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  • What we dont yet know could change everything.Genentech 2002 Annual Report

  • The acceleration of scientific knowledge over time has been profound and it is ceaseless.

    Today, the span of time between great discoveries in medicine gets smaller and smaller due in partto the relatively new field of biotechnology. Andthe number of breakthroughs and new approachesto disease continues to grow. At Genentech, webelieve we have only just begun to scratch thesurface of biotechnologys potential. Without adoubt, future discoveries will dramatically changeour understanding of serious illnesses and potentialtreatments. Even more importantly, science islikely to create dramatic change at a more personallevelincreasing the length and quality of life for our loved ones and ourselves.

  • PG 1

    What if one day everyone could survive cancer?

    Cancer is the second leading cause of death in the United States behind heart disease, with over 1.2 million new casesdiagnosed per year. Some predict it will become number one in the next 10 years. Curing cancer is our ultimate goal,but if we are able to keep cancer in check, extend patients lives and improve their quality of life, that will be amajor victory over the disease. Genentech developed the first two therapeutic antibodies for cancer in the UnitedStates, Rituxan (Rituximab), which was co-developed with IDEC Pharmaceuticals, and Herceptin (Trastuzumab) both of which attack malignant cells without causing extensive damage to healthy tissues. Rituxan and Herceptinare different from chemotherapy in that, although they are serious medicines, they tend to have relatively few sideeffects and can sometimes be taken for prolonged periods to stave off the disease. With this new approach to cancertreatment, it becomes more and more of a reality that someday cancer could be something you manage like diabetesor high blood pressure. Something you live with, grow old with and tell your grandchildren about.

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    What if cancer research helped discover new therapies for arthritis?

    The amazing thing about science is that every idea can be challenged. Our fundamental understanding of illness ischanging based on new discoveries about the relationships between the causes of cancer and the immune system which opens the doorway to new potential treatments in both areas. Genentech has long used products of theimmune system, antibodies, to fight cancer, but we are now also looking at ways in which our research in cancerand genomics might shed light on immune-related disorders. For instance, ongoing clinical work on Rituxan, a drugfor non-Hodgkins lymphoma, led to the groundbreaking discovery that Rituxan may also help patients withrheumatoid arthritis, an immunological disorder. Our scientists continue to explore the relationship between oncologyand immunology at a molecular level in the hopes of finding more unexpected connections between different kindsof cellular functions, illnesses and treatments.

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    The top 100 drugs target only 45 molecules. With approximately 30,000 genes left to explore, the opportunities are vast.

    A map of the human genome was completed in 2000, but we have only just begun to tap its potential for medicine. Thefirst phase of genomics was about identifying, sorting and screening genes, and we are now in a position to fully explore theirtherapeutic possibilities. At Genentech, our cross-disciplinary genomics initiatives have provided a tremendous reservoirof potential targets, which we will be investigating for the next decade or more. Our Tumor Antigen Program, for instance,has been focusing on targets overexpressed on the surface of tumor cells which can be important in tumor growth. The over-all goal of this program is to develop antibodies to these targets (or antigens) that might eventually serve as therapeutics inthe treatment of cancer. There are vast opportunities buried in the human genome that will come to light over time opportunities for whole new approaches to fighting disease, new kinds of medicine, and new leases on life.

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    There is no one magic bullet.

    For many years, scientists hoped for a single magic bullet to attack cancer. However, research has shown that canceris not one disease but a collection of diseases for which different kinds of therapies targeting multiple gene productsmay need to be developed. Genentechs Herceptin, which targets a particular form of metastatic breast cancer, HER2-overexpressing, led the way in changing the paradigm in cancer treatment and set the stage for the developmentof other targeted approaches to cancer. Weve also discovered that these targeted therapies may prove even morepowerful in combination with other anti-cancer agents in a cocktail approach that fights the cancer on manydifferent fronts. In the last decade, biotechnology has revolutionized our thinking about cancer. Only time will tellwhat other assumptions will be challenged and what other mysteries solved.

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    There are more than 1,000 biotech companies focused onmedical therapeutics in the United States. Fewer than10 percent of them have brought a drug to market.

    When we founded this industry, we stood alone. Twenty-seven years and 10 marketed products later, there are stillonly a few major players. Its no small feat to successfully bring a drug to market it takes a biotech or pharma-ceutical company, on average, 10 to 15 years and can cost up to $800 million. Biotech companies need to not only beable to make groundbreaking discoveries but also be able to transform them into safe and effective medicines forpatients. Partly because of our diverse product portfolio, Genentech has the biotech industrys most extensive trackrecord in all phases of the long and resource-intensive process of bringing new disease treatments to patients. By being a fully integrated drug development company, we are able to take the flicker of an idea in a lab and yearslater see it extend and enhance a patients life.

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    This simple inspiration has driven our business for 27 years. Since Bob Swanson and Herb Boyer foundedGenentech in 1976, biotechnology has given us entirelynew ways of thinking about the human body, diseaseand potential treatments. It has given us breakthroughtherapies for a host of medical conditions, includingdiabetes, hemophilia, cystic fibrosis, growth hormonedeficiency, heart attack, stroke, anemia, and cancer. Ithas spawned a robust and growing industry, with morethan 1,400 biotech companies in the United States, ofwhich more than 340 are publicly held.

    And, despite depressed stock prices and diminishingcapital investment, the momentum for the industry con-tinues to build. It was only in 1982 that the U.S. Food andDrug Administration (FDA) approved the first innovativebiotech medicine, recombinant human insulin, and sincethen it has approved 130 biotech drugs and vaccines.According to a recent industry study, more than 370biotech products targeting approximately 200 diseasesare in clinical trials. More than 100 of those products arein Phase III, which means the industry could produce

    roughly as many medicines in the next few years as it hasduring the past 20. In addition, gene-based diagnosticsfor many major illnesses could be available in the nextseveral years, changing the way disease is diagnosed andfacilitating treatment with appropriate biotherapeutics.

    As illustrated in the timeline which begins on the right,the last few decades are merely a small part of a muchlonger history of scientific discovery that began severalcenturies ago and will continue through our lifetimesand beyond. The pace of new discoveries over the lastquarter century has been particularly intense and willcontinue to increase, as we have only just begun toexplore the ways in which biotechnology will changemedicine. The science is still evolving dramatically, andthe learning curve remains steep in terms of the insightsthis new technology still has to offer.

    By studying the human body at the molecular level andunderstanding better its most basic processes, researchersin biotechnology are already making important advance-ments in cancer treatment. Targeted therapies havetransformed cancer patient care in the last several

    Dear Stockholders: The passion that drives our business is thebelief that the science of life biology holds the keys to solvelifes toughest health challenges.


  • PG 7

    years, and I believe biotechnology has much more yet tocontribute to the war against this intractable disease.If targeted therapies continue to prove effective, as Ibelieve they will, oncologists would regularly begintreatment by analyzing a patients tumor, determiningits particular genetic makeup, and prescribing theappropriate biotherapeutic to attack the tumor. Targetedtherapies may also be taken in combination with eachother in a drug cocktail approach that fights tumorgrowth through several different mechanisms at once.This targeted approach tends to be less toxic thanchemotherapy and may allow cancer patients to livelonger and relatively symptom-free lives, eventuallyrendering cancer a disease that can be contained andmanaged. At present, over a dozen targeted therapies forcancer have been accepted by the FDA for expeditedreview, so there will likely be more such medicines onthe market in the near future.

    Mapping the human genome was an enormous, historicalaccomplishment, but it was only the beginning. We arenow engaged in the real work of delving into the geneticinformation to find suitable targets and understandingthem well enough to develop medicines that successfullyaddress cancer and other serious and life-threateningillnesses. This process will not happen overnight butwill span many years, even dec