As filed with the Securities and Exchange Commission on May 15, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Genentech, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 94-2347624
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1 DNA Way
South San Francisco, California 94080-4990
Phone: (650) 225-1000
(Address, including zip code, and telephone number, including area
code, of Registrant's principal executive offices)
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Stephen G. Juelsgaard, Esq.
Senior Vice President, General Counsel and Secretary
Genentech, Inc.
1 DNA Way
South San Francisco, California 94080-4990
Phone: (650) 225-1672
Facsimile: (650) 225-8654
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
Richard A. Drucker, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Phone: (212) 450-4745
Facsimile: (212) 450-3745
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Approximate date of commencement of proposed sale to the public: From
time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. |_| _________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
<TABLE>
Proposed Maximum Proposed Maximum
Title of Each Class Amount to be Offering Price Per Aggregate Offering Amount of
of Securities to be Registered Registered(2) Share(1)(2) Price(1)(2) Registration Fee
- --------------------------------------------- ------------------ ------------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Common Stock, par value $.02 per share(2).... 6,517,309 shares $123 $801,629,007 $211,630
============================================= ================== =================== ================== =================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to rule 457 (c), based upon the average of the high and low prices
of the common stock on the NYSE on May 10, 2000.
(2) Pursuant to Rule 416 under the Securities Act, such number of shares of
Common Stock registered hereby shall include an indeterminate number of
shares of Common Stock that may be issued in connection with a stock split,
stock dividend, recapitalization or similar event.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
The information in this prospectus is not complete and may be changed. The
selling shareholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and we are not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
PROSPECTUS (Subject to Completion)
Dated May 15, 2000
6,517,309 Shares
GENENTECH, INC.
Common Stock
This prospectus relates to offerings by the selling shareholders from time to
time of a total of 6,517,309 shares.
The shares are being sold by shareholders who beneficially own common stock of
Genentech that was originally delivered in exchange for Liquid Yield Option
Notes due 2015 issued by Roche Holdings, Inc. We will not receive any of the
proceeds from the sale of the shares by the selling shareholders.
Our common stock is listed on the New York Stock Exchange under the symbol
"DNA".
Investing in our common stock involves certain risks. See "Risk Factors"
beginning on page 2.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
May __, 2000
<PAGE>
TABLE OF CONTENTS
Page
Prospectus Summary.............................................................1
Risk Factors...................................................................2
Special Note Regarding Forward-looking Statements..............................9
Use of Proceeds................................................................9
Dividend Policy................................................................9
Selling Shareholders..........................................................10
Material U.S. Federal Tax Considerations for Non-U.S.
Holders of Common Stock....................................................11
Shares Eligible for Future Sale...............................................13
Plan of Distribution..........................................................14
Legal Matters.................................................................15
Experts.......................................................................15
Where You Can Find More Information...........................................16
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In this prospectus, "Genentech," "we," "us" and "our" refer to Genentech,
Inc., "common stock" refers to Genentech's common stock, par value $.02 per
share.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. The selling shareholders are offering to sell, and
seeking offers to buy, shares of common stock only in jurisdictions where offers
and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of the common stock.
We have not taken any action to permit a public offering of the shares of
common stock outside the United States or to permit the possession or
distribution of this prospectus outside the United States. Persons outside the
United States who come into possession of this prospectus must inform themselves
about and observe any restrictions relating to this offering of the shares of
common stock and the distribution of this prospectus outside the United States.
---------------------------
We own or have rights to various copyrights, trademarks and trade names
used in our business including the following: Actimmune(R) interferon gamma-1b;
Activase(R) (alteplase, recombinant) tissue plasminogen activator; Herceptin(R)
(trastuzumab) anti-HER2 antibody; Nutropin(R) (somatropin (rDNA origin) for
injection) growth hormone; Nutropin AQ(R) (somatropin (rDNA origin) injection)
liquid formulation growth hormone; Nutropin Depot(TM) (somatropin (rDNA origin)
for injectable suspension) encapsulated sustained-release growth hormone;
Protropin(R) (somatrem for injection) growth hormone; Pulmozyme(R) (dornase
alfa, recombinant) inhalation solution; Rituxan(R) (rituximab) antibody;
TNKase(TM) (tenecteplase) second generation tissue plasminogen activator; and
Xubix(TM) (sibrafiban) oral IIb/IIIa antagonist. This prospectus also includes
trademarks, service marks and trade names of other companies.
-i-
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PROSPECTUS SUMMARY
The following information is qualified in its entirety by the more
detailed information appearing elsewhere in this prospectus and in the documents
incorporated by reference to this prospectus.
GENENTECH
Genentech is a leading biotechnology company that uses human genetic
information to discover, develop, manufacture and market human pharmaceuticals
for significant unmet medical needs. Thirteen of the approved products of
biotechnology stem from our science. Science at Genentech focuses primarily on
two areas of medicine: cardiovascular and oncology. We also pursue projects
where there exists a significant opportunity to fill a therapeutic void in other
important areas of medicine, such as with our growth hormone products.
Our principal executive offices are located at 1 DNA Way, South San
Francisco, California 94080-4990 and our telephone number is (650) 225-1000. Our
worldwide web site address is www.gene.com. The information on our web site is
not part of this prospectus.
RELATIONSHIP BETWEEN GENENTECH AND ROCHE
Since 1990, Roche Holdings, Inc., a Delaware corporation, commonly known
as Roche, has been Genentech's majority stockholder. Roche caused Genentech to
redeem on June 30, 1999 all of Genentech's special common stock held by
stockholders other than Roche at $41.25 per share in cash and retired all of the
shares of special common stock including those held by Roche. On July 23, 1999,
Roche completed the sale of 44,000,000 shares of Genentech common stock at
$48.50 per share. On October 26, 1999, Roche completed the sale of 40,000,000
shares of Genentech common stock at $71.75 per share. On January 19, 2000, Roche
issued an aggregate principal amount of $1,506,342,000 Liquid Yield Option Notes
due 2015 ("LYONs") exchangeable, under certain circumstances, for Genentech
common stock at an exchange rate of 4.32658 Genentech shares per $1,000
principal amount at maturity of LYONs. The LYONs are exchangeable for an
aggregate of 6,517,309 shares of our common stock held by Roche, or 2.5% of our
outstanding common stock as of April 30, 2000. The exchange ratio is subject to
adjustment upon the occurrence of certain events affecting the Genentech shares.
On March 29, 2000, Roche completed the sale of 17,300,000 shares of Genentech
common stock at $163 per share. On April 30, 2000, Roche owned approximately 59%
of the outstanding shares of Genentech common stock.
In July 1999, Genentech entered into certain affiliation arrangements with
Roche, amended a licensing and marketing agreement with F. Hoffmann-La Roche
Ltd., an affiliate of Roche Holdings, Inc., commonly known as Hoffmann-LaRoche,
and entered into a tax sharing agreement with Roche.
REGISTRATION OF GENENTECH SHARES UNDER THE SECURITIES ACT
In connection with the issuance and offering of LYONs, Genentech and
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, entered
into a registration rights agreement pursuant to which Genentech agreed to use
reasonable efforts to file a registration statement under the Securities Act
after consummation of the offering to register resales of the Genentech shares
deliverable upon the exchange of the LYONs.
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RISK FACTORS
You should carefully consider each of the risks and uncertainties
described below and all of the other information in this prospectus or
incorporated by reference before deciding to invest in shares of our common
stock. The risks and uncertainties described below are not the only ones facing
our company. Additional risks and uncertainties not presently known to us or
that we currently believe to be immaterial may also adversely affect our
business.
If any of the following risks and uncertainties develop into actual
events, our business, financial condition or results of operations could be
materially and adversely affected. In such case, the trading price of our common
stock could decline.
Fluctuations in Our Operating Results Could Affect the Price of Our Common Stock
Our operating results may vary from period to period for several reasons
including, but not limited to:
o the overall competitive environment for our products;
o the amount and timing of sales to customers in the United States;
o the amount and timing of our sales to Hoffmann-La Roche and the amount
and timing of its sales to its customers;
o the timing and volume of bulk shipments to licensees;
o the availability of third-party reimbursements for the cost of
therapy;
o the effectiveness and safety of our various products as determined
both in clinical testing and by the accumulation of additional
information on each product after it is approved for sale;
o the rate of adoption and use of our products for approved indications
and additional indications;
o the potential introduction of new products and additional indications
for existing products in 2000 and beyond; and
o the ability to manufacture sufficient quantities of any particular
marketed product.
These fluctuations may not match the expectations of securities
analysts and investors. This could cause the trading price of our common stock
to decline.
The Results of Our Research and Development Are Unpredictable
Successful pharmaceutical product development is highly uncertain and is
dependent on numerous factors, many of which are beyond our control. Products
that appear promising in the early phases of development may fail to reach the
market for numerous reasons, including, but not limited to:
o they may be found to be ineffective or to have harmful side effects in
preclinical or clinical testing;
o they may fail to receive necessary regulatory approvals;
o they may turn out to be uneconomical because of manufacturing costs or
other factors; or
o they may be precluded from commercialization by the proprietary rights
of others or by competing products or technologies for the same
indication.
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Success in preclinical and early clinical trials does not ensure that
large-scale clinical trials will be successful. Clinical results are frequently
susceptible to varying interpretations that may delay, limit or prevent
regulatory approvals.
The length of time necessary to complete clinical trials and to submit an
application for marketing approval for a final decision by a regulatory
authority varies significantly and may be difficult to predict.
Factors affecting our research and development expenses include, but are
not limited to:
o the number of and the outcome of clinical trials currently being
conducted by us and/or our collaborators;
o the number of products entering into development from late-stage
research;
o Hoffmann-La Roche's decisions whether to exercise its options to
develop and sell our future products in non- U.S. markets and the
timing and amount of any related development cost reimbursements;
o in-licensing activities, including the timing and amount of related
development funding or milestone payments; and
o future levels of revenues.
Roche, Our Controlling Stockholder, May Have Interests That Are Adverse to Other
Stockholders
As our majority stockholder, Roche controls the outcome of actions
requiring the approval of our stockholders. Our bylaws provide, among other
things, that the composition of our board of directors shall consist of two
Roche directors, three independent directors nominated by a nominating committee
and one Genentech employee nominated by the nominating committee. As long as
Roche owns in excess of 50% of our common stock, Roche directors will comprise
two of the three members of the nominating committee. However, at any time until
Roche owns less than 5% of our stock, Roche will have the right to obtain
proportional representation on our board. Roche intends to continue to allow our
current management to conduct our business and operations as we have done in the
past. However, we cannot assure you that Roche will not institute a new business
plan in the future. The interests of Roche may conflict with the interests of
other holders of common stock.
The affiliation agreement between us and Roche requires the approval of
the directors designated by Roche to make any acquisition or any sale or
disposal of all or a portion of our business representing 10% or more of our
assets, net income or revenues. Moreover, the affiliation agreement also
contains provisions which are designed to enable Roche to maintain its
percentage ownership interest in our common stock. These provisions may have the
effect of limiting our ability to make acquisitions. The affiliation agreement
with Roche requires us to, among other things, establish a stock repurchase
program designed to maintain Roche's percentage ownership interest in our common
stock. While the dollar amounts associated with these future purchases cannot
currently be estimated, such stock repurchases could have a material adverse
impact on our liquidity.
Our certificate of incorporation includes provisions relating to
competition by Roche with us, allocations of corporate opportunities,
transactions with interested parties and intercompany agreements and provisions
limiting the liability of certain people. Our certificate of incorporation
provides that any person purchasing or acquiring an interest in shares of our
capital stock shall be deemed to have consented to the provisions in the
certificate of incorporation relating to competition with Roche, conflicts of
interest, corporate opportunities and intercompany agreements, and such consent
may restrict such person's ability to challenge transactions carried out in
compliance with such provisions. Persons who are directors and/or officers of
Genentech and who are also directors and/or officers of Roche may choose to take
action in reliance on such provisions rather than act in a manner that might be
favorable to us but adverse to Roche. Two of our directors currently serve as
directors, officers and employees of Roche Holding Ltd and its affiliates.
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We Depend on Skilled Personnel and Key Relationships
The success of our business depends, in large part, on our continued
ability to attract and retain highly qualified management, scientific,
manufacturing and sales and marketing personnel, and on our ability to develop
and maintain important relationships with leading research institutions and key
distributors. Competition for such personnel and relationships is intense. In
connection with the redemption of our special common stock, two of our existing
employee stock option plans terminated and a number of employee options,
including many of those held by senior management, were canceled. We have issued
new employee stock options to attract and retain employees. However, certain
provisions of our affiliation agreement with Roche are designed to enable Roche
to maintain its percentage ownership interest in our common stock, which may
limit our flexibility as to the number of shares we are able to grant under our
stock option plans. We cannot assure you that we will be able to attract or
retain such personnel or maintain such relationships.
We Face Growing and New Competition
We face growing competition in two of our therapeutic markets and expect
new competition in a third market. First, in the thrombolytic market, Activase
has lost market share and could lose additional market share to Centocor, Inc.'s
Retavase(R) (reteplase), either alone or in combination with the use of another
Centocor, Inc. product, ReoPro(R) (abciximab); the resulting adverse effect on
sales could be material. Retavase received approval from the U.S. Food and Drug
Administration, commonly known as the FDA, in October 1996 for the treatment of
acute myocardial infarction. There is also an increasing use of mechanical
reperfusion in lieu of thrombolytic therapy for the treatment of acute
myocardial infarction, which we expect to continue.
Second, in the growth hormone market, we continue to face increased
competition from four other companies currently selling growth hormone and an
additional company which may enter the market in the near future. As a result of
that competition, we have experienced a loss in new patient market share. The
four competitors have also received approval to market their existing human
growth hormone products for additional indications. As a result of this
competition, our sales of Protropin, Nutropin and Nutropin AQ may decline,
perhaps significantly.
Third, in the non-Hodgkin's lymphoma market, Coulter Pharmaceuticals Inc.,
or Coulter, is expected to file a revised Biologics License Application, or BLA,
in 2000 for a product that would compete with our product Rituxan. We are also
aware of other potentially competitive biologic therapies for non-Hodgkin's
lymphoma in development.
Other Competitive Factors Could Affect Our Product Sales
Other competitive factors that could affect our product sales include, but
are not limited to:
o the timing of FDA approval, if any, of competitive products;
o our pricing decisions and the pricing decisions of our competitors;
o the degree of patent protection afforded to particular products;
o the outcome of litigation involving our patents and patents of other
companies for products and processes related to production and
formulation of those products;
o the increasing use and development of alternate therapies; and
o the rate of market penetration by competing products.
In Connection with the Redemption of Our Special Common Stock, We Recorded
Substantial Goodwill and Other Intangibles, the Amortization of Which Will
Adversely Affect Our Earnings
As a result of the redemption of our special common stock, Roche owned
all of our outstanding common stock. Consequently, push-down accounting under
generally accepted accounting principles was required. Push-down
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accounting required us to establish a new accounting basis for our assets and
liabilities, based on Roche's cost in acquiring all of our stock. In other
words, Roche's cost of acquiring Genentech was "pushed down" to us and reflected
on our financial statements. Push-down accounting required us to record goodwill
and other intangible assets of approximately $1,706.0 million and $1,499.0
million, respectively, during the second quarter of 1999. The amortization of
this goodwill and other intangible assets will have a significant negative
impact on our financial results in future years.
In addition, we will continuously evaluate whether events and circumstances have
occurred that indicate the remaining balance of this and other intangible assets
may not be recoverable. When factors indicate that assets should be evaluated
for possible impairment, we may be required to reduce the carrying value of our
intangible assets, which could have a material adverse effect on our financial
condition and results of operations during the periods in which such a reduction
is recognized. We may be required to write down intangible assets in future
periods. For more information about push- down accounting, see the notes to our
consolidated financial statements included in our annual report on Form 10-K for
the year ended December 31, 1999, which is incorporated herein by reference.
Our Royalty and Contract Revenues Could Decline
Royalty and contract revenues in future periods could vary significantly.
Major factors affecting these revenues include, but are not limited to:
o Hoffmann-La Roche's decisions whether to exercise its options and
option extensions to develop and sell our future products in non-U.S.
markets and the timing and amount of any related development cost
reimbursements;
o variations in Hoffmann-La Roche's sales and other licensees' sales of
licensed products;
o the conclusion of existing arrangements with other companies and
Hoffmann-La Roche;
o the timing of non-U.S. approvals, if any, for products licensed to
Hoffmann-La Roche and other licensees;
o fluctuations in foreign currency exchange rates;
o the initiation of new contractual arrangements with other companies;
o whether and when contract benchmarks are achieved;
o the failure of or refusal of a licensee to pay royalties; and
o the expiration or invalidation of patents or other licensed
intellectual property.
Protecting Our Proprietary Rights is Difficult and Costly
The patent positions of pharmaceutical and biotechnology companies can be
highly uncertain and involve complex legal and factual questions. Accordingly,
the breadth of claims allowed in these companies' patents cannot be predicted.
Patent disputes are frequent and can preclude commercialization of products. We
have in the past been, are currently, and may in the future be involved in
material patent litigation. Patent litigation is costly in its own right and
could subject us to significant liabilities to third-parties and, if decided
adversely, we may need to obtain third-party licenses at a material cost or
cease using the technology or product in dispute. The presence of patents or
other proprietary rights belonging to other parties may lead to the termination
of the research and development of a particular product. We believe that we have
strong patent protection or the potential for strong patent protection for a
number of our products that generate sales and royalty revenue or that we are
developing. However, the courts will determine the ultimate strength of patent
protection of our products and those on which we earn royalties.
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We Are Exposed to Market Risk
We are exposed to market risk, including changes to interest rates,
foreign currency exchange rates and equity investment prices. To reduce the
volatility relating to these exposures, we enter into various derivative
investment transactions pursuant to our investment and risk management policies
and procedures in areas such as hedging and counterparty exposure practices. We
could be exposed to losses related to these financial instruments should one of
our counterparties default. Variations in interest rates, foreign currency
exchange rates and equity investment prices may also affect our financial
results.
We May Incur Material Litigation Costs
Litigation to which we are currently or have been subjected relates to,
among other things, our patent and intellectual property rights, licensing
arrangements with other persons, product liability and financing activities. We
cannot predict with certainty the eventual outcome of pending litigation, and we
could be required to incur substantial expense in defending these lawsuits. We
have in the past taken substantial special charges relating to certain
litigation, including special charges of $230.0 million in 1999.
We May Incur Material Product Liability Costs
The testing and marketing of medical products entail an inherent risk of
product liability. We maintain limited product liability insurance coverage. Our
business may be materially and adversely affected by a successful product
liability claim in excess of our insurance coverage. We cannot assure you that
product liability insurance coverage will continue to be available to us in the
future on reasonable terms or at all.
Our Products Are Subject to Governmental Regulations and Approvals
The pharmaceutical industry is subject to stringent regulation with
respect to product safety and efficacy by various federal, state and local
authorities. Of particular significance are the FDA's requirements covering
research and development, testing, manufacturing, quality control, labeling and
promotion of drugs for human use. A pharmaceutical product cannot be marketed in
the United States until it has been approved by the FDA, and then can only be
marketed for the indications and claims approved by the FDA. As a result of
these requirements, the length of time, the level of expenditures and the
laboratory and clinical information required for approval of a New Drug
Application, or NDA, or a BLA, are substantial and can require a number of
years. In addition, after any of our products receive regulatory approval, it is
subject to ongoing FDA regulation, including, for example, changes to its label
and product recall. We cannot be sure that we can obtain necessary regulatory
approvals on a timely basis, if at all, for any of the products we are
developing or that we can maintain necessary regulatory approvals for our
existing products, and all of the following could have a material adverse effect
on our business:
o significant delays in obtaining or failing to obtain required
approvals;
o loss of or changes to previously obtained approvals; and
o failing to comply with existing or future regulatory requirements.
Moreover, it is possible that the current regulatory framework could
change or additional regulations could arise at any stage during our product
development, which may affect our ability to obtain approval of our products.
Difficulties or Delays in Product Manufacturing Could Harm Our Business
We currently produce all of our products at our manufacturing facilities
located in South San Francisco, California and Vacaville, California or through
various contract manufacturing arrangements. Problems with any of our or our
contractor's manufacturing processes could result in product defects, which
could require us to delay shipment of products or recall products previously
shipped. In addition, any prolonged interruption in the operations of our or our
contractor's manufacturing facilities could result in cancellations of
shipments. A number of factors could cause
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interruptions, including equipment malfunctions or failures, or damage to a
facility due to natural disasters or otherwise. Because our manufacturing
processes and those of our contractor's are highly complex and are subject to a
lengthy FDA approval process, we cannot assure you that alternative qualified
production capacity would be available on a timely basis or at all. Difficulties
or delays in our and our contractor's manufacturing could increase our costs,
cause us to lose revenue or market share and damage our reputation.
Our Stock Price, Like That of Many Biotechnology Companies, Is Highly Volatile
The market prices for securities of biotechnology companies in general
have been highly volatile and may continue to be highly volatile in the future.
In addition, due to the absence of the put and call that were associated with
our special common stock and the reduction in the number of shares of our
publicly traded stock, the market price of our common stock has been and may
continue to be more volatile than our special common stock was in the past. The
following factors, in addition to other risk factors described in this section,
may have a significant impact on the market price of our common stock:
o announcements of technological innovations or new commercial products
by us or our competitors;
o developments concerning proprietary rights, including patents;
o publicity regarding actual or potential medical results relating to
products under development by us or our competitors;
o regulatory developments in the United States and foreign countries;
o public concern as to the safety of biotechnology products;
o economic and other external factors or other disaster or crisis; and
o period-to-period fluctuations in financial results.
A Variety of Factors Could Adversely Affect Our Cash Position
Factors that could adversely affect our cash position include, but are not
limited to, future levels of our product sales, royalty and contract revenues,
expenses, in-licensing activities, including the timing and amount of related
development funding or milestone payments, acquisitions, capital expenditures
and the amount of any stock repurchased under any stock repurchase program. The
affiliation agreement with Roche requires us to, among other things, establish a
stock repurchase program designed to maintain Roche's percentage ownership
interest in our common stock. While the dollar amounts associated with these
future purchases cannot currently be estimated, such stock repurchases could
have a material adverse effect on our cash position and may have the effect of
limiting our ability to use our capital stock as consideration for acquisitions.
Future Sales by Roche Could Cause the Price of Our Common Stock to Decline
Sales of a substantial number of shares of our common stock in the public
market following this offering could adversely affect the market price of our
common stock. You should read "Shares Eligible for Future Sale".
We Are Subject to a Variety of Factors Could Affect Our Income Tax
Our annual effective tax rate will be higher than the statutory rate
primarily as a result of nondeductible goodwill amortization. In addition, our
effective tax rate is dependent upon several other factors including, but not
limited to, changes in tax laws and rates, interpretation of existing tax laws,
future levels of research and development spending, the outcome of clinical
trials of certain development products, our success in commercializing such
products, potential competition regarding the products and non-deductible items.
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Our Interest Income is Subject to Fluctuations in Interest Rates
Our interest income is sensitive to changes in the general level of
interest rates, primarily U.S. interest rates. In this regard, changes in U.S.
interest rates affect the interest earned on our cash equivalents, short-term
investments, convertible preferred stock investments, convertible loans and
long-term investments.
We Are Exposed to Risks Relating to Foreign Currency Exchange Rates and Foreign
Economic Conditions
We receive royalty revenues from licensees selling products in
countries throughout the world. As a result, our financial results could be
significantly affected by factors such as changes in foreign currency exchange
rates or weak economic conditions in the foreign markets in which our licensed
products are sold. We are exposed to changes in exchange rates in Europe, Asia
(primarily Japan) and Canada. Our exposure to foreign exchange rates primarily
exists with the euro. When the U.S. dollar strengthens against the currencies in
these countries, the U.S. dollar value of non-U.S. dollar-based revenue
decreases; when the U.S. dollar weakens, the U.S. dollar value of the non-U.S.
dollar-based revenue increases. Accordingly, changes in the exchange rates, and
in particular a strengthening of the U.S. dollar, may adversely affect our
royalty revenues as expressed in U.S. dollars. In addition, as part of our
overall investment strategy, a portion of our portfolio is primarily in
non-dollar denominated investments. As a result, we are exposed to changes in
the exchange rates of the countries in which these non-dollar denominated
investments are made.
Our Investments in Equity Securities Are Subject to Market Risks
As part of our strategic alliance efforts, we invest in equity instruments
of biotechnology companies. These investments are subject to fluctuations from
market value changes in stock prices.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained or incorporated by reference in this
prospectus are forward-looking statements concerning our operations, economic
performance and financial condition. Forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, are
included, for example, in the discussions about:
o our strategy;
o our future relationship with Roche;
o our liquidity;
o product sales, royalties and contract revenues;
o new product development or product introduction;
o expenses and net income;
o our credit risk management;
o our asset/liability risk management;
o our operational and legal risks;
o our consumer business; and
o how we may be affected by certain legal proceedings.
These statements involve risks and uncertainties. Actual results may
differ materially from those expressed or implied in those statements. Factors
that could cause such differences include, but are not limited to, those
discussed under "Risk Factors".
USE OF PROCEEDS
We will not receive any proceeds from the sale of our common stock by the
selling shareholders.
DIVIDEND POLICY
We have never declared or paid cash dividends. We do not intend to declare
or pay any cash dividends on our common stock in the foreseeable future. We plan
to retain any earnings for use in the operation of our business and to fund
future growth.
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SELLING SHAREHOLDERS
The LYONs were originally issued by Roche and sold to Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "initial purchaser").
The initial purchaser agreed that it would not offer or sell LYONs except (i) to
persons that it reasonably believed are "qualified institutional buyers" as
defined in Rule 144A under the Securities Act and (ii) pursuant to offers and
sales that occur outside the United States within the meaning of Regulation S
under the Securities Act. Each LYON is exchangeable at the option of the holder,
at any time prior to maturity, unless previously redeemed or otherwise
purchased, for shares of our common stock. Those holders who have exchanged
their LYONs for our common stock may from time to time offer and sell pursuant
to this prospectus any or all of such common stock.
Prior to any use of this prospectus in connection with an offering of our
common stock, this prospectus will be supplemented to set forth the name and
number of shares beneficially owned by the selling shareholder. The prospectus
supplement will also disclose whether any selling shareholder has held any
position or office with, been employed by or otherwise has had a material
relationship with, the company or any of its affiliates during the three years
prior to the date of the prospectus supplement.
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MATERIAL U.S. FEDERAL TAX CONSIDERATIONS FOR
NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of the material United States
federal income and estate tax consequences of the ownership and disposition of
our common stock by a beneficial owner thereof that is a "Non-U.S. Holder." A
"Non- U.S. Holder" is a person or entity that, for U.S. federal income tax
purposes, is a non-resident alien individual, a foreign corporation, a foreign
partnership, or a foreign estate or trust.
This discussion is based on the Internal Revenue Code of 1986, as amended,
and administrative interpretations as of the date of this prospectus, all of
which are subject to change, including changes with retroactive effect. This
discussion does not address all aspects of United States federal income and
estate taxation that may be relevant to Non- U.S. Holders in light of their
particular circumstances and does not address any tax consequences arising under
the laws of any state, local or foreign jurisdiction. Prospective holders should
consult their tax advisors with respect to the particular tax consequences to
them of owning and disposing of our common stock, including the consequences
under the laws of any state, local or foreign jurisdiction.
Dividends
Subject to the discussion below, dividends, if any, paid to a Non-U.S.
Holder of our common stock generally will be subject to withholding tax at a 30%
rate or such lower rate as may be specified by an applicable income tax treaty.
For purposes of determining whether tax is to be withheld at a 30% rate or at a
reduced rate as specified by an income tax treaty, Genentech ordinarily will
presume that dividends paid on or before December 31, 2000 to an address in a
foreign country are paid to a resident of such country absent knowledge that
such presumption is not warranted.
Under United States Treasury Regulations applicable to dividends paid
after December 31, 2000, to obtain a reduced rate of withholding under a treaty,
a Non-U.S. Holder generally will be required to provide an Internal Revenue
Service Form W-8 BEN certifying such Non-U.S. Holder's entitlement to benefits
under a treaty. The regulations also provide special rules to determine whether,
for purposes of determining the applicability of a tax treaty, dividends paid to
a Non-U.S. Holder that is an entity should be treated as paid to the entity or
those holding an interest in that entity.
There will be no withholding tax on dividends paid to a Non-U.S. Holder
that are effectively connected with the Non-U.S. Holder's conduct of a trade or
business within the United States if a Form 4224 or, after December 31, 2000, a
Form W-8 ECI, stating that the dividends are so connected is filed with
Genentech. Instead, the effectively connected dividends will be subject to
regular United States income tax in the same manner as if the Non-U.S. Holder
were a United States resident. A non-U.S. corporation receiving effectively
connected dividends may also be subject to an additional "branch profits tax"
which is imposed, under certain circumstances, at a rate of 30% (or such lower
rate as may be specified by an applicable treaty) of the non-U.S. corporation's
effectively connected earnings and profits, subject to certain adjustments.
Generally, Genentech must report to the United States Internal Revenue
Service the amount of dividends paid, the name and address of the recipient, and
the amount, if any, of tax withheld. A similar report is sent to the holder.
Pursuant to tax treaties or certain other agreements, the United States Internal
Revenue Service may make its reports available to tax authorities in the
recipient's country of residence.
Dividends paid to a Non-U.S. Holder at an address within the United States
may be subject to backup withholding imposed at a rate of 31% if the Non-U.S.
Holder fails to establish that it is entitled to an exemption or to provide a
correct taxpayer identification number and certain other information to
Genentech.
Under current United States federal income tax law, backup withholding
generally does not apply to dividends paid on or before December 31, 2000 to a
Non-U.S. Holder at an address outside the United States, unless the payer has
knowledge that the payee is a U.S. person. Under the regulations described
above, however, a Non-U.S. Holder will be subject to backup withholding unless
applicable certification requirements are met.
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Gain on Disposition of Common Stock
A Non-U.S. Holder generally will not be subject to United States federal
income tax with respect to gain realized on a sale or other disposition of our
common stock unless (i) the gain is effectively connected with a trade or
business of such holder in the United States, (ii) in the case of certain
Non-U.S. Holders who are non-resident alien individuals and hold our common
stock as a capital asset, such individuals are present in the United States for
183 or more days in the taxable year of the disposition, (iii) the Non-U.S.
Holder is subject to tax pursuant to the provisions of the Code regarding the
taxation of U.S. expatriates, or (iv) Genentech is or has been a "U.S. real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code at any time within the shorter of the five-year period preceding such
disposition or such holder's holding period. Genentech believes that it is not,
and does not anticipate becoming, a U.S. real property holding corporation.
Information Reporting Requirements and Backup Withholding on Disposition of
Common Stock
Under current United States federal income tax law, information reporting
and backup withholding imposed at a rate of 31% will apply to the proceeds of a
disposition of our common stock effected by or through a United States office of
a broker unless the disposing holder certifies as to its non-U.S. status or
otherwise establishes an exemption. Generally, United States information
reporting and backup withholding will not apply to a payment of disposition
proceeds where the transaction is effected outside the United States through a
non-U.S. office of a non-U.S. broker. However, U.S. information reporting
requirements will apply to a payment of disposition proceeds where the
transaction is effected outside the United States by or through an office
outside the United States of a broker that fails to maintain documentary
evidence that the holder is a Non-U.S. Holder and that certain conditions are
met, or that the holder otherwise is entitled to an exemption, and the broker is
(i) a U.S. person, (ii) a foreign person which derives 50% or more of its gross
income for certain periods from the conduct of a trade or business in the United
States, (iii) a "controlled foreign corporation" for U.S. federal income tax
purposes, or (iv) effective after December 31, 2000, a foreign partnership (A)
at least 50% of the capital or profits interest in which is owned by U.S.
persons, or (B) that is engaged in a U.S. trade or business.
Effective after December 31, 2000, backup withholding will apply to a
payment of those disposition proceeds if the broker has actual knowledge that
the holder is a U.S. person.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the U.S.
Internal Revenue Service.
Federal Estate Tax
An individual Non-U.S. Holder who is treated as the owner of, or has made
certain lifetime transfers of, an interest in our common stock will be required
to include the value thereof in his gross estate for U.S. federal estate tax
purposes, and may be subject to U.S. federal estate tax unless an applicable
estate tax treaty provides otherwise.
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SHARES ELIGIBLE FOR FUTURE SALE
The shares of our common stock sold pursuant to this prospectus will be
freely tradable without restriction under the Securities Act of 1933 except for
any such shares which may be acquired by one of our affiliates as that term is
defined in Rule 144 promulgated under the Securities Act of 1933, which shares
will remain subject to the resale limitations of Rule 144.
The shares of our common stock held by Roche constitute "restricted
securities" within the meaning of Rule 144, and will be eligible for sale by
Roche in the open market, subject to the applicable requirements of Rule 144,
described below.
Generally, Rule 144 provides that a person who has beneficially owned
"restricted" shares for at least one year will be entitled to sell on the open
market in brokers' transactions within any three month period a number of shares
that does not exceed the greater of:
o 1% of the then outstanding shares of common stock; and
o the average weekly trading volume in the common stock on the open
market during the four calendar weeks preceding such sale.
Sales under Rule 144 are also subject to certain other requirements
regarding the manner of sale, notice and availability of current public
information about us.
In the event that any person, who is deemed to be our affiliate, purchases
shares of our common stock or acquires shares of our common stock pursuant to
one of our employee benefit plans, the shares held by such person are required
under Rule 144 to be sold in brokers' transactions, subject to the volume
limitations described above. Shares properly sold in reliance upon Rule 144 to
persons who are not our affiliates are thereafter freely tradable without
restriction.
Sales of substantial amounts of our common stock in the open market, or
the availability of such shares for sale, could adversely affect the price of
our common stock. Shares sold pursuant to this prospectus will be eligible for
immediate resale in the public market without restrictions by persons other than
our affiliates. Our affiliates would be subject to the restrictions of Rule 144
described above.
Outstanding options representing an aggregate of 18,475,581 shares of our
common stock have been issued under our stock option plans, of which options
representing 4,675,018 shares of our common stock were exercisable as of April
30, 2000. The shares issued pursuant to our stock option plans are freely
tradable, subject to the restrictions on resale by affiliates under Rule 144
discussed above.
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PLAN OF DISTRIBUTION
The selling shareholders and their successors (which term includes their
transferees, pledgees or donees or their successors) may sell the common stock
directly to purchasers or through underwriters, broker-dealers or agents, who
may receive compensation in the form of discounts, concessions or commissions
from the selling shareholders or the purchasers (which discounts, concessions or
commissions as to any particular underwriter, broker-dealer or agent may be in
excess of those customary in the types of transactions involved).
The common stock may be sold in one or more transactions at fixed prices,
at prevailing market prices at the time of sale, at prices related to such
prevailing market prices, at varying prices determined at the time of sale, or
at negotiated prices. Such sales may be effected in transactions (which may
involve crosses or block transactions) (1) on any national securities exchange
or quotation service on which the common stock may be listed or quoted at the
time of sale, (2) in the over-the-counter market, (3) in the transactions
otherwise than on such exchanges or services or in the over-the-counter market,
(4) through the writing of options (whether such options are listed on an
options exchange or otherwise), or (5) through the settlement of short sales. In
connection with the sale of the common stock, the selling shareholders may enter
into hedging transactions with broker-dealers or other financial institutions
which may in turn engage in short sales of the common stock and deliver these
securities to close out such short positions, or loan or pledge the common stock
to broker-dealers that in turn may sell these securities.
The aggregate proceeds to the selling shareholders from the sale of the
common stock offered by them hereby will be the purchase price of such common
stock less discounts and commissions, if any. Each of the selling shareholders
reserves the right to accept and, together with their agents from time to time,
to reject, in whole or in part, any proposed purchase of common stock to be made
directly or through agents. We will not receive any of the proceeds from any
offerings by the selling shareholders.
In order to comply with the securities laws of some states, if applicable,
the common stock may be sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, in some states the common stock may
not be sold unless they have been registered or qualified for sale or an
exemption from registration or qualification requirements is available and is
complied with.
The selling shareholders and any underwriters, broker-dealers or agents
that participate in the sale of the common stock may be "underwriters" within
the meaning of Section 2(11) of the Securities Act. Any discounts, commissions,
concessions or profit they earn on any resale of the shares may be underwriting
discounts and commissions under the Securities Act. Selling shareholders who are
"underwriters" within the meaning of Section 2(11) of the Securities Act will be
subject to the prospectus delivery requirements of the Securities Act. The
selling shareholders have acknowledged that they understand their obligations to
comply with the provisions of the Exchange Act and the rules thereunder relating
to stock manipulation, particularly Regulation M, and have agreed that they will
not engage in any transaction in violation of such provisions.
In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus. A selling
shareholder may not sell any common stock described herein and may not transfer,
devise or gift such securities by other means not described in this prospectus.
To the extent required, the common stock to be sold, the names of the
selling shareholders, the respective purchase prices and public offering prices,
the names of any agent, dealer or underwriter, and any applicable commissions or
discounts with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement of which this prospectus is a part.
We entered into a registration rights agreement for the benefit of holders
of the LYONs to register the common stock exchangeable for LYONs under
applicable federal and state securities laws. The registration rights agreement
provides for cross-indemnification of the selling shareholders and the company
and their respective directors, officers and controlling persons against certain
liabilities in connection with the offer and sale of the common stock, including
liabilities under the Securities Act. The company and Roche will pay
substantially all of the expenses incurred by the
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company as a result of complying with the registration rights agreement.
However, neither Roche nor the company shall reimburse the holders of the LYONs
or the holders of the common stock exchanged for LYONs for any fees or expenses
incurred by them.
LEGAL MATTERS
Certain legal matters relating to the shares of common stock offered
hereby will be passed upon for Genentech by Davis Polk & Wardwell, New York, New
York.
EXPERTS
The consolidated financial statements of Genentech, Inc. incorporated by
reference in Genentech Inc.'s annual report (Form 10-K) for the year ended
December 31, 1999, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon incorporated by reference therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
With respect to the unaudited condensed consolidated interim financial
information for the three-month periods ended March 31, 2000 and March 31, 1999,
incorporated by reference in this prospectus, Ernst & Young LLP have reported
that they have applied limited procedures in accordance with professional
standards for a review of such information. However, their separate report,
included in Genentech, Inc.'s quarterly report on Form 10-Q for the quarter
ended March 31, 2000, and incorporated herein by reference, states that they did
not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their report on such
information should be restricted considering the limited nature of the review
procedures applied. The independent auditors are not subject to the liability
provisions of Section 11 of the Securities Act of 1933 (the "Act") for their
report on the unaudited interim financial information because that report is not
a "report" or a "part" of the registration statement prepared or certified by
the auditors within the meaning of Sections 7 and 11 of the Act.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. We have also filed with the SEC a registration
statement on Form S-3 to register the shares of common stock being offered in
this prospectus. This prospectus, which forms part of the registration
statement, does not contain all of the information included in the registration
statement. For further information about us and the shares of common stock
offered in this prospectus, you should refer to the registration statement and
its exhibits and our other SEC filings.
You may read and copy any document we file with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information on the operation of the
Public Reference Room. We file our SEC materials electronically with the SEC, so
you can also review our filings by accessing the website maintained by the SEC
at http://www.sec.gov. This website contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the SEC.
The SEC allows us to "incorporate by reference" the information we file
with it, which means we can disclose important information to you by referring
you to those documents. The information included in the following documents is
incorporated by reference and is considered to be a part of this prospectus. The
most recent information that we file with the SEC automatically updates and
supersedes more dated information. We have previously filed the following
documents with the SEC and incorporate them by reference into this prospectus:
1. Our annual report on Form 10-K for the year ended December 31, 1999;
2. Our current report on Form 8-K dated January 14, 2000;
3. Our proxy statement for the 2000 annual meeting of stockholders;
4. Our quarterly report on Form 10-Q for the quarter ended March 31,
2000; and
5. The description of our capital stock under the caption "Description of
Capital Stock" in our registration statement on Form 8-A (File No.
1-09813).
We also incorporate by reference all documents subsequently filed by us
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act until all of
the shares being offered in this prospectus are sold.
We will provide without charge to each person to whom a prospectus is
delivered a copy of any or all of the information that has been incorporated by
reference in this prospectus. If you would like to obtain this information from
us, please direct your request, either in writing or by telephone, to Genentech,
Inc., 1 DNA Way, South San Francisco, California 94080, Attention Investor
Relations (650) 225-1260.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable by the
Registrant in connection with the sale of the securities being registered
hereby. All amounts are estimates except the registration fee.
Amount to be
Paid
-----------------
Registration fee.......................................... $ 211,630
Printing and engraving expenses........................... 10,000
Legal fees and expenses................................... 40,000
Transfer agent's fees..................................... 2,500
Accounting fees and expenses.............................. 15,000
Miscellaneous............................................. 20,870
------------
TOTAL................................................. $ 300,000
============
Item 15. Indemnification of Directors and Officers
Our certificate of incorporation limits, to the fullest extent permitted
by Delaware corporate law, the personal liability of directors for monetary
damages for breach of their fiduciary duties.
Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") provides, in summary, that directors and officers of Delaware
corporations are entitled, under certain circumstances, to be indemnified
against all expenses and liabilities (including attorneys' fees) incurred by
them as a result of suits brought against them in their capacity as a director
or officer, if they acted in good faith and in a manner they reasonably believed
to be in or not opposed to the best interests of the corporation, and with
respect to any criminal action or proceeding, if they had no reasonable cause to
believe their conduct was unlawful; provided, that no indemnification may be
made against expenses in respect of any claim, issue or matter as to which they
shall have been adjudged to be liable to the corporation, unless and only to the
extent that the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, they are fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. Any such
indemnification may be made by the corporation only as authorized in each
specific case upon a determination by the stockholders or disinterested
directors that indemnification is proper because the indemnitee has met the
applicable standard of conduct.
Our board of directors may provide similar indemnification of our
officers, employees and agents as they deem appropriate and as authorized by
Delaware law. We may purchase insurance on behalf of any director, officer,
employee or agent against any expense incurred by such person in his or her
capacity.
Our certificate of incorporation also provides that Roche and the officers
or directors of Roche will not be presumed liable to us or our stockholders for
breach of any fiduciary duty or duty of loyalty, failure to act in the best
interests of Genentech, or receipt of any improper personal benefit, simply
because Roche or any director or officer of Roche, in good faith, takes any
action, exercises any right or gives or withholds any consent with respect to
any agreement or contract between Roche and Genentech.
In addition, Roche will not be liable to us or our stockholders for breach
of any fiduciary duty if Roche pursues or acquires a potential corporate
opportunity of ours or does not inform us of a potential corporate opportunity.
If a director, officer or employee of Genentech who is also a director, officer
or employee of Roche knows a potential transaction or matter that may be a
corporate opportunity both for Genentech and Roche, the director, officer or
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employee is entitled to offer the corporate opportunity to us or Roche as the
director, officer or employee deems appropriate under the circumstances in his
sole discretion, and no such director, officer or employee will be liable to us
or our stockholders for breach of any fiduciary duty or duty of loyalty or
failure to act in our best interests or the derivation of any improper personal
benefit by reason of the fact that such director, officer or employee offered
such corporate opportunity to Roche (rather than to us) or did not communicate
information regarding such corporate opportunity to us, or Roche pursues or
acquires such corporate opportunity for itself or directs such corporate
opportunity to another person or does not communicate the corporate opportunity
to us.
Neither Roche nor any officer or director thereof shall be liable to us or
our stockholders for breach of any fiduciary duty or duty of loyalty or failure
to act in (or not opposed to) our best interests or the derivation of any
improper personal benefit by reason of the fact that Roche or an officer or
director thereof in good faith takes any action or exercises any rights or gives
or withholds any consent in connection with any agreement or contract between
Roche and Genentech. No vote cast or other action taken by any person who is an
officer, director or other representative of Roche, which vote is cast or action
is taken by such person in his capacity as a director of Genentech, shall
constitute an action of or the exercise of a right by or a consent of Roche for
the purpose of any such agreement or contract.
Item 16. Exhibits and Financial Statement Schedules
(a) The following exhibits are filed as part of this Registration
Statement:
Exhibit No. Document
----------- --------
4.1 Registration Rights Agreement between the Registrant and Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
as the purchaser, dated as of January 19, 2000
5.1 Opinion of Davis Polk & Wardwell
15.1 Letter re: Unaudited Interim Financial Information
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Davis Polk & Wardwell (included in Exhibit 5.1)
24.1 Power of Attorney (included on the signature page of the
Registration Statement)
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act,
(b) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registrant statement,
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(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that clauses (a) and (b) do not apply if the
information required to be included in a post- effective amendment by such
clauses is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission by the Registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") that
are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section
13(a) of Section 15(d) of the Exchange Act that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as the indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions referenced in Item 15 of
this Registration Statement, or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer, or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered hereunder,
the registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this Registration Statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of South San Francisco,
State of California, on the 15th day of May, 2000.
GENENTECH, INC.
By: /s/ Arthur D. Levinson
-------------------------------
Name: Arthur D. Levinson
Title: Chief Executive Officer and
Chairman of the Board
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POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Arthur D. Levinson and Stephen G.
Juelsgaard, and each or any one of them, his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capabilities, to sign any and all
amendments (including post-effective amendments) to this registration statement
and any and all additional registration statements pursuant to Rule 462(b) of
the Securities Act of 1933, as amended, and to file the same, with all exhibits
thereto, and all other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection therewith, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Arthur D. Levinson Principal Executive Officer and May 15, 2000
- ----------------------------- Director
Arthur D. Levinson
/s/ Louis J. Lavigne, Jr. Principal Financial Officer May 15, 2000
- -----------------------------
Louis J. Lavigne, Jr.
/s/ John M. Whiting Principal Accounting Officer May 15, 2000
- -----------------------------
John M. Whiting
/s/ Herbert W. Boyer Director May 15, 2000
- -----------------------------
Herbert W. Boyer
/s/ Franz B. Humer Director May 15, 2000
- -----------------------------
Franz B. Humer
/s/ Jonathan K.C. Knowles Director May 15, 2000
- -----------------------------
Jonathan K.C. Knowles
/s/ Charles A. Sanders Director May 15, 2000
- -----------------------------
Charles A. Sanders
/s/ Mark Richmond Director May 15, 2000
- -----------------------------
Mark Richmond
II-5
<PAGE>
EXHIBIT INDEX
Exhibit No. Document
4.1 Registration Rights Agreement between the Registrant and Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
as the purchaser, dated as of January 19, 2000
5.1 Opinion of Davis Polk & Wardwell
15.1 Letter re: Unaudited Interim Financial Information
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Davis Polk & Wardwell (included in Exhibit 5.1)
24.1 Power of Attorney (included on the signature page of the
Registration Statement)
II-6
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into as of January 19, 2000 between GENENTECH, INC., a Delaware
corporation ("Genentech"), and Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, a Delaware corporation (the "Purchaser").
This Agreement is made pursuant to the Private Placement Purchase
Agreement, dated as of January 12, 2000 (the "Purchase Agreement"), between
Roche Holdings, Inc. ("Roche Holdings") and the Purchaser, which provides for
the sale by Roche Holdings to the Purchaser of $1,506,342,000 aggregate
principal amount at maturity of Roche Holdings' Liquid Yield Option(TM)Notes due
January 19, 2015 (Zero Coupon) (the "LYONs") and the Agreement dated as of
January 12, 2000 between Genentech and the Purchaser (the "Genentech
Agreement"). For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by Genentech, Genentech has agreed to provide the
registration rights set forth in this Agreement. The execution of this Agreement
is a condition to the closing under the Purchase Agreement. In the Purchase
Agreement, Roche Holdings has agreed to take certain actions in furtherance of
the agreements of Genentech set forth in this Agreement.
The parties hereby agree as follows:
SECTION 1. Definitions. As used in this Agreement, the following terms
shall have the following meanings:
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York or London are
closed.
Closing Date: January 19, 2000, or such other date as may be agreed
upon for the sale and purchase of the LYONs pursuant to the Purchase Agreement.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Exchange Agent: Any person appointed by Roche Holdings as provided in
Section 902 of the Indenture to exchange LYONs.
Genentech Common Stock: Common stock, par value $0.02 per share, of
Genentech.
Indenture: The Indenture, to be dated as of January 19, 2000, between
Roche Holdings and The Bank of New York, as Trustee, pursuant to which the LYONs
are being issued, as amended or supplemented from time to time in accordance
with the terms thereof.
II-1
<PAGE>
Person: An individual, partnership, limited liability company,
corporation, association, trust, joint venture or any other unincorporated
organization or entity.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Securities covered by such Registration Statement, and all
other amendments and supplements to the Prospectus, including post-effective
amendments and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
Registrable Securities: Shares of Genentech Common Stock issuable upon
exchange of LYONs that are Restricted Securities.
Registration Expenses: See Section 5 hereof.
Registration Statement: Any registration statement of Genentech that
covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Restricted Securities: Any and all shares of Genentech Common Stock
issuable upon exchange of LYONs and at all times subsequent thereto until, as to
any Restricted Security, (i) the sale of such Restricted Security has been
effectively registered under the Securities Act and such Restricted Security has
been disposed of in accordance with the method of distribution set forth in the
Registration Statement relating thereto, or (ii) it is distributed to the
public, or is otherwise able to be sold, pursuant to Rule 144(k) (or any similar
provision then in force, but not Rule 144A) under the Securities Act.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules and
regulations promulgated by the SEC thereunder.
Shelf Registration: See Section 3 hereof.
Special Counsel: Shearman & Sterling, special counsel to the Purchaser or
such other special counsel as may be designated by the holders of a majority
(with holders of LYONs deemed to be the holders, for purposes of determining
such majority, of the number of shares of Registrable Securities into which such
LYONs would be exchangeable as of the date such designation is made) of shares
of Registrable Securities outstanding.
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Trustee: The Bank of New York until a successor Trustee shall have become
such pursuant to the applicable provisions of the Indenture, and thereafter
Trustee shall mean such successor Trustee.
SECTION 2. Securities Subject to this Agreement.
(a) Securities. The securities entitled to the benefits of this Agreement
are the Registrable Securities.
(b) Holders of Registrable Securities. A Person is deemed to be a holder
of Registrable Securities whenever such Person beneficially owns Registrable
Securities.
SECTION 3. Shelf Registrations.
(a) Shelf Registrations. As promptly as practicable and, subject to
Section 4(a), in no event later than 120 days after the date hereof, Genentech
shall use reasonable efforts to prepare and file with the SEC a Registration
Statement (which may include any previously filed Registration Statement meeting
the requirements set forth herein) under the Securities Act for an offering to
be made on a continuous basis pursuant to Rule 415 (or any similar rule that may
be adopted by the SEC) under the Securities Act covering all of the Registrable
Securities (the "Shelf Registration").
(b) The Shelf Registration shall be on Form S-3 or another appropriate
form permitting registration of such Registrable Securities for resale by such
holders in the manner or manners designated by them.
(c) Genentech shall use reasonable efforts to cause the Shelf Registration
to become effective under the Securities Act as soon as practicable after filing
in accordance with Section 3(a) hereof and shall keep the Shelf Registration
continuously effective until the earlier of (i) the sale pursuant to the Shelf
Registration statement of all the securities registered thereunder, (ii) the
expiration of the holding period under Section 144(k) of the Securities Act
applicable to Registrable Securities after the exchange of the last outstanding
LYON for Registrable Securities, (iii) the date all Registrable Securities cease
to exist and (iv) two years after maturity of the LYONs.
(d) Genentech may suspend use of the Prospectus due to pending material
corporate developments or any material event that has not yet been publicly
disclosed, whether in whole or in part. Promptly after any such suspension,
Genentech will deliver a certificate in writing, signed by an authorized officer
of Genentech, to Roche Holdings, the holders of Registrable Securities, the
Trustee, the Exchange Agent and the Special Counsel setting forth that such an
event (without notice of the nature or details of such event) has taken or is
taking place and the length of time of suspension of the use of the Prospectus
that is part of the Shelf Registration statement. Genentech will use reasonable
efforts to ensure that use of the Shelf Registration statement may be resumed as
promptly as is practicable. The period of time that the Shelf Registration
statement is not available for sales as a result of events under this Section
3(d) shall not exceed in the aggregate 45 days in any 3 month period and 90 days
in any 12 month period. Genentech shall also supplement or make
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<PAGE>
amendments to any Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used by Genentech or if
required by the Securities Act.
SECTION 4. Registration Procedures. In connection with the registration
obligations pursuant to Section 3 hereof, Genentech shall use reasonable efforts
to effect such registration to permit the sale of such Registrable Securities in
accordance with the then intended method or methods of disposition thereof
(which shall not include an underwritten offering), and pursuant thereto
Genentech shall as expeditiously as possible:
(a) prepare and file with the SEC, within the time period specified in
Section 3, a Registration Statement or Registration Statements on any
appropriate form under the Securities Act, which form shall be available for the
sale of the Registrable Securities by the holders thereof in accordance with the
intended method or methods of distribution thereof, and use all reasonable
efforts to cause each such Registration Statement to become effective and remain
effective as provided herein; provided, however, that before filing a
Registration Statement or Prospectus or any amendments or supplements thereto,
Genentech shall furnish to the Special Counsel copies of the Registration
Statement or Prospectus and all such documents in the form proposed to be filed
at least three Business Days prior thereto, which documents will be subject to
the review of the Special Counsel, and Genentech shall not file any such
Registration Statement or amendment thereto or any Prospectus or any supplement
thereto to which the Special Counsel shall reasonably object on a timely basis
(such objection shall be given within five Business Days from the date such
Special Counsel receives such Registration Statement, amendment, Prospectus or
supplement and if such objection cannot be resolved with good faith efforts
within five days from the date such objection is sent, then the 120 day period
referred to in Section 3(a) shall be tolled until such objection is resolved),
unless Genentech is advised by its counsel that such Registration Statement or
amendment thereto or any Prospectus or supplement thereto is required to be
filed by applicable law;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the applicable period; cause
the related Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 (or any similar
provisions then in force) under the Securities Act;
(c) promptly notify the Special Counsel, the Exchange Agent, the Trustee
and Roche Holdings and, with respect to any event contemplated by clause (i)(B),
(iv), (v) or (vi) hereof, notify holders of Registrable Securities promptly (and
in each case, if requested, confirm any such oral or telephonic notice in
writing), (i) when a Prospectus or any Prospectus supplement or post-effective
amendment related to such Registrable Securities (A) has been filed, and (B)
with respect to a Registration Statement or any post-effective amendment related
to such Registrable Securities, when the same has been filed and has become
effective, (ii) of the receipt of any comments from the SEC, (iii) of any
request by the SEC for amendments or supplements to a Registration Statement or
related Prospectus or for additional information, (iv) of the issuance by the
SEC of any stop order suspending the effectiveness of a Registration Statement
or the initiation of any proceedings for that purpose, (v) of the receipt by
Genentech of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale or
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<PAGE>
exchange in any jurisdiction of the United States of America or the initiation
of any proceeding for such purpose, (vi) of the happening of any event that
makes any statement of a material fact made in such Registration Statement or
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue or that requires the making of any changes in a
Registration Statement or related Prospectus so that such documents will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading
(provided that the timely filing of a report under the Exchange Act which is
incorporated by reference in the Registration Statement and related Prospectus
shall constitute effective notice under this subsection (vi); and provided
further, that such notice may be the same notice delivered pursuant to Section
3(d); and provided further that notice that an event of the type referred to in
this subsection (vi) (without notice of the nature or details of such event)
shall constitute effective notice under this subsection (vi)), and (vii) of the
determination of Genentech that a post-effective amendment to a Registration
Statement would be appropriate;
(d) use reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale or exchange in any jurisdiction of the United
States of America, as promptly as practicable;
(e) if reasonably requested by any holder of Registrable Securities
covered by a Registration Statement, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment such information as such holder
reasonably requests to be included therein as is required by applicable law or
as necessary so that the Registration Statement does not include an untrue
statement of a material fact or omit to state a material fact with respect to
such holder or such holder's planned method of distribution, (ii) make all
required filings of such Prospectus supplement or such post- effective amendment
as soon as Genentech has received notification of the matters to be incorporated
in such Prospectus supplement or such post-effective amendment, and (iii)
supplement or make amendments to any Registration Statement as is required by
applicable law;
(f) furnish to each selling holder of Registrable Securities upon request,
and to each of Roche Holdings and the Special Counsel, without charge (subject
to the provisions of Section 5), at least one conformed copy of the Registration
Statement or Statements and any post-effective amendment thereto, including
financial statements and schedules, without charge, as well as all documents
incorporated therein by reference or deemed incorporated therein by reference
and all exhibits (including those previously furnished or incorporated by
reference), at the earliest practicable time under the circumstances after the
filing of such documents with the SEC;
(g) deliver to each holder of Registrable Securities, Roche Holdings and
the Special Counsel, without charge (subject to the provisions of Section 5), as
many copies of the Prospectus or Prospectuses (including each preliminary
prospectus) and any relevant amendment or supplement thereto as such Persons may
reasonably request; Genentech consents to the use of such Prospectus or any
amendment or supplement thereto in accordance with applicable law and this
Agreement by each of the selling holders of Registrable Securities in connection
with the offering and sale of the
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Registrable Securities covered by such Prospectus or any amendment or supplement
thereto in accordance with applicable law and this Agreement;
(h) prior to any public offering of Registrable Securities, use reasonable
efforts to register or qualify or cooperate with the selling holders of
Registrable Securities and the Special Counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale, as the case
may be, under the securities or Blue Sky laws of such state or local
jurisdictions in the United States as any seller reasonably requests in writing;
keep each such registration or qualification (or exemption therefrom) effective
during the period such Registration Statement is required to be kept effective
and do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by the
applicable Registration Statement; provided, however, that Genentech will not be
required to (i) qualify generally to do business in any jurisdiction where it is
not then so qualified, (ii) take any action that would subject it to general
service of process in any such jurisdiction where it is not then so subject or
(iii) register or qualify securities prior to the effective date of any
Registration Statement under Section 3 hereof;
(i) cooperate with the selling holders of Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities, which certificates shall not bear any restrictive
legends; and enable such Registrable Securities to be registered in such names,
in all cases consistent with the requirements set forth in the Indenture, as the
holders may request;
(j) subject to the exceptions contained in (i), (ii) and (iii) of
subsection (h) hereof, use all reasonable efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other Federal, state and local governmental regulatory
agencies or authorities in the United States as may be necessary, by virtue of
the business and operations of Genentech, to enable the seller or sellers
thereof to consummate the disposition of such Registrable Securities and
cooperate with each seller of Registrable Securities in connection with any
filings required to be made with the National Association of Securities Dealers,
Inc.;
(k) subject to the suspension of the use of the Prospectus that is part of
the Shelf Registration statement in accordance with Section 3(d), upon the
occurrence of any event contemplated by paragraph 4(c)(vi) or 4(c)(vii) above,
as promptly as practicable after the resolution of such an event as determined
by Genentech in good faith, prepare and file with the SEC a supplement or post-
effective amendment to the applicable Registration Statement or a supplement to
the related Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the purchasers
of the Registrable Securities being sold thereunder, such Prospectus will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
(l) take all customary actions in order to expedite or facilitate the
disposition of such Registrable Securities; and
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(m) comply with all applicable rules and regulations of the SEC and make
generally available to Genentech's securityholders an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder no later than the date required for the filing of the applicable
forms referred to in Rule 158, commencing on the first day of the first fiscal
quarter of Genentech commencing after the effective date of a Registration
Statement, which statement shall cover said 12-month period.
Purchaser shall, as a condition to the sale of any Registrable Security,
require the holder to whom such Registrable Security is sold to agree to be
bound by this Agreement with respect to the obligations of holders of
Registrable Securities set forth herein. Genentech may require each selling
holder of Registrable Securities under a Shelf Registration to furnish to
Genentech such information regarding such selling holder and the distribution of
such Registrable Securities, including the information specified in Item 507 of
Regulation S-K under the Securities Act, as Genentech may from time to time
reasonably request in writing, and each holder in acquiring such Registrable
Securities agrees to supply such information to Genentech promptly upon such
request.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that (i) within three Business Days of such acquisition,
such holder shall provide Genentech, with a copy to the Trustee and the Exchange
Agent, with such holder's name, address and telecopier number, if any, (ii) such
holder will promptly (and in any case within two Business Days after completion
of such sale or distribution) notify Genentech following any sale of Registrable
Securities under a Shelf Registration or distribution to the public pursuant to
Rule 144(k) (or any similar provision then in force, but not Rule 144A under the
Securities Act) and (iii) upon receipt of any notice from Genentech of the
happening of any event of the kind described in Section 4(c)(iii), 4(c)(iv),
4(c)(v) or 4(c)(vi) hereof, such holder will forthwith discontinue disposition
of such Registrable Securities covered by such Registration Statement or
Prospectus and will not resume disposition of such Registrable Securities until
such holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 4(k) hereof, or until it is advised in writing by
Genentech that the use of the applicable Prospectus may be resumed and has
received copies of the Registration Statement and Prospectus and any additional
or supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus.
SECTION 5. Registration Expenses. Except as set forth in the next
succeeding sentence, Genentech shall pay the following fees and expenses
incurred by it incident to the performance of or compliance with this Agreement
by Genentech (i) all stock exchange fees, (ii) all internal expenses in
preparing or assisting in preparing, printing and distributing any Registration
Statement, any Prospectus, any amendments or supplements thereto, and other
documents relating to Genentech's performance of and compliance with this
Agreement, and (iii) all rating agency fees.
Notwithstanding the preceding sentence, Roche Holdings has separately agreed
with Genentech to pay (A) all reasonable external fees and expenses incurred by
Genentech, including, without limitations, reasonable fees and expenses of
counsel for Genentech, reasonable fees and expenses of independent public
accounts retained by Genentech (including the reasonable costs connected with
the delivery of any comfort letter) and printing expenses, (B) all SEC or
National Association of Securities Dealers, Inc. registration and filing fees
and (C) all filing fees in connection with compliance with state securities or
Blue Sky laws (the Purchaser and the Holders have no obligation
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to pay for such expenses outlined in clauses (A), (B) and (C)). Neither Roche
Holdings nor Genentech shall bear or reimburse the holders of Registrable
Securities and LYONs for any fees or expenses incurred by them, including,
without limitation, the fees and disbursements of the Special Counsel.
SECTION 6. Indemnification; Contribution. (a) Indemnification by
Genentech. Genentech agrees to indemnify and hold harmless, to the fullest
extent permitted by law, each holder of Registrable Securities and each person
who controls any holder (within the meaning of either the Securities Act or the
Exchange Act) against any and all losses, claims, damages, liabilities and
expenses (including attorneys' fees) caused by any untrue or alleged untrue
statement of material fact contained in the Registration Statement, the
Prospectus or any preliminary prospectus (each as amended or supplemented, if
Genentech shall have furnished any amendments or supplements thereto), or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they were made) not
misleading, provided that Genentech shall not be required to indemnify any
holder or controlling persons for any losses, claims, damages, liabilities or
expenses resulting from any such untrue statement or omission if such untrue
statement or omission is made in reliance on and conformity with any written
information with respect to such holder furnished to Genentech by such holder
expressly for use therein.
(b) Indemnification by Holders. In connection with any Shelf Registration
in which a holder of Registrable Securities is participating, in furnishing
information relating to such holder of Registrable Securities to Genentech in
writing expressly for use in such Registration Statement, any preliminary
prospectus, the Prospectus or any amendments or supplements thereto, the holders
of such Registrable Securities agree, severally and not jointly, to indemnify
and hold harmless Genentech, any of its directors and officers who sign a
Registration Statement and each person, if any, who controls Genentech within
the meaning of either the Securities Act or the Exchange Act, to the same extent
as the foregoing indemnity from Genentech to such holder, but only with respect
to information relating to such holder furnished to Genentech in writing by such
holder expressly for use in the Registration Statement, or any amendment
thereto, or the Prospectus or any preliminary prospectus, or any amendment or
supplement thereto.
(c) Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to Section 6(a) or
Section 6(b), such person (hereinafter called the indemnified party) shall
promptly notify the person against whom such indemnity may be sought
(hereinafter called the indemnifying party) in writing but failure to so notify
an indemnifying party shall not relieve such indemnifying party from any
liability hereunder to the extent it is not materially prejudiced as a result
thereof and in any event shall not relieve it from any liability which it may
have otherwise than on account of this indemnity agreement. The indemnifying
party, upon request of the indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the indemnified party and any
others the indemnifying party may designate in such proceeding and shall pay the
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the
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indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel, (ii) the indemnifying party has failed within a
reasonable time to retain counsel reasonably satisfactory to the indemnified
party, or (iii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and the indemnified party shall have been advised by counsel that representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for (a) the fees and expenses of more than one
separate firm (in addition to any local counsel) for Genentech, any of its
directors or officers who sign the Registration Statement and each person, if
any, who controls Genentech within the meaning of either the Securities Act or
the Exchange Act and (b) the fees and expenses of more than one separate firm
(in addition to any local counsel) for all holders of Registrable Securities and
all persons, if any, who control any holders of Registrable Securities within
the meaning of either the Securities Act or the Exchange Act, and that all such
fees and expenses shall be reimbursed as they are incurred. In such case
involving the holders of Registrable Securities and such controlling persons of
holders of Registrable Securities, such firm shall be designated in writing by
holders of a majority (with holders of LYONs deemed to be holders, for purposes
of determining such majority of the number of shares of Registrable Securities
into which such LYONs would be exchangeable as of the date such designation is
made) of shares of Registrable Securities. In all other cases, such firm shall
be designated in writing by Genentech.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the third sentence of this section 6(c), the indemnifying party agrees that
it shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request or reasonably objected in writing, on the basis of the
standards set forth herein, to the propriety of such reimbursement prior to the
date of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding.
(d) Contribution. If the indemnification provided for in this Section 6
from the indemnifying party is unavailable to an indemnified party hereunder or
insufficient in respect of any losses, claims, damages, liabilities or expenses
referred to in this Section 6, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified parties in connection
with the actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such
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indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 6(c), any legal or
other fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Sections 6(a) and 6(b) without regard to the relative fault of said indemnifying
party or indemnified party or any other equitable consideration provided for in
this Section 6(d).
Notwithstanding the provisions of this Section 6, no holder of Registrable
Securities shall be required to indemnify or contribute any amount in excess of
the amount by which the total price at which the Registrable Securities sold by
such holder of Registrable Securities and distributed to the public were offered
to the public exceeds the amount of any damages that such holder of Registrable
Securities has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
For purposes of this Section 6(d), each person, if any, who controls any
holder of Registrable Securities within the meaning of the Securities Act or the
Exchange Act shall have the same rights to contribution of such holder, and each
director or officer of Genentech who signed the Registration Statement, and each
person, if any, who controls Genentech within the meaning of the Securities Act
or the Exchange Act shall have the same rights to contribution as Genentech.
SECTION 7. Rules 144 and 144a. Genentech shall use its reasonable efforts
to file the reports required to be filed by them under the Securities Act and
the Exchange Act in a timely manner and, if at any time it is not required to
file such reports but in the past had been required to or did file such reports,
it will, upon the request of any holder of Registrable Securities, make
available other information as required by, and so long as necessary to permit,
sales of its Registrable Securities pursuant to Rules 144 and 144A under the
Securities Act or, in each case, any similar rule or regulation hereafter
adopted by the SEC as a replacement thereto having substantially the same effect
as such rule. Notwithstanding the foregoing, nothing in this Section 7 shall be
deemed to require Genentech to register any of their securities pursuant to the
Exchange Act.
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SECTION 8. Miscellaneous. (a) Remedies. In the event of a breach by
Genentech of any of its obligations under this Agreement, each holder of
Registrable Securities, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. Genentech agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific performance in respect of
such breach, it shall waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Genentech shall not, on or after the date
of this Agreement, enter into any agreement with respect to their securities
that is inconsistent with the rights granted to the holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
(c) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented
(other than to cure any ambiguity or correct or supplement any provision
herein), and waivers or consents to departures from the provisions hereof may
not be given, unless Genentech has obtained the written consent of holders of a
majority of the shares of Registrable Securities (with holders of the LYONs
deemed to be the holders, for purposes of this Section, of the number of shares
of Registrable Securities into which such LYONs would be exchangeable as of the
date such consent is requested), except in the case of the Purchaser prior to
distribution of the LYONs to the holders, then the consent of the Purchaser.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
holders of Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other holders of Registrable Securities or holders of LYONs may be
given by holders of at least a majority of shares of the Registrable Securities
being sold by such holders.
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered first
class mail, or telecopier:
(i) if to a holder of Registrable Securities, at the most current
address or telecopier number given by such holder to Genentech in
accordance with the provisions of this Section 8(d) and Section 4, except
with respect to the Purchaser prior to distribution of the LYONS, then to
the Purchaser at the address set forth on the first page of the Purchase
Agreement, attention of Andrew Burch (fax: 650-849-2102), with a copy to
William Hinman, Shearman & Sterling, 555 California Street, San Francisco,
CA 94104 (fax: (415) 616-1199);
(ii) if to the Trustee or the Exchange Agent, 101 Barclay Street, New
York, New York, attention: Corporate Trust Administrator (Fax: 212-
815-5915), and thereafter by such other address, notice of which is given
in accordance with the provision of this Section 8(d) by Roche Holdings,
the Trustee or the Exchange Agent;
(iii) if to Roche Holdings, Roche Holdings, Inc., One Commerce Center,
Suite 1050, Wilmington, Delaware 19801, attention: Investor Relations (Fax:
302-425-4713), and thereafter
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by such other address, notice of which is given in accordance with the
provision of this Section 8(d);
(iv) if to the Special Counsel, Shearman & Sterling, 555 California
Street, San Francisco, CA 94104, attention: William Hinman (Fax:
415-616-1199), and thereafter by such other address, notice of which is
given in accorance with the provision of this Section 8(d); and
(v) if to Genentech, Genentech, Inc., 1 DNA Way, South San Francisco,
California 94080, attention: Corporate Secretary (fax: 650-225-8654), and
thereafter by such other address, notice of which is given in accordance
with the provision of this Section 8(d).
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five Business Days after
being deposited in the mail, postage prepaid, if mailed; the next Business Day
after being sent by next-day delivery by a solvent air courier; and when receipt
acknowledged, whether telecopied or otherwise (which acknowledgement may be via
electronic transmission, such as telecopier confirmation, e-mail receipt or
otherwise). All such notices and communications given in accordance with Section
8(d)(i) shall be deemed to have been duly given even if the last address or
telecopier number given by a holder of Registrable Securities pursuant to this
Section 8(d) and Section 4 is not current. Furthermore, a good faith effort made
by Genentech to give such notices and communications to holders of Registrable
Securities shall be deemed sufficient notice hereunder; provided that such
notices and communications shall have also been given to the Trustee and the
Exchange Agent.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
holders of Registrable Securities.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(i) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to
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find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such which may be hereafter declared
invalid, void or unenforceable.
(j) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement, and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by Genentech with respect to the
securities sold pursuant to the Purchase Agreement. This Agreement supersedes
all prior agreements and understandings between the parties with respect to such
subject matter.
(k) Securities Held by Genentech or Roche Holdings or their Affiliates;
Calculation of Percentage of Registrable Securities. Whenever the consent or
approval of holders of a specified percentage of Registrable Securities is
required hereunder, any Registrable Securities and LYONs held by Genentech,
Roche Holdings or any of their affiliates shall not be counted in determining
whether such consent or approval was given by the holders of such required
percentage or amount.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
GENENTECH, INC.
By /s/ Stephen G. Juelsgaard
------------------------------
Name: Stephen G. Juelsgaard
Title: Senior Vice President,
General Counsel
and Secretary
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/ Andrew W. Burch
------------------------------
Name: Andrew W. Burch
Title: Vice President
14
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
Fax 212-450-4800
May 15, 2000
Genentech, Inc.
1 DNA Way
South San Francisco, CA 94080-4990
Ladies and Gentlemen:
We have acted as counsel to Genentech, Inc., a Delaware corporation
("Genentech"), in connection with the preparation of Genentech's Registration
Statement on Form S-3, as amended (the "Registration Statement'), filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Securities Act"), relating to the registration of 6,517,309 shares (the
"Shares') of common stock, par value $.02 per share, of Genentech.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of such documents, corporate records, certificates of public
officials and other instruments as we have deemed necessary for the purposes of
rendering this opinion.
In rendering this opinion we have assumed that, prior to the offering of
any of the Shares, the Registration Statement, as then amended, will have become
effective under the Securities Act.
On the basis of the foregoing, we are of the opinion that the Shares have
been duly authorized and validly issued and are fully paid and non-assessable.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of the
United States of America and the General Corporation Law of the State of
Delaware.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus contained in this Registration Statement. In giving
such consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act.
Very truly yours,
/s/ Davis Polk & Wardwell
Exhibit 15.1
May 10, 2000
The Board of Directors and Stockholders
Genentech, Inc.
We are aware of the incorporation by reference in the registration statement
(Form S-3) of Genentech, Inc., for the registration of 6,517,309 shares of its
common stock, of our report dated April 10, 2000 relating to the unaudited
condensed consolidated interim financial statements of Genentech, Inc. that are
included in its Form 10-Q for the quarter ended March 31, 2000.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report dated April 10,
2000 is not a part of the registration statement prepared or certified by
accountants within the meaning of Section 7 or 11 of the Securities Act of 1933.
Very Truly Yours,
/s/ Ernst & Young LLP
Exhibit 23.1
Consent of Ernst & Young, LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
registration statement (Form S-3) and related prospectus of Genentech, Inc., for
the registration of 6,517,309 shares of its common stock, and to the
incorporation by reference therein of our reports dated January 18, 2000, with
respect to the consolidated financial statements of Genentech, Inc. incorporated
by reference in its Annual Report (Form 10-K) for the year ended December 31,
1999, and the related financial statement schedule included therein, filed with
the Securities and Exchange Commission.
San Jose, California
May 10, 2000
/s/ Ernst & Young LLP
