As filed with the Securities and Exchange Commission on October 23, 2000
Registration No. 333-37072
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2
TO
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)
-----------------------
Copies to:
John G. Crowley, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Phone: (212) 450-4550
Facsimile: (212) 450-3550
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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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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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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS 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 October 23, 2000
GENENTECH, INC.
Common Stock
This prospectus relates to offerings by the selling stockholders from time to
time of a total of 6,517,309 shares of our common stock.
Our common stock is listed on the New York Stock Exchange under the symbol
"DNA".
Investing in our common stock involves risk. See "Risk Factors" beginning on
page 3.
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.
, 2000
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TABLE OF CONTENTS
Page
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Prospectus Summary.............................................................1
Risk Factors...................................................................3
Special Note Regarding Forward-looking Statements.............................12
Use of Proceeds...............................................................12
Dividend Policy...............................................................12
Selling Stockholders..........................................................13
Material U.S. Federal Tax Considerations for Non-U.S.
Holders of Common Stock..................................................14
Shares Eligible for Future Sale...............................................17
Plan of Distribution..........................................................18
Legal Matters.................................................................20
Experts.......................................................................20
Where You Can Find More Information...........................................21
General Information...........................................................22
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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:
o cardiovascular; and
o oncology.
We also pursue projects, such as our growth hormone products, in other
important areas of medicine where we believe there is a significant opportunity
to fill a therapeutic void.
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.
Our Relationship with Roche
Since 1990, Roche Holdings, Inc., a Delaware corporation, commonly known
as Roche, has been our majority stockholder. Listed below are some of the
recent significant events in our relationship.
o On June 30, 1999, Roche caused us to redeem all of our special common
stock held by stockholders other than Roche at $41.25 per share in
cash and retire all of those shares including those shares of our
special common stock held by Roche. Prior to that redemption, we had
two classes of common stock outstanding: our common stock and our
special common stock.
The purpose of the special common stock was:
o to establish a four-year period during which we could redeem our
publicly traded stock at Roche's option at specified prices per
share ranging from $31.25 during the quarter ending December 31,
1995 to $41.25 during the quarter ending June 30, 1999; and
o to afford the holders of special common stock the right to
require the purchase of all or a portion, at the option of the
holder, of their shares of such stock at a price of $30.00 per
share, exercisable during the 30-business day period following
June 30, 1999.
o In July 1999, we entered into an affiliation agreement and a tax
sharing agreement with Roche. We also amended a licensing and
marketing agreement with F. Hoffmann-La Roche Ltd., an affiliate of
Roche Holdings, Inc., commonly known as Hoffmann-LaRoche.
o On July 23, 1999, Roche completed the sale of 44,000,000 shares of our
common stock at $48.50 per share.
o On October 26, 1999, Roche completed the sale of 40,000,000 shares of
our common stock at $71.75 per share.
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o On January 19, 2000, Roche issued an aggregate principal amount of
$1,506,342,000 Liquid Yield Option Notes due 2015 ("LYONs")
exchangeable for our 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
conversion rate adjustments in order to provide antidilution
protection to the holders of the LYONs.
o On March 29, 2000, Roche completed the sale of 17,300,000 shares of
our common stock at $163 per share.
o On June 30, 2000, Roche owned 153,297,176 shares of our common stock
or approximately 59% of our outstanding shares.
The Offering
In connection with the issuance of LYONs, we entered into a registration
rights agreement in which we agreed to file a registration statement, of which
this prospectus is a part, to register resales of our shares deliverable upon
the exchange of the LYONs.
The shares offered for sale by the selling stockholders were originally
delivered 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 and 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:
o The overall competitive environment for our products.
For example, sales of our Activase product decreased in 1998 from
1997 primarily due to competition from Centocor Inc.'s competing
product which received FDA approval in October 1996.
o The amount and timing of sales to customers in the United States.
For example, sales of our three growth hormone products increased in
1999 due to fluctuations in distributor ordering patterns.
o The amount and timing of our sales to Hoffmann-La Roche of products
for sale outside of the United States and the amount and timing of
its sales to its customers, which directly impact both our product
sales and royalty revenues.
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.
For example, sales of Pulmozyme increased in 1998 due, in part, to
new patients who were attracted to our product as a result of an FDA
approval for a label extension to include cystic fibrosis patients
under the age of five.
o The potential introduction of new products and additional indications
for existing products in 2000 and beyond.
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.
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The Successful Development of Pharmaceutical Products is Highly Uncertain.
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 several reasons including:
o preclinical and clinical trails that may show the product to be
ineffective or to have harmful side effects;
o failure to receive the necessary regulatory approvals;
o manufacturing costs or other factors that make the product
uneconomical; or
o the proprietary rights of others and their competing products and
technologies that may prevent the product from being commercialized.
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.
For example, in June 2000, we announced that the preliminary results
from our 415-patient Phase II clinical trial of our recombinant
humanized anti-CD18 monoclonal antibody fragment, which is known as
rhuMAb CD18, for the treatment of myocardial infarction, more
commonly known as a heart attack, did not meet its primary
objectives.
o The number of products entering into development from late-stage
research.
For example, there is no guarantee that internal research efforts
will succeed in generating sufficient data for us to make a positive
development decision or that an external candidate will be available
on terms acceptable to us. In the past, promising candidates have not
yielded sufficiently positive pre-clinical results to meet our
stringent development criteria.
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.
For example, in February 2000, we entered into an agreement with
Actelion Ltd. for the development and co-promotion in the United
States of tezosentan, and paid Actelion an upfront fee of $15
million.
o Future levels of revenue.
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
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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. Roche's interests may conflict with your
interests.
Our Affiliation Agreement with Roche Could Limit Our Ability to Make
Acquisitions and Could Have A Material Impact on Our Liquidity.
The affiliation agreement between us and Roche contain provisions that:
o 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;
o enable Roche to maintain its percentage ownership interest in our
common stock; and
o establish a stock repurchase program designed to maintain Roche's
percentage ownership interest in our common stock.
These provisions may have the effect of limiting our ability to make
acquisitions and while the dollar amounts associated with the stock repurchase
program cannot currently be estimated, those stock repurchases could have a
material adverse impact on our liquidity.
Our Stockholders May Be Unable to Prevent Transactions That are Favorable to
Roche but Adverse to Us.
Our certificate of incorporation includes provisions relating to:
o competition by Roche with us;
o offering of corporate opportunities;
o transactions with interested parties;
o intercompany agreements; and
o provisions limiting the liability of specified employees.
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 with Roche, the offer of
corporate opportunities to Roche and intercompany agreements with Roche. This
deemed consent may restrict your ability to challenge transactions carried out
in compliance with these provisions.
Potential Conflicts of Interest Could Limit Our Ability to Act on Opportunities
that are Adverse to Roche.
Persons who are directors and/or officers of Genentech and who are also
directors and/or officers of Roche may decline to take action in a manner that
might be favorable to us but adverse to Roche. Two of our directors, Dr. Franz
B. Humer and Dr. Jonathan K.C. Knowles, currently serve as directors, officers
and employees of Roche Holding Ltd and its affiliates.
We May be Unable to Retain Skilled Personnel and Maintain 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
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maintain important relationships with leading research institutions and key
distributors. Competition for these types of personnel and relationships is
intense.
Roche has the right to maintain its percentage ownership interest in our
common stock. Our affiliation agreement with Roche requires us to, among other
things, establish a stock repurchase program designed to maintain Roche's
percentage ownership in our common stock if we issue or sell any shares. This
right of Roche may limit our flexibility as to the number of shares we are able
to grant under our stock option plans. We therefore cannot assure you that we
will be able to attract or retain skilled personnel or maintain key
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.
For example, in June 2000 one of our competitors, Novo Nordisk,
received FDA approval for a liquid formulation of its growth hormone
product that will directly compete with our liquid formulation,
Nutropin AQ. And in June 2000, another of our competitors, Serono,
received FDA approval to deliver its competitive growth hormone
product in a needle-free device.
o Our pricing decisions and the pricing decisions of our competitors.
For example, we raised the prices of Rituxan in May 2000 and
Pulmozyme in June 2000 by approximately 5%.
o The degree of patent protection afforded to particular products.
For example, in January 2000, a federal court judge lifted a
preliminary injunction that had been in effect since 1995 against
Bio-technology General Corporation, more commonly known as BTG. BTG
is now permitted to sell its competitive growth hormone product in
the United States.
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.
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For example, as further described in "-- Protecting Our Proprietary
Rights is Difficult and Costly," in May 1999 and June 2000, two
complaints were filed against us by companies which alleged that we
infringed their patents by the manufacture and sale of our products.
o The increasing use and development of alternate therapies.
For example, the overall size of the market for thrombolytic
therapies, such as our Activase product, continues to decline as a
result of the increasing use of mechanical reperfusion.
o The rate of market penetration by competing products.
For example, in the past, we have lost market share to new
competitors in the thrombolytic and growth hormone markets.
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 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.
If our assets need to be evaluated for possible impairment, we may have to
reduce the carrying value of our intangible assets. This could have a material
adverse effect on our financial condition and results of operations during the
periods in which we recognize a reduction. We may have 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 we have
incorporated by reference into this prospectus.
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.
For example, we began receiving royalty revenues from Immunex
Corporation's sale of Embrel in 1999.
o The conclusion of existing arrangements with other companies and
Hoffmann-La Roche.
For example, royalty revenues decreased in 1998 from 1997 due to the
expiration of royalties primarily on sales of human insulin, from Eli
Lilly and Company in August 1998.
o The timing of non-U.S. approvals, if any, for products licensed to
Hoffmann-La Roche and other licensees.
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For example, we expect the timing of the approval of Herceptin
outside the United States to have an impact on royalties.
o Fluctuations in foreign currency exchange rates.
o The initiation of new contractual arrangements with other companies.
For example, license fees from Immunex and Schwarz Pharma increased
contract revenues in 1999.
o Whether and when contract benchmarks are achieved.
For example, milestone payments from Pharmacia & Upjohn increased
contract revenue in 1997.
o The failure of or refusal of a licensee to pay royalties.
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,
we cannot predict the breadth of claims allowed in these companies' patents.
Patent disputes are frequent and can preclude the 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. In
addition, an adverse decision could force us to either obtain third-party
licenses at a material cost or cease using the technology or product in
dispute. For example, in late 1999 we settled a patent infringement lawsuit
brought against us by the Regents of the University of California in which the
University alleged that the manufacture and sale of our Protropin and Nutropin
growth hormone products infringed a patent owned by the University. In
connection with that settlement we paid the University of California $150
million and donated $50 million for the construction of a new life sciences
building on the University of California, San Francisco campus. 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.
Two lawsuits have been filed against us in which the companies involved
allege that we have infringed their patents by the manufacture and sale of our
products:
o In May 1999, GlaxoWellcome filed a lawsuit in which it alleged that
our manufacture and sale of Rituxan and Herceptin infringed the
claims of GlaxoWellcome patents that have claims relating to the use
of monoclonal antibodies as human therapeutics.
o In June 2000, Chiron Corporation filed a lawsuit in which it alleged
that our manufacture and sale of Herceptin infringed a patent it
owned.
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 might have to incur substantial expense in defending these lawsuits. We have
in the past taken substantial special charges relating to litigation, including
special charges of $230.0 million in 1999.
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We May Incur Material Product Liability Costs.
The testing and marketing of medical products entail an inherent risk of
product liability. Pharmaceutical product liability exposures could be
extremely large and pose a material risk. Our business may be materially and
adversely affected by a successful product liability claim in excess of any
insurance coverage that we may have.
We May be Unable to Obtain Regulatory Approvals for Our Products.
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.
For example:
o in 1999, our Phase III clinical trial of recombinant human nerve
growth factor, which is known as rhNGF, for use in diabetic
peripheral neuropathy did not meet its objectives and we decided
not to file for product approval with the FDA;
o in 1999, our Phase II clinical study of recombinant human
vascular endothelial growth factor, which is known as VEGF,
protein failed to meet the primary endpoints of the study; and
o in June 2000, our Phase II clinical of recombinant humanized
anti-CD18 monoclonal antibody fragment, which is known as rhuMAb
CD 18 for treatment of myocardial infarction, more commonly
known as a heart attack, did not meet its primary study
objectives.
o Loss of or changes to previously obtained approvals.
For example, in May 2000, we changed the warning section of the
package insert for Herceptin and sent letters to physicians advising
them of some deaths associated with the administration of that
product.
o Failing to comply with existing or future regulatory requirements.
For example, in 1999, we paid a $50 million settlement in connection
with a federal investigation of our former clinical, sale and
marketing activities associated with our human growth hormone
products.
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.
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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.
For example, in March 2000, we issued an important drug notification
regarding a defect in the packaging of our Pulmozyme product. During a quality
assurance inspection, we had discovered that there was a defect in the
packaging of Pulmozyme which occasionally caused a small puncture in ampules of
that product. We suspended shipping the product while we determined the source
and extent of the defect. We ultimately recalled some of the product.
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 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 of existing or new products 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.
In addition, the following factors 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.
For example, our stock increased by approximately 4% on the day we
announced FDA approval for our Nutropin Depot product.
o Developments concerning proprietary rights, including patents.
For example, our stock price decreased by approximately 4% on the day
one of our competitors, Chiron, announced a patent infringement suit
against us.
o Publicity regarding actual or potential medical results relating to
products under development by us or our competitors.
For example, our stock price increased by approximately 9% on the day
we announced positive preliminary phase III results from the Anti IgE
asthma clinic.
o Regulatory developments in the United States and foreign countries.
o Public concern as to the safety of biotechnology products.
For example, on May 8, we issued a warning concerning our Herceptin
drug after 15 deaths resulted from the administration of Herceptin.
Our stock price decreased by approximately 2% at that time.
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o Economic and other external factors or other disaster or crisis.
For example, our stock hit a high of $245 in March, 2000 and
decreased, as the biotech sector and stock market in general
decreased, to a low of $85 in late May.
o Period-to-period fluctuations in financial results.
For example, our stock price has historically been effected by
whether we met or exceeded analyst expectations.
Our Affiliation Agreement With Roche Could Adversely Affect Our Cash Position.
Our 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, those 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.
As of June 30, 2000, Roche owned 153,297,176 shares of our common stock or
approximately 59% of our outstanding shares. All of our shares owned by Roche
are eligible for sale in the public market subject to compliance with the
applicable securities laws. We have agreed that, upon Roche's request, we will
file one or more registration statements under the Securities Act in order to
permit Roche to offer and sell shares of our common stock. We have agreed to
use our best efforts to facilitate the registration and offering of those
shares designated for sale by Roche. 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.
11
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
There are statements contained or incorporated by reference in this
prospectus that 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 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 those differences include, but are not limited to, those
factors discussed under "Risk Factors".
USE OF PROCEEDS
We will not receive any proceeds from the sale of our common stock by the
selling stockholders.
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.
12
<PAGE>
SELLING STOCKHOLDERS
The LYONs were originally issued by Roche and sold to the initial
purchaser, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated. The LYONs were resold by the initial purchaser to:
o qualified institutional buyers within the meaning of Rule 144A under
the Securities Act; and
o pursuant to offers and sales that occurred 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 any or all of that common stock pursuant to this
prospectus. The common stock that may be offered pursuant to this prospectus
will be offered by the selling holders, which includes their transferees,
pledgees or donees or their successors.
The selling holders may offer and sell the common stock from time to time
to purchasers directly, or through underwriters, brokers, dealers or agents, at
market prices prevailing at the time of sale or at negotiated prices. See "Plan
of Distribution".
The following table sets forth information, as of October 16, 2000, with
respect to the selling holders and the respective amounts of LYONs and common
stock beneficially owned by each selling holder. The information is based on
information provided by or on behalf of the selling holders and, with regard to
the beneficial holdings of the selling holders, is accurate only to the extent
beneficial holdings information was disclosed to us by or on behalf of the
selling holders. The selling holders and holders listed in any supplement to
this prospectus, and any transferors, pledgees, donees or successors to these
persons, may from time to time offer and sell, pursuant to this prospectus and
any subsequent prospectus supplement, any and all of the common stock listed
below. Any supplement to this prospectus may contain certain additional or
varied information about the selling holders and/or additional holders, and any
of their transferors, pledgees, donees or successors, and the amount of common
stock beneficially owned by each person that they are offering. This
information will be obtained from the selling holders. Because the selling
holders may offer all or some portion of their common stock, no estimate can
currently be given as to the amount of the common stock that will be held by
the selling holders upon termination of such sales. In addition, the selling
holders identified below may have sold, transferred or otherwise disposed of
all or a portion of their LYONs or common stock since the date on which they
provided the information to us in transactions exempt from the registration
requirements of the Securities Act.
13
<PAGE>
<TABLE>
Principal Amount Common Stock
of LYONs Owned Prior to the Common Stock
Name Beneficially Owned Offering(1)(2) Offered Hereby(1)(2)
----- ------------------ ------------------ --------------------
<S> <C> <C> <C>
1976 Distribution Trust f/b/o A. R.
Lauder/Zinterhofer............................ $ 15,000 64 64
1976 Distribution Trust f/b/o Jane A. Lauder..... 31,000 134 134
Advantus Capital Management Inc. ................ 266,000 1,150 1,150
Aerin Lauder Zinterhofer......................... 16,000 69 69
AIG/National Union Fire Insurance................ 1,525,000 6,598 6,598
Aloha Airlines Non-Pilots Pension Trust.......... 275,000 1,189 1,189
Aloha Airlines Pilots Retirement Trust........... 150,000 648 648
ARBCO Associates, L.P............................ 7,000,000 30,282 30,282
Arpeggio Fund.................................... 4,300,000 18,604 18,604
Aventis Pension Master Trust..................... 292,000 1,263 1,263
AXP Bond Fund, Inc............................... 3,940,000 17,046 17,046
AXP Variable Portfolio Bond Fund, a series
of AXP Variable Portfolio Income Series,
Inc......................................... 1,747,000 7,558 7,558
AXP Variable Portfolio Managed Fund, a series
of AXP Variable Portfolio Managed Series,
Inc......................................... 2,000,000 8,653 8,653
Bank Austria Cayman Island, Ltd.................. 6,150,000 26,608 26,608
British Virgin Islands Social Security Board..... 80,000 346 346
C&H Sugar Company, Inc........................... 420,000 1,817 1,817
Cova Bond Debenture Fund......................... 1,800,000 7,787 7,787
CGU Life Insurance Co. of America................ 3,500,000 15,143 15,143
City University of New York...................... 158,000 683 683
Commonwealth Professional Assurance
Company c/o Income Research
Management.................................... 400,000 1,730 1,730
ELF Aquitane..................................... 350,000 1,514 1,514
Executive Life Insurance Co. of New York......... 88,000 380 380
Family Service Life Insurance Co................. 500,000 2,163 2,163
Fidelity Advisor Series I: Fidelity Advisor
Balanced Fund................................ 7,379,000 31,925 31,925
Fidelity Financial Trust: Fidelity Convertible
Securities Fund............................... 6,225,000 26,932 26,932
Fidelity Management Trust Company on behalf
of accounts managed by it..................... 1,310,000 5,667 5,667
Fifth Third Bank................................. 715,000 3,093 3,093
First Republic Bank.............................. 190,000 822 822
Grady Hospital Foundation........................ 239,000 1,034 1,034
Gryphon Domestic III, LLC........................ 12,800,000 55,380 55,380
Guardian Life Insurance Co....................... 12,450,000 53,865 53,865
Guardian Pension Trust 550,000 2,379 2,379
Halliburton Company Employee Benefit............. 266,000 1,050 1,050
Hamilton Partner Limited......................... 28,000,000 121,144 121,144
Hawaiian Airlines Employees Pension Plan -
IAM........................................... 125,000 540 540
Hawaiian Airlines Pension Plan for Salaried
Employees..................................... 30,000 129 129
</TABLE>
14
<PAGE>
<TABLE>
Principal Amount Common Stock
of LYONs Owned Prior to the Common Stock
Name Beneficially Owned Offering(1)(2) Offered Hereby(1)(2)
----- ------------------ ------------------ --------------------
<S> <C> <C> <C>
Hawaiian Airlines Pilots Retirement Plan......... 245,000 1,060 1,060
Income Portfolio, a series of IDS Life Series
Fund, Inc..................................... 123,000 532 532
Independence Blue Cross.......................... 225,000 973 973
Investcorp SAM Fund Limited...................... 13,100,000 56,678 56,678
Island Holdings.................................. 90,000 389 389
J.P. Morgan Securities, Inc...................... 9,410,000 40,713 40,713
Kayne Anderson Capital Income Partners (Q.P.),
L.P........................................... 500,000 2,162 2,162
Lazard Freres & Co. LLC.......................... 1,000,000 4,326 4,326
Local Unititiatives Union........................ 98,000 424 424
Lord Abbett Bond Debenture Fund.................. 17,500,000 75,715 75,715
Lord Abbett Securities Trust World Bond
Debenture..................................... 200,000 865 865
Maryland Retirement Agency....................... 5,706,000 24,687 24,687
Merrill Lynch Insurance Group.................... 546,000 2,362 2,362
Merrill Lynch, Pierre Fenner & Smith
Incorporated.................................. 14,406,000 62,328 62,328
Nalco Chemical Company........................... 600,000 2,595 2,595
New Orleans Firefighters Pension/Relief Fund..... 243,000 1,051 1,051
New York Life Insurance and Annuity
Corporation................................... 2,650,000 11,465 11,465
New York Life Insurance Company.................. 26,150,000 113,140 113,140
Nomura International plc......................... 8,700,000 37,641 37,641
Occidental Petroleum Corporation................. 417,000 1,804 1,804
Ohio Bureau of Workers Compensation.............. 274,000 1,185 1,185
Oxford, Lord Abbett & Co......................... 2,000,000 8,653 8,653
OZ Master Fund, Ltd.............................. 5,140,000 22,238 22,238
Pacific Life Insurance Company................... 11,000,000 47,592 47,592
Queens Health Plan............................... 100,000 432 432
Radian Group Inc................................. 2,000,000 8,653 8,653
Ramius Capital Group Holdings, Ltd............... 1,100,000 4,759 4,759
Raytheon Master Pension Trust.................... 837,000 3,621 3,621
Rhapsody Fund, L.P. ............................. 14,200,000 61,437 61,437
Royal Bank of Canada............................. 5,000,000 21,633 21,633
Shell Pension Trust.............................. 579,000 2,505 2,505
Spear, Leeds & Kellogg........................... 2,000,000 8,653 8,653
Starvest Combined Portfolio...................... 1,900,000 8,220 8,220
Starvest Managed Portfolio....................... 90,000 389 389
State of Oregon/SAIF Corporation................. 10,250,000 44,347 44,347
TCW Group, Inc................................... 54,090,000 234,024 234,024
The Grable Foundation............................ 220,000 951 951
The Travelers Indemnity Company.................. 11,228,000 48,578 48,578
The Travelers Insurance Company - Life........... 7,179,000 31,060 31,060
The Travelers Managed Assets Trust............... 300,000 1,297 1,297
The Travelers Series Trust Convertible Bond
Portfolio................................... 450,000 1,946 1,946
Toronto Dominion (New York), Inc. ............... 17,500,000 75,715 75,715
Total Return Portfolio, a series of Growth and
Income Trust.................................. 2,030,000 8,782 8,782
Tufts Associated Health Plan c/o Income
Research Management........................... 520,000 2,249 2,249
</TABLE>
15
<PAGE>
<TABLE>
Principal Amount Common Stock
of LYONs Owned Prior to the Common Stock
Name Beneficially Owned Offering(1)(2) Offered Hereby(1)(2)
----- ------------------ ------------------ --------------------
<S> <C> <C> <C>
UBS O'Connor LLC f/b/o UBS Global Equity
Arbitrage Master Limited...................... 83,000,000 359,106 359,106
University of Massachusetts c/o Income
Research Management........................... 80,000 346 346
University of South Florida...................... 400,000 1,730 1,730
Variable Insurance Products Fund III: Balanced 851,000 3,681 3,681
Portfolio.....................................
-------------------
</TABLE>
(1) Assumes an exchange rate of 4.32658 Genentech shares per US$1,000
principal amount at maturity of LYONs and a cash payment in lieu of any
fractional interest.
(2) Assumes that any holder of the LYONs or any future transferee from any
such holder does not beneficially own any common stock other than common
stock into which the LYONs are convertible at the exchange rate of 4.32658
Genentech shares per US$1,000 principal amount at maturity of LYONs.
16
<PAGE>
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 to a "Non-U.S. Holder" of owning and
disposing of our common stock. A "Non-U.S. Holder" is a person or entity that,
for U.S. federal income tax purposes, is:
o a non-resident alien individual;
o a foreign corporation;
o a foreign partnership; or
o 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:
o all aspects of United States federal income and estate taxation that
may be relevant to Non-U.S. Holders in the light of their particular
circumstances; and
o 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, any dividends paid to a Non-U.S. Holder
of our common stock generally will be subject to withholding tax at a 30% rate
or at a lower rate that 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, we will presume, unless we
know otherwise, that dividends paid on or before December 31, 2000 to an
address in a foreign country are paid to a resident of that foreign country.
Under United States Treasury Regulations applicable to dividends paid
after December 31, 2000, a Non-U.S. Holder will generally be required to
provide, in order to obtain a reduced rate of withholding under a treaty, an
Internal Revenue Service Form W-8 BEN certifying the 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 us.
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 may be imposed at a rate
of 30% (or at a lower rate that may be specified by an applicable treaty) of
the non-U.S. corporation's effectively connected earnings and profits, subject
to adjustments.
17
<PAGE>
Generally, we must report to the United States Internal Revenue Service:
o the amount of dividends paid;
o the name and address of the recipient; and
o the amount, if any, of tax withheld.
A similar report is sent to the holder. Pursuant to tax treaties or 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 fails to
provide a correct taxpayer identification number and other requested
information to us.
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.
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:
o the gain is effectively connected with a trade or business of the
holder in the United States;
o in the case of Non-U.S. Holders who are non-resident alien
individuals and hold our common stock as a capital asset, these
individuals are present in the United States for 183 or more days in
the taxable year of the disposition;
o the Non-U.S. Holder is subject to tax pursuant to the provisions of
the Code regarding the taxation of U.S. expatriates; or
o we are or have 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 the disposition or the
holder's holding period. We believe that we are not, and do 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.
18
<PAGE>
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 or that
the holder otherwise is entitled to an exemption, and the broker is:
o a U.S. person;
o a foreign person which derives 50% or more of its gross income for
defined periods from the conduct of a trade or business in the United
States;
o a "controlled foreign corporation" for U.S. federal income tax
purposes; or
o 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
lifetime transfers of, an interest in our common stock will be required to
include its value 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.
19
<PAGE>
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
those 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. Shares
acquired by one of our affiliates 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 the sale.
Sales under Rule 144 are also subject to other requirements regarding:
o the manner of sale;
o notice; and
o 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 that affiliate 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 substantial amounts of our common stock 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.
20
<PAGE>
PLAN OF DISTRIBUTION
The selling stockholders and their successors, which includes their
transferees, pledgees or donees or their successors, may sell the common stock
directly to purchasers or through underwriters, broker-dealers or agents.
Underwriters, broker-dealers or agents may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders or the
purchasers. These discounts, concessions or commissions may be in excess of
those customary in the types of transactions involved.
The common stock may be sold in one or more transactions:
o at fixed prices;
o at prevailing market prices at the time of sale;
o at prices related to the prevailing market prices;
o at varying prices determined at the time of sale; or
o at negotiated prices.
These sales may be effected in transactions in the following manner:
o on any national securities exchange or quotation service on which the
common stock may be listed or quoted at the time of sale;
o in the over-the-counter market;
o in transactions that are not on any national securities exchange or
quotation service or in the over-the-
counter market;
o through the writing of options, whether those options are listed on
an options exchange or otherwise; or
o through the settlement of short sales.
Selling stockholders 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 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 stockholders from the sale of the
common stock will be the purchase price of the common stock less discounts and
commissions, if any. Each of the selling stockholders 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 stockholders.
In order to comply with the securities laws of some states, the common
stock may be sold in those states only through registered or licensed brokers
or dealers.
In addition, in some states the common stock may not be sold unless:
o they have been registered or qualified for sale; or
o an exemption from registration or qualification requirements is
available and is complied with.
21
<PAGE>
The selling stockholders 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 stockholders 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 stockholders 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 those
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
stockholder may not sell any common stock described herein and may not
transfer, devise or gift the securities by other means not described in this
prospectus.
To the extent required,
o the common stock to be sold,
o the names of the selling stockholders,
o the respective purchase prices and public offering prices,
o 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 stockholders and the company
and their respective directors, officers and controlling persons against
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 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.
22
<PAGE>
LEGAL MATTERS
The validity of common stock offered by this prospectus 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. Those consolidated financial statements are
incorporated herein by reference in reliance upon the report given on the
authority of Ernst & Young LLP 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
and the three- and six- month periods ended June 30, 2000 and June 30, 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 that information. However, their separate reports,
included in Genentech, Inc.'s quarterly reports on Forms 10-Q for the quarters
ended March 31, 2000 and June 30, 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
reports on that 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 reports on the unaudited interim financial information because those
reports are 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.
23
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
materials that we have filed with the SEC at the following SEC public reference
rooms:
450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, New York 10048 Chicago, Illinois 60661
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms.
Our SEC filings are also available to the public on the SEC's Internet
website at http://www.sec.gov.
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;
5. Our quarterly report on Form 10-Q for the quarter ended June 30, 2000;
and
6. 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.
24
<PAGE>
GENERAL INFORMATION
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 incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. The selling stockholders
are not making an offer of the shares of common stock in any state where the
offer is not permitted. You should not assume that the information in this
prospectus or any prospectus supplement is accurate as of any date other than
the date on the front of this document.
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.
25
<PAGE>
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
II-1
<PAGE>
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 Private Placement Purchase Agreement between Roche Holdings,
Inc. and Merrill Lynch & Co., Merrill Lynch, Pierce Fenner &
Smith Incorporated, dated as of January 12, 2000+
4.2 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)+
------------------
+ Previously filed
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<PAGE>
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,
(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:
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<PAGE>
(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.
II-4
<PAGE>
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 23rd day of October, 2000.
GENENTECH, INC.
By: /s/ Stephen G. Juelsgaard
------------------------------
Name: Stephen G. Juelsgaard
Title: Senior Vice President, General
Counsel and Secretary
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<PAGE>
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amendment to the registration statement has been signed by the following
persons in the capacities indicated on October 23, 2000.
Signature Title
-------------------- ----------
Arthur D. Levinson* Principal Executive Officer and
----------------------------- Director
Arthur D. Levinson
Louis J. Lavigne, Jr* Principal Financial Officer
-----------------------------
Louis J. Lavigne, Jr.
John M. Whiting* Principal Accounting Officer
-----------------------------
John M. Whiting
Herbert W. Boyer* Director
-----------------------------
Herbert W. Boyer
Franz B. Humer* Director
-----------------------------
ranz B. Humer
Jonathan K.C. Knowles* Director
-----------------------------
Jonathan K.C. Knowles
Charles A. Sanders* Director
-----------------------------
Charles A. Sanders
Mark Richmond* Director
-----------------------------
Mark Richmond
* /s/ Stephen G. Juelsgaard
-----------------------------
Stephen G. Juelsgaard
Attorney-in-fact
II-6
<PAGE>
EXHIBIT INDEX
Exhibit No. Document
----------- --------
4.1 Private Placement Purchase Agreement between Roche Holdings,
Inc. and Merrill Lynch & Co., Merrill Lynch, Pierce Fenner &
Smith Incorporated, dated as of January 12, 2000+
4.2 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)+
------------------
+ Previously filed
II-7
