Watch List Presentations

April 17, 2008

David Light, Phil Rosen, Tim Tyson

Company Overview Leading Biotechnology firm Discover, develop, and manufacture

medicines for patients with unmet medical needs

3 Main Areas of Focus Oncology Immunology Tissue Growth and Repair

http://www.gene.com/gene/ir/financials/annual-reports/2007/financials/marketedproducts.html, Accessed 15 Apr 08

2007 Product Sales

3 Blockbuster Drugs 38% Average Growth in

Product Sales past 5 years

Rituxan 27%

Avastin 27%

Herceptin 15%

Q1 2008 RevenueRituxan® 605 535 13%

Avastin® 600 533 13

Herceptin® 339 311 9

Lucentis® 198 211 -6

Xolair® 117 111 5

Tarceva® 111 102 9

Nutropin® Products 84 91 -8

Thrombolytics 67 68 -1

Pulmozyme® 57 52 10

Raptiva® 26 24 8

Total U.S. product sales 2,205 2,037 8

Net product sales to collaborators 174 292 -40

Total product sales 2,379 2,329 2

2008 Q1 2007 Q1 % Change

http://www.gene.com/gene/ir/financials/annual-reports/2007/financials/marketedproducts.html, Accessed 15 Apr 08

Avastin

Approved to treat Lung, Colon, and Breast Cancer Blocks blood vessels from forming

in tumors 31% sales growth from ’06 to ‘07

Rituxan

http://www.gene.com/gene/ir/financials/annual-reports/2007/financials/marketedproducts.html, Accessed 15 Apr 08

Approved to treat non-Hodgkin’s Lymphoma, Leukemia, and some autoimmune diseases Depletes B cells in diseases characterized

by having too many B cells or dysfunctional B cells

10% sales growth from ‘06 to ‘07

Herceptin

http://www.gene.com/gene/ir/financials/annual-reports/2007/financials/marketedproducts.html, Accessed 15 Apr 08

Approved to treat various forms of breast cancer Significant sales growth when new uses are

discovered, but otherwise steady growth

Pipeline•Many extended uses of Avastin, Herceptin, and Rituxan

•Majority already undergoing Phase III clinical trials

Management CEO/Chairman: Arthur Levinson, PH.D.

Started in the company as a senior scientist President Product Development: Susan Desmond-Hellmann, M.D.

Joined the company as a clinical scientist

Executive VP/CFO: David Ebersman Started as a business development analyst with the company

Executive VP of Research: Richard Scheller, PH.D. Prior to joining DNA he was a professor of Molecular and Cellular

Physiology and of Biological Sciences at Stanford

Management’s 2010 Goals Bring at least 20 new molecules into clinical

development Bring at least 15 major new products or indications

onto the market Achieve a compund annual non-GAAP earnings per

share growth rate of 25% Achieve cumulative free cash flow of $12 billion Become the number one U.S. oncology company in

sales

Roche Majority owner of Genentech Holding company that helps market

Genentech’s products internationally

Recent News and Developments On February 22, 2008, the FDA granted

accelerated approval for Avastin in combination with paclitaxel chemotherapy for the first-line treatment of advanced HER2-negative breast cancer.

Valuation

Valuation Current Price: $74.18

DCF Valuation: $114.83

Intrinsic Value: 103.35 – 126.31

WACC: 8.25%

Beta: .75, L/T Growth: 4%

Valuation  Growth Rate  

                       114.80  2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0%

WACC 7.0%

                       

111.22       

120.87       

132.95       

148.47       

169.17       

198.15          

241.61          

314.05          

458.94 

  7.5%

                          99.37 

      106.95 

      116.21 

      127.79 

      142.68 

      162.52 

         190.31 

         231.99 

         301.45 

  8.0%

                          89.55 

         95.61 

      102.87 

      111.76 

      122.86 

      137.14 

         156.17 

         182.82 

         222.80 

  8.25%

                          85.30 

         90.76 

         97.25 

      105.12 

      114.83 

      127.14 

         143.24 

         165.20 

         196.94 

  9.0%

                          74.22 

         78.26 

         82.98 

         88.56 

         95.24 

      103.42 

         113.64 

         126.78 

         144.30 

  9.5%

                          68.14 

         71.50 

         75.38 

         79.91 

         85.26 

         91.67 

           99.52 

         109.33 

         121.94 

  10.0%

                          62.84 

         65.67 

         68.89 

         72.62 

         76.96 

         82.10 

           88.26 

           95.79 

         105.20 

  11.0%

                          54.09 

         56.13 

         58.43 

         61.03 

         64.00 

         67.44 

           71.44 

           76.18 

           81.85 

  12.0%

                          47.16 

         48.68 

         50.37 

         52.25 

         54.37 

         56.77 

           59.51 

           62.68 

           66.38 

Recommendation Add Genentech to the RCMP Watch List

Increasing uses of big 3 drugs Strong Drug Pipeline (Many Phase III Trials) Strong earnings growth Strong balance sheet (minimal debt, surplus cash) Not greatly threatened by generic competition Warrants further review in Fall 2008