PRESS RELEASE: Genentech Announces Third Quarter 2007 Results

• U.S. product sales of $2,155 million, an 18 percent increase over U.S. product sales of $1,830 million in the third quarter of 2006.
• Non-GAAP operating revenues of $2,905 million, a 22 percent increase over operating revenues of $2,384 million in the third quarter of 2006¹; GAAP operating revenues of $2,908 million, which include recognition of $3 million of deferred royalty revenue associated with the acquisition of Tanox, Inc.
• Non-GAAP net income increase of 22 percent to $778 million from $637 million in the third quarter of 2006¹; GAAP net income increase of 21 percent to $685 million from $568 million reported for the third quarter of 2006.
• Non-GAAP earnings per share increase of 24 percent to $0.73 per share from $0.59 per share in the third quarter of 2006¹; GAAP earnings per share increase of 21 percent to $0.64 per share from $0.53 per share reported for the third quarter of 2006.

Reconciliation between non-GAAP and GAAP earnings per share for the third quarters of 2007 and 2006 is provided in the following table:

The company continues to expect 28 to 32 percent growth in non-GAAP earnings per share for the full year 2007, relative to 2006, for a range of $2.85 to $2.95.¹

Product Sales
Product sales for the three months ended September 30, 2007 and 2006 are provided in the following table (dollars in millions):

+Third quarter 2007 Avastin U.S. product sales results include a net recognition of approximately $5 million in previously deferred revenue in conjunction with the company's Avastin Patient Assistance Program launched in February 2007.
++Amounts may not sum due to rounding.

Total Costs and Expenses
Information on costs and expenses for the three months ended September 30, 2007, is provided in the accompanying tables. Key cost and expense highlights include the following:

• Cost of sales (COS), on a non-GAAP basis, increased 31 percent to $390 million, from $297 million in the third quarter of 2006². Non-GAAP COS as a percentage of product sales was 17 percent, compared to 15 percent for the third quarter of 2006. On a GAAP basis, COS increased 37 percent to $406 million, including employee stock-based compensation expense of $16 million. GAAP COS for the third quarter of 2007 was 17 percent of product sales, compared to 15 percent in the third quarter of 2006. COS for the third quarter of 2007 includes approximately $53 million in charges related to the termination of a contract manufacturing agreement.
• Research and development (R&D) expenses, on a non-GAAP basis, increased 38 percent to $578 million, from $419 million in the third quarter of 2006². Non-GAAP R&D expenses as a percentage of operating revenues were 20 percent, compared to 18 percent for the third quarter of 2006. On a GAAP basis, R&D expenses increased 35 percent to $615 million, including employee stock-based compensation expense of $37 million, from $454 million in the third quarter of 2006. GAAP R&D expenses for the third quarter of 2007 were 21 percent of operating revenues, compared to 19 percent in the third quarter of 2006.
• Marketing, general and administrative (MG&A) expenses, on a non-GAAP basis, increased 8 percent to $497 million, from $460 million in the third quarter of 2006². Non-GAAP MG&A expenses as a percentage of operating revenues were 17 percent, compared to 19 percent in the third quarter of 2006. On a GAAP basis, MG&A expenses increased 8 percent to $541 million, including employee stock-based compensation expense of $44 million, from $501 million in the third quarter of 2006. GAAP MG&A expenses for the third quarter of 2007 were 19 percent of operating revenues, compared to 21 percent in the third quarter of 2006.
• GAAP results included a one-time in-process research and development (IPR&D) charge of $77 million, or $0.07 per share, for acquired IPR&D projects and technologies associated with the acquisition of Tanox, Inc., which was completed on August 2, 2007. GAAP results also reflected a gain of $0.07 per share (after tax) related to the acquisition of Tanox, resulting from the application of fair value measurement principles required in the accounting for the acquisition of a company with which a prior business relationship existed.³

Clinical Development
Genentech announced that in the third quarter of 2007 it resubmitted the supplemental Biologic License Application for Avastin® (bevacizumab) with chemotherapy in first-line metastatic breast cancer based on data from the E2100 trial. The U.S. Food and Drug Administration (FDA) notified the company that the Oncologic Drugs Advisory Committee (ODAC) meeting would occur in December 2007 and the FDA action date is February 23, 2008.

Genentech also announced that enrollment was completed in the Phase III first-line HER2-negative metastatic breast cancer study RIBBON-1 evaluating physicians' choice of chemotherapy with Avastin, the Phase III study of Rituxan® (rituximab) in second-line relapsed chronic lymphocytic leukemia, and the Phase II study of topical VEGF (telbermin) as a treatment for diabetic foot ulcers. Additionally, Genentech initiated enrollment in a Phase III combination study of Rituxan and Avastin in first-line diffuse large B-cell lymphoma, a Phase II combination study of Avastin and sunitinib malate in renal cell carcinoma, and a Phase I study of the anti-cMET molecule MetMab in patients with solid tumor malignancies.

Webcast
Genentech will be offering a live webcast of a discussion by Genentech management of the earnings and other business results on Monday, October 15, 2007, at 2:15 p.m. Pacific Time (PT). The live webcast may be accessed on Genentech's website at http://www.gene.com [1]. This webcast will be available via the website until 5:00 p.m. PT on November 5, 2007. A telephonic audio replay of the webcast will be available beginning at 5:15 p.m. PT on October 15, 2007 through 5:15 p.m. PT on October 22, 2007. Access numbers for this replay are:1-800-642-1687 (U.S./Canada) and 1-706-645-9291 (international); conference ID number is 17476409.

About Genentech
Founded more than 30 years ago, Genentech is a leading biotechnology company that discovers, develops, manufactures and commercializes biotherapeutics for significant unmet medical needs. A considerable number of the currently approved biotechnology products originated from or are based on Genentech science. Genentech manufactures and commercializes multiple biotechnology products and licenses several additional products to other companies. The company has headquarters in South San Francisco, California and is listed on the New York Stock Exchange under the symbol DNA. For additional information about the company, please visit http://www.gene.com [1].

About Genentech's Commitment to Patient Access
Genentech is committed to eligible patients having access to our therapies. For those eligible patients treated for approved indications in the United States who do not have insurance or who cannot afford their out-of-pocket co-pay costs, Genentech has several support programs. Since 1985, Genentech has donated free product to uninsured patients and those deemed uninsured due to payor denial through its Genentech® Access to Care Foundation (GATCF) and the Genentech Endowment for Cystic Fibrosis. In 2006 alone, GATCF supported over 14,000 patients by providing approximately $205 million of free product. Since 2005, Genentech has donated approximately $70 million to various independent public charities that provide financial assistance to eligible patients who cannot access needed medical treatment due to co-pay costs. Through its Single Point of Contact (SPOC) program, Genentech provides patients with assistance and information on a broad array of reimbursement services and support.

For information on Genentech's latest business and product development events please refer to http://www.gene.com/gene/news/press-releases/index.jsp [2].

This press release contains a forward-looking statement regarding expected growth in non-GAAP EPS for 2007. Such statement is a prediction and involves risks and uncertainties such that the actual result may differ materially. Among other factors, growth in non-GAAP EPS could be affected by unexpected safety, efficacy or manufacturing issues, additional time requirements for BLA preparation or decision making, need for additional data or clinical studies, FDA actions or delays, the failure to obtain or maintain FDA approval, changes in dosing or duration of product use, competition, pricing, reimbursement, intellectual property or contract rights, the ability to supply product, product withdrawals, new product approvals and launches, product sales, contract revenues and royalties, cost of sales, R&D or MG&A expenses, stock-based compensation expense, unanticipated expenses such as litigation or legal settlement expenses or equity securities write-downs, fluctuations in tax and interest rates, and changes in accounting or tax laws or the interpretation of such laws. Please also refer to Genentech's periodic reports filed with the Securities and Exchange Commission. Genentech disclaims, and does not undertake, any obligation to update or revise the forward-looking statement in this press release.

¹ Genentech's non-GAAP operating revenues exclude recognition of deferred royalty revenue associated with the acquisition of Tanox, Inc. Genentech's non-GAAP net income and non-GAAP earnings per share exclude the after-tax impact of certain items associated with the acquisition of Tanox, Inc., including in-process research and development expenses (a non-recurring expense in the third quarter of 2007), recurring recognition of deferred royalty revenue, recurring amortization of intangible assets, and a gain pursuant to Emerging Issues Task Force (EITF) issue no. 04-1 (a non-recurring gain in the third quarter of 2007). Non-GAAP net income and non-GAAP earnings per share also exclude recurring charges related to the 1999 redemption of Genentech's stock by Roche Holdings, Inc., litigation-related special items, and employee stock-based compensation expense. The differences in non-GAAP and GAAP numbers, including expected 2007 earnings per share, are reconciled in the accompanying tables and on http://www.gene.com [1].

² Genentech's non-GAAP reported COS, R&D and MG&A expenses exclude the effects of employee stock-based compensation expense associated with Genentech's adoption of FAS 123R on January 1, 2006. Stock-based compensation expense was recognized in COS for the first time in the first quarter of 2007 as the company capitalized employee stock-based compensation into inventory produced in 2006 and began to sell those products in 2007. The differences in non-GAAP and GAAP numbers are reconciled in the accompanying tables and on http://www.gene.com [1].

³ Pursuant to purchase accounting guidance, estimates associated with the valuation of the assets and liabilities from the acquisition of Tanox, Inc. may change if actual results materially differ from initial estimates.