.9 x
Required Current Year Revenues
Multiple for Breakeven(1) 5.3 x 5.2 x 4.8 x 4.4 x 4.1 x
</TABLE>
<TABLE>
<CAPTION>
REQUIRED EPS FOR BREAKEVEN
-------------------------------------------------------------------
Pickup/(Dilution) versus Management Estimates
-------------------------------------------------------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
15.0 x $3.13 $3.33 $3.54 $3.76 $4.00
109% 103% 77% 52% 13%
17.5 x 2.68 2.85 3.03 3.23 3.43
79% 74% 52% 30% -3%
Illustrative 20.0 x 2.35 2.50 2.65 2.82 3.00
Forward P/E 57% 52% 33% 14% -15%
Multiples
22.5 x 2.09 2.22 2.36 2.51 2.67
39% 35% 18% 1% -25%
25.0 x 1.88 2.00 2.12 2.26 2.40
25% 22% 6% -9% -32%
27.5 x 1.71 1.82 1.93 2.05 2.18
14% 11% -3% -17% -39%
30.0 x 1.57 1.66 1.77 1.88 2.00
4% 1% -12% -24% -44%
</TABLE>
Note: (1) Current Year Revenues Multiple assumes Aggregate Value based on 117.6
million shares as of March 31, 1995 and Net Debt of -$547.2 million.
Revenue are Management Estimates.
<PAGE> 45
PROJECT ACTIVE
Call Price Implied Multiple and Breakeven Analysis
Standalone
<TABLE>
<CAPTION>
Special Common Stock Redemption Dates
----------------------------------------------------------------------------------
07/01/95 06/30/96 06/30/97 06/30/98 06/30/99
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Near Term Call Price $61.25 $65.00 $70.00 $76.00 $82.00
<CAPTION>
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Management Projection
Forward EPS - Standalone $1.50 $1.64 $2.00 $2.48 $3.55
% growth 11.1% 9.3% 22.0% 24.0% 43.1%
Required Forward P/E Multiple for Breakeven 40.8 x 39.6 x 35.0 x 30.6 x 23.1
Required Current Year Revenues
Multiple for Breakeven(1) 7.1 x 6.9 x 6.5 x 6.1 x 6.7
<CAPTION>
REQUIRED EPS FOR BREAKEVEN
----------------------------------------------------------------------------------
Pickup/(Dilution) versus Management Estimates
----------------------------------------------------------------------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
15.0 x $4.08 $4.33 $4.67 $5.07 $5.47
172% 164% 133% 104% 54%
17.5 x 3.50 3.71 4.00 4.34 4.69
133% 126% 100% 75% 32%
Illustrative 20.0 x 3.06 3.25 3.50 3.80 4.10
Forward P/E 104% 98% 75% 53% 15%
Multiples
22.5 x 2.72 2.89 3.11 3.38 3.64
81% 76% 56% 36% 3%
25.0 x 2.45 2.60 2.80 3.04 3.28
63% 59% 40% 23% -8%
27.5 x 2.23 2.36 2.55 2.76 2.98
48% 44% 27% 11% -16%
30.0 x 2.04 2.17 2.33 2.53 2.73
36% 32% 17% 2% -23%
Note: (1) Current Year Revenues assumes Aggregate Value based on 117.6 million
shares as of March 31, 1995 and Net Debt of -$547.2 million. Revenues
are Management Estimates.
</TABLE>
<PAGE> 46
PROJECT ACTIVE
Analysis of Option Components
<TABLE>
<CAPTION>
X Axis Y Axis
------ ------
Share Price at
Maturity Value at Maturity
-------------- -----------------
<S> <C>
Below 60 60
60 60
65 65
70 70
75 75
80 80
82 82
Above 82 82
</TABLE>
Active Shareholders' effective position:
Own a Roche Bond Face Value of $60
Own a Call at $60
Sold a Call at $82
Value in Excess of Bond was represented by the area bound by Value at Maturity
above $60 in the area between Share Price at Maturity of $60 and $82.
<PAGE> 47
PROJECT ACTIVE
Analysis of Option Components
(Continued)
------------------------------
/ Value of Bond(1): $46.97 /
------------------------------
<TABLE>
<CAPTION>
PREMIUM TO
VALUE IN EXCESS VALUE OF UNAFFECTED
OF BOND(2) PACKAGE SHARE PRICE
--------------- ----------------- ---------------
LOW HIGH LOW HIGH LOW HIGH
----- ----- ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Unaffected $35.00 $0.00 - $3.00 $46.97 - $49.97 34.2% - 42.8%
Share Prices 40.00 0.00 - 3.50 46.97 - 50.47 17.4% - 26.2%
45.00 0.00 - 4.50 46.97 - 51.47 4.4% - 14.4%
</TABLE>
NOTES:
(1) Value of Bond equals the present value of $60 based on a
four year AA bond rate of 6.31% on 6/30/95.
(2) Value in Excess of Bond equals the value of a call struck
at $60 minus the value of a call struck at $82 based on a
Black-Scholes option calculation.
<PAGE> 48
PROJECT ACTIVE
Analysis of Standstill Agreement
<TABLE>
<CAPTION>
DISCOUNT TO
OPEN BLENDED COST (1) $82 CALL PRICE
MARKET -------------------------------- ---------------- DIFFERENCE AS %
PRICE 75.0% 79.9% Difference 75.0% 79.9% OF $82 CALL PRICE
-------- ------- ------- ------------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
$48.63 $68.17 $64.34 $3.83 -16.9% -21.5% 4.7%
50.00 68.74 65.07 3.67 -16.2% -20.7% 4.5%
52.00 69.57 66.12 3.44 -15.2% -19.4% 4.2%
54.00 70.40 67.18 3.21 -14.2% -18.1% 3.9%
56.00 71.23 68.24 2.98 -13.1% -16.8% 3.6%
58.00 72.05 69.30 2.75 -12.1% -15.5% 3.4%
60.00 72.88 70.36 2.53 -11.1% -14.2% 3.1%
62.00 73.71 71.42 2.30 -10.1% -12.9% 2.8%
64.00 74.54 72.47 2.07 -9.1% -11.6% 2.5%
66.00 75.37 73.53 1.84 -8.1% -10.3% 2.2%
68.00 76.20 74.59 1.61 -7.1% -9.0% 2.0%
70.00 77.03 75.65 1.38 -6.1% -7.7% 1.7%
72.00 77.86 76.71 1.15 -5.1% -6.5% 1.4%
74.00 78.68 77.77 0.92 -4.0% -5.2% 1.1%
76.00 79.51 78.82 0.69 -3.0% -3.9% 0.8%
78.00 80.34 79.88 0.46 -2.0% -2.6% 0.6%
80.00 81.17 80.94 0.23 -1.0% -1.3% 0.3%
82.00 82.00 82.00 0.00 -0.0% -0.0% 0.0%
</TABLE>
Note:
(1) Roche currently holds 57.3% of Active equity securities on a
fully-diluted basis. It is assumed that shares are purchased
on the open market up to the respective standstill levels with
the remainder purchased pursuant to the final call price of $82.
<PAGE> 49
PROJECT ACTIVE
Analysis of Collaboration
Incremental Discounted Cash Flow Value of Collaboration
<TABLE>
<CAPTION>
INCREMENTAL DCF VALUE ABOVE/(BELOW) STANDALONE DCF VALUE
-----------------------------------------------------------------------
LTM P/E TERMINAL MULTIPLE
-----------------------------------------------------------------------
18.0 20.0 22.5 25.0 27.5 28.0
------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
15.0% ($0.96) ($1.12) ($1.31) ($1.50) ($1.70) ($1.74)
17.0% (0.81) (0.95) (1.13) (1.31) (1.48) (1.52)
DISCOUNT
RATE 19.0% (0.77) (0.81) (0.97) (1.13) (1.29) (1.32)
21.0% (0.64) (0.77) (0.82) (0.97) (1.11) (1.14)
23.0% (0.51) (0.64) (0.79) (0.83) (0.96) (0.99)
<CAPTION>
INCREMENTAL DCF VALUE ABOVE/(BELOW) COLLABORATION DCF VALUE
-----------------------------------------------------------------------
% IMPROVEMENT IN ANNUAL INTERNATIONAL REVENUES (1997-2000)
-----------------------------------------------------------------------
10% 15% 20%
------ ------ ------
<S> <C> <C> <C>
15.0% $0.30 $0.45 $0.60
17.0% 0.28 0.43 0.57
DISCOUNT
RATE 19.0% 0.27 0.41 0.54
21.0% 0.29 0.44 0.59
23.0% 0.28 0.42 0.56
</TABLE>
<PAGE> 50
PROJECT ACTIVE
License Agreement
- Focused on rights to Active's international marketing and development
activities
- Existing products 20% royalty for Europe and Canada, 12.5-15.0% royalty
for international sales outside Europe and Canada; transfer price to
include 20% manufacturing mark-up
- 10 year option to license international rights for products under
development until after completion of first phase II clinical trial
- Roche pays 50% of all Active development costs plus 100% of
international development costs
- 12.5-15% royalty on international sales
- 20% manufacturing mark-up plus reimbursement for development of
manufacturing process for peptides and proteins
- Collaborative agreements generally consist of equity investment,
milestone payments, R&D funding and royalty payments
- 100% development funding in return for exclusive rights (typically
including manufacturing rights), milestone payments and royalties
generally ranging 6-15%
- Roche/Active Agreement
- Benefits
- Top end of royalty rates plus 50% funding for past and future U.S.
development expenses
- Scope of R&D and marketing support significant - estimated at $500MM
through 2000 (mgmt projections)
- Manufacturing rights add another 20% plus 50% process funding
- Eliminates costs to develop international infrastructures (not a
priority through 2000)
- Roche has strong international infrastructure to i) accelerate product
development; and ii) increase sales (hence royalty) potential of
Active products
- Issues
- Breadth eliminates potential for other partners
- Upside capped (impact most significant past 2000)
- Length; option extends 6 years beyond call period
