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Executive Summary

GENENTECH HER-2 HUMANIZED MONOCLONAL ANTIBODY BREAST CANCER TRIALS will begin during the second quarter of 1992, President Kirk Raab told securities analysts at Hambrecht & Quist's Healthcare Conference on Jan. 7. Raab noted that Genentech has completed Phase I trials with a murine form of the HER-2 monoclonal and "received some very encouraging data from those trials." The company has since developed a humanized form of the monoclonal antibody, which is expected to enter Phase I trials in breast cancer patients "in the second quarter of this year," Raab reported. One of the endpoints of the trial, Raab said, will be extension of survival. The HER-2 monoclonal antibody is one of five compounds in the pipeline that Genentech considers to be high priority development projects. The others are DNase, insulin-like growth factor-1, gp120, and Nutropin. Raab said the company's primary goal is to get at least three of these compounds to the market by 1995. The lead product is a second generation recombinant human growth hormone product, Nutropin, which recently completed Phase III trials for Turner Syndrome and chronic renal insufficiency. The company plans to file a PLA for the product in the near future. Recombinant DNase moved into Phase III study for the treatment of cystic fibrosis in December 1991, Raab told the analysts. He noted that the company is currently "in the process of expanding our manufacturing facilities to be able to produce commercial quantities of this product." In addition, DNase is entering Phase II study in Europe for the treatment of chronic bronchitis; and the company plans to begin studies in the U.S. for that indication later this year. Recombinant IGF-1 is currently in Phase II study for the treatment of malnourished hospital patients and Type II diabetics. Raab suggested that the product's "most important opportunity" may be in using it to treat wasting syndrome in AIDS patients. Genentech is preparing to begin Phase II studies for that indication. Also in the AIDS area, Genentech's gp120 is being studied as both a potential immunotherapeutic and as a vaccine. Raab reported that the company began clinical trials in December with a recombinant gp120 product based on the MN strain of the HIV virus, which is the most common strain of the virus in the U.S. He added that Genentech expects to start Phase II trials of gp120 in 1993. Raab also discussed two other products in the Genentech pipeline -- tissue growth factor-beta and nerve growth factor. He said the company has "decided to seek a strategic relationship outside of Genentech for the development of TGF-beta." Regarding NGF, he said that Genentech "should enter clinical trials with this product in the next few months." With Genentech's current product line reaching maturity, the company has decided to further increase its already high R&D spending levels to speed up the development process, Raab indicated. "We're going to increase our R&D investment around 20% [in 1992], or about $40 mil., which will be 50% of our revenues," Raab said. "Most of this money is going into product development and the vast majority of that into clinical trials." In 1991, Genentech spent $221.3 mil. on R&D, which represented about 43% of revenues. He told the analysts to expect R&D expenditures of approximately $260 mil. in 1992. Raab also told the Hambrecht & Quist meeting to expect revenues to be flat in 1992. Genentech revenues in 1991 grew 8% to $515 mil., including contract and royalty revenues of $84 mil. and interest income of almost $49 mil. He predicted that Protropin sales will grow to about $200 mil. in 1992 from $185.1 mil. in 1991. However, he said that Activase sales are expected to continue to decline in 1992 to about $185 mil., due largely to an anticipated reduction in volume shipments to Japan. In 1991, net sales of Activase declined 6.4% from $210 mil. in 1990 to $196.5 mil. Sales of Actimmune interferon gamma, he added, are expected to grow to about $2.5 mil., up from $1.5 mil. in 1991.

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