Genentech Inc – ‘S-4/A’ on 9/8/95

As of:  Friday, 9/8/95   ·   Accession #:  950123-95-2577   ·   File #:  33-59949

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Pre-Effective Amendment to Registration of Securities Issued in a Business-Combination Transaction   —   Form S-4
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-4/A       Amendement No.1 to Form S-4                          189   1.10M 
 2: EX-2.2      Agreement, Dated as of July 7, 1995                    7     25K 
 3: EX-2.3      Agreement, Dated as of September 6, 1995              12     40K 
 4: EX-5.1      Opinion of Wachtell, Lipton, Rosen                     2     10K 
 5: EX-8.1      Opinion of Wachtell, Lipton, Rosen                     1      9K 
 6: EX-10.4     Agency Agreement, Dated as of September 6, 1995       12     39K 
 7: EX-10.5     Letter Agreement, Dated September 6, 1995              2     12K 
 8: EX-15.1     Letter Re: Unaudited Interim Financial Information     1      8K 
 9: EX-23.2     Consent of Ernst & Young LLP                           1      8K 
10: EX-23.3     Consent of Price Waterhouse Ag                         1      6K 
11: EX-24.1     Powers of Attorneys                                    1      9K 
12: EX-27.1     Financial Data Schedule                                1     10K 
13: EX-99.1     Form of Proxy for Special Meeting of Stockholders      2±    11K 

S-4/A   —   Amendement No.1 to Form S-4
Document Table of Contents

S-4/A
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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 8, 1995 

                                             REGISTRATION STATEMENT NO. 33-59949

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 1 

TO

FORM S-4
REGISTRATION STATEMENT
UNDER 
THE SECURITIES ACT OF 1933
------------------------

GENENTECH, INC. 
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

                                                        [Enlarge/Download Table]
                                                                                                      
             DELAWARE                            2834                           94-2347624            
   (STATE OR OTHER JURISDICTION      (PRIMARY STANDARD INDUSTRIAL            (I.R.S. EMPLOYER         
OF INCORPORATION OR ORGANIZATION)    CLASSIFICATION CODE NUMBER)           IDENTIFICATION NO.)        
                                                                JOHN P. MCLAUGHLIN, ESQ.              
                                                           SENIOR VICE PRESIDENT AND SECRETARY        
                                                                     GENENTECH, INC.                  
           460 POINT SAN BRUNO BOULEVARD                      460 POINT SAN BRUNO BOULEVARD           
    SOUTH SAN FRANCISCO, CALIFORNIA 94080-4990         SOUTH SAN FRANCISCO, CALIFORNIA 94080-4990     
                  (415) 225-1000                                     (415) 225-1000                   
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,  (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
  INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL                         NUMBER,                      
                 EXECUTIVE OFFICER)                    INCLUDING AREA CODE, OF AGENT FOR SERVICE)     

------------------------

COPIES OF ALL COMMUNICATIONS TO:

                                                                [Download Table]
                                                                              
   RICHARD D. KATCHER, ESQ.                            PETER R. DOUGLAS, ESQ. 
WACHTELL, LIPTON, ROSEN & KATZ                          DAVIS POLK & WARDWELL 
      51 WEST 52ND STREET                               450 LEXINGTON AVENUE  
 NEW YORK, NEW YORK 10019-6150                        NEW YORK, NEW YORK 10017
        (212) 403-1000                                     (212) 450-4000     

------------------------

    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of the Registration     
Statement and the effective time of the merger (the "Merger") of Genentech, Inc.
("Genentech") and HLR (U.S.) II, Inc. ("Merger Sub") as described in the        
Agreement and Plan of Merger dated as of May 23, 1995, as amended and restated, 
among Genentech, Roche Holdings, Inc. ("Roche") and Merger Sub attached as Annex
A to the Proxy Statement/Prospectus forming a part of this Registration         
Statement.                                                                      

------------------------

If the securities being registered on this Form are being offered in  
connection with the formation of a holding company and there is compliance with 
General Instruction G, check the following box:  / /                            

CALCULATION OF REGISTRATION FEE 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                                          
--------------------------------------------------------------------------------                          
                                                     PROPOSED MAXIMUM  PROPOSED MAXIMUM                   
TITLE OF EACH CLASS                  AMOUNT TO BE     OFFERING PRICE  AGGREGATE OFFERING     AMOUNT OF    
OF SECURITIES TO BE REGISTERED        REGISTERED         PER UNIT           PRICE        REGISTRATION FEE 
----------------------------------------------------------------------------------------------------------
Special Common Stock,                                                                                     
  par value $.02 per share........   61,868,803(1)         N.A.             (2)(3)       $1,027,659(2)(3) 
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------

(1) Based upon the number of outstanding shares of Common Stock, par value $.02 
per share ("Common Stock"), of Genentech, assuming the exercise of all  
    Genentech warrants and stock options (whether or not currently exercisable),
not including shares of Common Stock held by Roche and its affiliates.  

(2) On June 5, 1995, in connection with the original filing of this Registration
  Statement, the registration fee was computed pursuant to Rule 457(f) under
the Securities Act of 1933, as amended (the "Securities Act"), by       
multiplying (i) $48.25, the average of the high and low sales price of a
 share of Redeemable Common Stock quoted on the New York Stock Exchange on
    May 31, 1995 as reported in published financial sources, by (ii) 57,198,521,
the number of then outstanding shares of Common Stock calculated as set 
    forth in note (1) above. The result was then divided by 2900. As of the date
 hereof, in accordance with note (1), the total number of shares of Common
   Stock to be registered hereby is 61,868,803, which represents an additional
   4,670,282 shares of Common Stock over the number of shares specified in the
    first sentence of this note (2). The additional registration fee payable was
determined by multiplying (i) $47.1875, the average of the high and low 
    sales price of a share of Common Stock quoted on the New York Stock Exchange
on August 31, 1995 as reported in published financial sources, by (ii)  
4,670,282, the incremental number of shares described in the preceding  
sentence, and then dividing the result by 2900.                         

(3) Pursuant to Rule 457(b) under the Securities Act and Section 14(g) of the   
 Securities Exchange Act of 1934, as amended, and Rule 0-11 thereunder, of
the total registration fee of $1,027,659 payable hereunder, $555,000 was
    previously paid by Genentech in connection with the filing of a Schedule 14A
on June 2, 1995 and $396,666 was previously paid in connection with the 
filing of this Registration Statement on June 5, 1995. Accordingly, an  
 additional fee of $75,993 is payable upon the filing of this Amendment to
the Registration Statement.                                             

------------------------

 THE REGISTRANT HEREBY AMENDS THE 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, 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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GENENTECH, INC. 

SHARES OF SPECIAL COMMON STOCK
TO BE ISSUED IN CONNECTION WITH THE MERGER
OF GENENTECH, INC.
AND 
A WHOLLY OWNED SUBSIDIARY OF ROCHE HOLDINGS, INC. 
------------------------

CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) 
OF REGULATIONS S-K SHOWING THE LOCATION IN THE PROSPECTUS 
OF THE INFORMATION REQUIRED BY PART I OF FORM S-4 

                                                        [Enlarge/Download Table]

                                                                 LOCATION OR CAPTION IN        
                   ITEM OF FORM S-4                            PROXY STATEMENT/PROSPECTUS      
-------------------------------------------------------  --------------------------------------
                                                                                               
A. INFORMATION ABOUT THE TRANSACTION                                                           
   1.     Forepart of Registration Statement and                                               
            Outside Front Cover Page of Prospectus.....  Facing Page of the Registration       
                                                         Statement; Outside Front Cover Page of
                                                         Proxy Statement/Prospectus            
   2.     Inside Front and Outside Back Cover Pages of                                         
            Prospectus.................................  Available Information; Incorporation  
                                                         of Documents by Reference; Table of   
                                                         Contents                              
   3.     Risk Factors, Ratio of Earnings to Fixed                                             
            Charges and Other Information..............  Outside Front Cover Page of Proxy     
                                                         Statement/Prospectus; Summary and     
                                                         Special Factors; Selected Historical  
                                                         Financial Information; Business of    
                                                         Genentech                             

                                                        [Enlarge/Download Table]
                                                                                       
4. Terms of the Transaction..................... Summary and Special Factors -- Terms  
                                                 of the Proposed Transactions; The     
                                                 Proposed Transactions -- Purpose and  
                                                 Structure of the Transactions; The    
                                                 Merger Agreement; The Charter         
                                                 Amendment; Description of the Special 
                                                 Common Stock; Certain Federal Income  
                                                 Tax Considerations and Accounting     
                                                 Treatment; The Proposed               
                                                 Transactions -- Recommendation of the 
                                                 Board of Directors; Fairness of the   
                                                 Transaction; The Proposed             
                                                 Transactions -- Opinion of the        
                                                 Financial Advisor                     
5. Pro Forma Financial Information.............. Not Applicable                        
6. Material Contacts with the Company Being                                            
     Acquired................................... Summary and Special Factors -- The    
                                                 Existing Governance Agreement; -- The 
                                                 Licensing Agreement; -- Terms of the  
                                                 Proposed Transactions; The Proposed   
                                                 Transactions; The Merger Agreement;   
                                                 The Amended Governance Agreement;     
                                                 Guaranty of Roche Holding; The        
                                                 Licensing Agreement; Certain          
                                                 Relationships and Related Transactions
7. Additional Information Required for                                                 
     Reoffering by Persons and Parties                                                 
     Deemed to be Underwriters.................. Not Applicable                        

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                                                                 LOCATION OR CAPTION IN        
                   ITEM OF FORM S-4                            PROXY STATEMENT/PROSPECTUS      
-------------------------------------------------------  --------------------------------------
                                                                                               
   8.     Interests of Named Experts and Counsel.......  Legal Matters                         
   9.     Disclosure of Commission Position on                                                 
            Indemnification for Securities Act                                                 
            Liabilities................................  Not Applicable                        
B. INFORMATION ABOUT THE REGISTRANT                                                            
  10.     Information with Respect to S-3                                                      
            Registrants................................  Available Information; Incorporation  
                                                         of Documents by Reference             
  11.     Incorporation of Certain Information                                                 
            by Reference...............................  Available Information; Incorporation  
                                                         of Documents by Reference             
  12.     Information with Respect to S-2 or S-3                                               
            Registrants................................  Not Applicable                        
  13.     Incorporation of Certain Information                                                 
            by Reference...............................  Not Applicable                        
  14.     Information with Respect to Registrants Other                                        
            Than S-3 or S-2 Registrants................  Not Applicable                        
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED                                                
  15.     Information with Respect to S-3 Companies....  Not Applicable                        
  16.     Information with Respect to S-2 or S-3                                               
            Companies..................................  Not Applicable                        
  17.     Information with Respect to Companies Other                                          
            Than S-2 or S-3 Companies..................  Certain Information Concerning Roche  
                                                         and Roche Holding                     
D. VOTING AND MANAGEMENT INFORMATION                                                           
  18.     Information if Proxies, Consents or                                                  
            Authorizations Are to be Solicited.........  Outside Front Cover Page of Proxy     
                                                         Statement/Prospectus; Available       
                                                         Information; Incorporation of         
                                                         Documents by Reference; General       
                                                         Information; Security Ownership of    
                                                         Management; Certain Information       
                                                         Concerning Directors and Executive    
                                                         Officers; Certain Relationships and   
                                                         Related Transactions                  
  19.     Information if Proxies, Consents or                                                  
            Authorizations Are Not to be Solicited or                                          
            in an Exchange Offer.......................  Not Applicable                        

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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A 
     REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
  SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
    MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
     BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
  THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
    SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
   UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.                                                    

  SUBJECT TO COMPLETION, DATED SEPTEMBER 8, 1995

PRELIMINARY COPY                                                          

LOGO                                                                      
460 Point San Bruno Boulevard                                             
South San Francisco, CA 94080                                             

Arthur D. Levinson                                                        

President and                                                             

   Chief Executive Officer                                    September   , 1995

Dear Fellow Stockholder:                                                  

       You are cordially invited to attend the Special Meeting of Stockholders
of Genentech, Inc., which will be held on Wednesday, October 25, 1995, at 
10:00 a.m., local time, at [location].                                    

        As you may know, I was recently elected as President and Chief Executive
   Officer of Genentech. This is the first opportunity I have had to communicate
with all of the stockholders of Genentech, and I am pleased to enclose a  
Proxy Statement/Prospectus relating to the Special Meeting to be held with
respect to the pending transaction between Roche and Genentech. Although I
was not involved in the negotiations with Roche, I am strongly in favor of
 the proposed transactions and urge you to vote FOR the Proposal to be voted
upon at the Special Meeting.                                              

     At the Special Meeting, you will be asked to consider and vote upon a
   Proposal to approve a Merger Agreement that results in each outstanding share
of Genentech Common Stock (other than shares held by Roche and its        
affiliates) being converted into one share of Genentech Callable Putable  
Common Stock (the "Special Common Stock"). The purpose of the Merger is,  
through the conversion of Common Stock to Special Common Stock, to, among 
other matters, (i) establish a four-year period during which Genentech's  
publicly traded stock (i.e., the Special Common Stock) is subject to      
redemption at the option of Roche at prices per share beginning at $62.50 
  during the quarter ending December 31, 1995 and increasing $1.25 per quarter
  for six quarters and then $1.50 per quarter for the following eight quarters
 to $82.00 in the quarter ending June 30, 1999 (with each of such redemption
   prices being increased by $0.50, to a final price of $82.50, upon final court
approval of the settlement of certain stockholder litigation); and (ii)   
  provide holders of Special Common Stock the right to require the purchase of
some or all of their shares for 30 business days beginning in July 1999   
  (unless such right is accelerated following the occurrence of certain events
  of insolvency of Genentech) at a price of $60.00 per share in the event that
  Roche does not exercise its right to cause Genentech to redeem the shares on
or before June 30, 1999. Currently, stockholders have no such put rights. 
  Roche's right to cause redemption of the Special Common Stock is, in effect,
an extension of Roche's right to cause redemption of Genentech's formerly 
outstanding Redeemable Common Stock, which right expired on June 30, 1995 
   when the then outstanding Redeemable Common Stock was automatically converted
into Common Stock.                                                        

       If the Proposal is approved, (i) Genentech and Roche will enter into an
extension of the current Governance Agreement and (ii) Genentech and Roche
 will enter into a Licensing Agreement in which Roche will have the right to
   market certain Genentech products on an exclusive basis outside of the United
States and have an option, on a product-by-product basis, to develop and  
market on an exclusive basis outside the United States all other Genentech
  products which conclude Phase II trials during the next 10 years. Roche will
be obligated to pay 50% of the vast majority of Genentech development     
  expenses with respect to those products Roche markets or exercises the right
to develop and market and will be obligated to pay royalties to Genentech 
  ranging from 12.5% to 20% of sales depending on the product and the level of
sales.                                                                    

     The Proposal, together with the extension of the Governance Agreement
and the Licensing Agreement, protects against downward pressure on        
Genentech's stock price and provides downside protection for stockholders,
 preserves Genentech's existing corporate governance arrangements with Roche
in order to maintain the scientific excellence and                        

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resulting productivity of the Company, and, to the extent Roche's option  
 under the Licensing Agreement is exercised, reduces Genentech's development
expenses in the United States as well as development and commercialization
expenses outside the United States in return for reasonable royalties.    

    The Genentech Board of Directors believes that the redemption prices
 leave substantial room for future growth of the Company to be recognized in
   its stock price and that the "downside protection" afforded by the put rights
is a significant advantage to the Genentech public stockholders which     
  mitigates any "upside limitations" that may result from the existence of the
Roche redemption rights.                                                  

       I urge you to read carefully the accompanying Notice of Special Meeting
of Stockholders and Proxy Statement/Prospectus for details of the Proposal
and additional related information.                                       

 The approval of the Proposal requires the affirmative vote of the
holders of at least a majority of the outstanding shares of Common Stock  
unaffiliated with Roche. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL    
  MEETING, IT IS IMPORTANT TO GENENTECH'S FUTURE THAT YOU COMPLETE, SIGN, DATE
 AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PREPAID
ENVELOPE. If you attend the Special Meeting, you may vote in person if you
 wish, even though you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.                                  

      The Proposal before you has followed a tortuous path. It was fashioned
after months of discussions. It was determined to be fair by an investment
bank, and reviewed and approved by the Board of Directors (other than the 
 directors designated by Roche) in April. Based on the subsequent revelation
  in June of a possible conflict of interest during the discussions with Roche
on the part of Genentech's then CEO and President, the Board appointed an 
Independent Committee to review the Proposal again. The Committee took    
 measures, detailed in the "Background of the Proposed Transactions" section
   of the enclosed Proxy Statement/Prospectus, to determine whether the Proposal
 should continue to be recommended to Genentech's public stockholders. AFTER
  COMPLETION OF THAT REVIEW, AND WITH THE OPINION OF A SECOND INVESTMENT BANK,
   GENENTECH'S BOARD OF DIRECTORS (OTHER THAN THE DIRECTORS DESIGNATED BY ROCHE)
   HAS AGAIN DETERMINED THE PROPOSAL AND RELATED AGREEMENTS TO BE FAIR TO AND IN
  THE BEST INTERESTS OF GENENTECH AND ITS STOCKHOLDERS (OTHER THAN ROCHE), AND
 HAS UNANIMOUSLY APPROVED THE PROPOSAL AND RELATED AGREEMENTS AND RECOMMENDS
THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE PROPOSAL.                      

        In the best interests of Genentech, I also urge you to vote FOR approval
of the Proposal.                                                          

      Sincerely,

               ARTHUR D. LEVINSON,

                                 President and Chief Executive Officer

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GENENTECH, INC. 
460 POINT SAN BRUNO BOULEVARD 
SOUTH SAN FRANCISCO, CA 94080 

------------------------

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS 

TO BE HELD ON OCTOBER 25, 1995

------------------------

TO THE STOCKHOLDERS OF GENENTECH, INC.:                                         

NOTICE IS HEREBY GIVEN that a Special Meeting of the Stockholders (the
"Special Meeting") of Genentech, Inc., a Delaware corporation ("Genentech" or   
the "Company"), will be held on Wednesday, October 25, 1995, at 10:00 a.m.,     
local time, at [location].                                                      

The purpose of the Special Meeting will be to consider and vote upon a
proposal (the "Proposal") to approve the Agreement and Plan of Merger, dated as 
of May 23, 1995, as amended and restated (the "Merger Agreement"), among        
Genentech, Roche Holdings, Inc., a Delaware corporation ("Roche"), and HLR      
(U.S.) II, Inc., a Delaware corporation and a wholly-owned subsidiary of Roche  
("Merger Subsidiary"), pursuant to which, among other things, (i) Merger        
Subsidiary will be merged with and into Genentech (the "Merger"), with Genentech
being the surviving corporation, (ii) the Certificate of Incorporation of       
Genentech will be amended to authorize the issuance by Genentech of Callable    
Putable Common Stock, par value $.02 per share (the "Special Common Stock"),    
(iii) each outstanding share of Common Stock, par value $.02 per share, of      
Genentech (the "Common Stock") (other than shares of Common Stock held by Roche 
and its affiliates) will be converted into one share of Special Common Stock,   
(iv) each outstanding share of Common Stock held by Roche and its affiliates    
will be cancelled, and (v) the outstanding common stock of Merger Subsidiary    
will be converted into shares of Common Stock representing the same number of   
shares of Common Stock held by Roche and its affiliates immediately prior to the
Merger.                                                                         

Pursuant to the current Genentech Certificate of Incorporation, at the
close of business on June 30, 1995, each then outstanding share of Genentech's  
Redeemable Common Stock, par value $.02 per share (the "Redeemable Common       
Stock"), was converted automatically into one share of Common Stock. As noted   
above, in the Merger, such Common Stock (other than Common Stock held by Roche  
or its affiliates) will be converted into Special Common Stock. The purpose of  
the Merger and of the resulting conversion of such Common Stock into Special    
Common Stock is to, among other matters, (i) establish a four-year period during
which the publicly traded stock of Genentech is subject to redemption by        
Genentech at the option of Roche, with such redemption during such four-year    
period being at specified prices per share ranging from $62.50 during the       
quarter ending December 31, 1995 increasing $1.25 per share for the next six    
quarters and $1.50 per share for the next eight quarters to $82.00 during the   
quarter ending June 30, 1999 (the "Call Rights") (with each of such redemption  
prices being increased by $0.50, to a final price of $82.50, upon final court   
approval of the settlement of certain stockholder litigation as described in the
enclosed Proxy Statement/Prospectus), and (ii) provide holders thereof the right
to require the purchase of all or a portion (at the election of the holder) of  
their shares of such stock for 30 business days beginning in July 1999 (unless  
such right is accelerated following the occurrence of certain events of         
insolvency of Genentech, as described in the attached Proxy                     
Statement/Prospectus) at a price of $60.00 per share (the "Put Rights") in the  
event that Roche does not cause the exercise of the Call Rights. The Merger will
have the effect of amending the Certificate of Incorporation of Genentech to    
create the Special Common Stock. For a detailed description of such amendment   
and of the terms of the Special Common Stock, see "The Charter Amendment;       
Description of the Special Common Stock" in the attached Proxy                  
Statement/Prospectus. A vote in favor of the Proposal is therefore also a vote  
in favor of amending the Genentech Certificate of Incorporation.                

     If Genentech's future growth and/or market conditions were to warrant a per
share valuation of Genentech prior to June 30, 1999 in excess of the redemption 
prices applicable under the Call Rights, the existence of the Call Rights under 
the Special Common Stock will prevent the Special Common Stock from trading     
above its applicable redemption price. If the Special Common Stock were to be   
redeemed through exercise of the Call Rights, holders of Special Common Stock   
would participate in any increased valuation of Genentech only to the extent    
permitted by the applicable redemption price. Holders of Special Common Stock   
will, however, benefit from the ability to sell their shares of Special Common  
Stock to the Company pursuant to the Put Rights at a price of $60.00 per share  
in July 1999 if the Call Rights have not been exercised. The Special Committee  
of the Genentech Board of Directors (consisting of all directors of Genentech at
the time of formation of such Committee other than the two Roche designees)     
believes that the redemption prices of the Call Rights leave substantial room   
for future growth of the                                                        

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Company to be recognized in its stock price and that the "downside protection"  
afforded by the Put Rights is a significant advantage to the Genentech public   
stockholders which mitigates any "upside limitations" that may result from the  
existence of the Call Rights.                                                   

GENENTECH'S BOARD OF DIRECTORS (OTHER THAN THE DIRECTORS DESIGNATED BY
ROCHE, WHO DID NOT PARTICIPATE IN THE DELIBERATIONS) HAS DETERMINED THE PROPOSED
TRANSACTIONS TO BE FAIR TO AND IN THE BEST INTERESTS OF GENENTECH AND ITS       
STOCKHOLDERS (OTHER THAN ROCHE), HAS UNANIMOUSLY APPROVED AND DECLARED ADVISABLE
THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE PROPOSAL AND          
RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE PROPOSAL.                 

  Under Genentech's Certificate of Incorporation, approval of the Proposal
requires the affirmative vote of the holders of at least a majority of the      
outstanding shares of Common Stock held by persons other than Roche or any of   
its affiliates. ACCORDINGLY, THE PROPOSAL WILL NOT BE APPROVED UNLESS THE       
HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK HELD BY PERSONS 
OTHER THAN ROCHE AND ITS AFFILIATES VOTE IN FAVOR OF THE PROPOSAL. Thus, failure
to submit a proxy card (or vote in person at the Special Meeting) or the        
abstention from voting by a stockholder will have the same effect as a vote     
"Against" the Proposal.                                                         

   Under the Merger Agreement, Roche, which currently owns approximately 65%
of the outstanding shares of Common Stock, has agreed, for purposes of the vote 
required by the Delaware General Corporation Law (i.e., a majority of the stock 
outstanding and entitled to vote) to vote all shares owned by it or any of its  
affiliates in favor of the Proposal.                                            

The Board of Directors of Genentech has fixed the close of business on
September 14, 1995 as the record date for determining the stockholders entitled 
to receive notice of, and to vote at, the Special Meeting or any adjournment or 
postponement thereof. A complete list of such stockholders will be available at 
Genentech's headquarters, 460 Point San Bruno Boulevard, South San Francisco,   
California 94080, for ten days before the Special Meeting. Detailed information 
relating to the Proposal and related matters is contained in the accompanying   
Proxy Statement/Prospectus, and the annexes thereto, which form a part of this  
Notice.                                                                         

  All stockholders are cordially invited to attend the Special Meeting. To
ensure your representation at the Special Meeting, however, you are urged to    
complete, date, sign and return the enclosed proxy as promptly as possible. A   
postage-prepaid envelope is enclosed for that purpose. Any stockholder attending
the Special Meeting may vote in person even if that stockholder has returned a  
proxy.                                                                          

 WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED    
POSTAGE PREPAID ENVELOPE. PLEASE DO NOT SEND ANY SHARE CERTIFICATES AT THIS     
TIME. YOUR PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED BY SIGNING AND   
RETURNING A LATER DATED PROXY WITH RESPECT TO THE SAME SHARES, BY FILING WITH   
THE SECRETARY OF GENENTECH A WRITTEN REVOCATION BEARING A LATER DATE, OR BY     
ATTENDING AND VOTING AT THE SPECIAL MEETING.                                    

                                        By Order of the Board of Directors

                         JOHN P. MCLAUGHLIN,
               Secretary

South San Francisco, California                                                 

September   , 1995                                                              

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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A 
     REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
  SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
    MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
     BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
  THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
    SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
   UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.                                                    

SUBJECT TO COMPLETION, DATED SEPTEMBER 8, 1995

PRELIMINARY COPY                                                                

GENENTECH, INC. 
460 POINT SAN BRUNO BOULEVARD 
SOUTH SAN FRANCISCO, CA 94080 
------------------------

PROXY STATEMENT 

FOR THE SPECIAL MEETING OF STOCKHOLDERS 

TO BE HELD ON OCTOBER 25, 1995

------------------------

PROSPECTUS COVERING 61,868,803 SHARES OF

CALLABLE PUTABLE COMMON STOCK 

------------------------

This Proxy Statement/Prospectus (this "Proxy Statement/Prospectus") of
Genentech, Inc., a Delaware corporation ("Genentech" or the "Company"), relates 
to the solicitation of proxies by the Board of Directors for use at a Special   
Meeting of Stockholders of Genentech scheduled to be held on Wednesday, October 
25, 1995, at 10:00 a.m., local time, at the [location], and any adjournments or 
postponements thereof (the "Special Meeting"). The purpose of the Special       
Meeting will be to consider and vote upon a proposal (the "Proposal") to approve
the Agreement and Plan of Merger, dated as of May 23, 1995, as amended and      
restated (the "Merger Agreement"), among Genentech, Roche Holdings, Inc., a     
Delaware corporation ("Roche"), and HLR (U.S.) II, Inc., a Delaware corporation 
and a wholly-owned subsidiary of Roche ("Merger Subsidiary"), pursuant to which,
among other things, (i) Merger Subsidiary will be merged with and into Genentech
(the "Merger"), with Genentech being the surviving corporation, (ii) the        
Certificate of Incorporation of Genentech will be amended to authorize the      
issuance by Genentech of Callable Putable Common Stock, par value $.02 per share
(the "Special Common Stock"), (iii) each outstanding share of Common Stock, par 
value $.02 per share, of Genentech (the "Common Stock") (other than shares of   
Common Stock held by Roche and its affiliates) will be converted into one share 
of Special Common Stock, (iv) each outstanding share of Common Stock held by    
Roche and its affiliates will be cancelled, and (v) the outstanding common stock
of Merger Subsidiary will be converted into shares of Common Stock representing 
the same number of shares of Common Stock held by Roche and its affiliates      
immediately prior to the Merger.                                                

Pursuant to the current Genentech Certificate of Incorporation, at the
close of business on June 30, 1995, each then outstanding share of Genentech's  
Redeemable Common Stock, par value $.02 per share (the "Redeemable Common       
Stock"), was converted automatically into one share of Common Stock. As noted   
above, in the Merger, such Common Stock (other than Common Stock held by Roche  
or its affiliates) will be converted into Special Common Stock. See "The Merger 
Agreement." The purpose of the Merger and of the resulting conversion of such   
Common Stock into Special Common Stock is to, among other matters, (i) establish
a four-year period during which the publicly traded stock of Genentech is       
subject to redemption by Genentech at the option of Roche, with such redemption 
during such four-year period being at specified prices per share ranging from   
$62.50 during the quarter ending December 31, 1995 and increasing $1.25 per     
quarter for the next six quarters and $1.50 per quarter for the next eight      
quarters to $82.00 during the quarter ending June 30, 1999 (the "Call Rights")  
(with each of such redemption prices being increased by $0.50, to a final price 
of $82.50, upon final court approval of the settlement of the Stockholder       
Litigation (as hereinafter defined) as described under "The Charter Amendment;  
Description of the Special Common Stock -- Call Rights"), and (ii) provide      
holders thereof the right to require the purchase of all or a portion (at the   
election of the holder) of their shares of such stock for 30 business days      
beginning in July 1999 (unless such right is accelerated following the          
occurrence of certain Insolvency Events (as hereinafter defined)) at a price of 
$60.00 per share (the "Put Rights") in the event that Roche does not cause the  
exercise of the Call Rights. The Merger will have the effect of amending the    
Genentech Certificate of Incorporation to create the Special Common Stock. A    
vote in favor of the Proposal is therefore also a vote in favor of amending the 
Genentech Certificate of Incorporation. For a detailed description of such      
amendment and of the terms of the Special Common Stock, see "The Charter        
Amendment; Description of the Special Common Stock."                            

   The Company's obligation to pay the Put Price (as hereinafter defined) to
stockholders who properly exercise their Put Rights will be conditioned upon    
Genentech's having received from Roche, or an affiliate of Roche, the funds     
required to be contributed to the Company by Roche under the Amended Governance 
Agreement (as hereinafter defined). See "The Charter Amendment; Description of  
the Special Common Stock -- Put Rights;" "-- Condition to the Company's         
Obligations;" "The Amended Governance Agreement -- Put Rights with Respect to   
the Special Common Stock;" "-- Capital Contribution and Assumption of Put       
Obligations by Roche" and "Certain Information Concerning Roche and Roche       
Holding." Under the Amended Governance Agreement, Roche has agreed to either (i)
contribute to Genentech (in exchange for Common Stock) the funds required to    
satisfy the Put Rights and certain other liabilities of the Company or (ii)     
elect to purchase directly from Genentech's stockholders the shares of Special  
Common Stock which such stockholders elect to have purchased pursuant to their  
exercise of the Put Rights. See "The Amended Governance Agreement -- Capital    
Contribution and Assumption of Put Obligations by Roche" and "Certain           
Information Concerning Roche and Roche Holding."                                

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Such obligations of Roche are guaranteed (the "Guaranty") by Roche Holding (as  
hereinafter defined). See "Guaranty of Roche Holding." Amended Article Third (as
hereinafter defined) provides that Genentech will take (and will have no        
authority not to take) all necessary action to enforce, and to cause the        
performance of, Roche's and Roche Holding's obligations with respect to payment 
of the Put Price under the Amended Governance Agreement and the Guaranty and to 
ensure that Roche and Roche Holding otherwise comply with their respective      
obligations described under "The Amended Governance Agreement -- Capital        
Contribution and Assumption of Put Obligations by Roche" and under the Guaranty.
See "Guaranty of Roche Holding." Genentech has appointed Citibank, N.A. as its  
irrevocable agent (the "Agent") to enforce the respective obligations of Roche  
and Roche Holding described under "The Amended Governance Agreement -- Capital  
Contribution and Assumption of Put Obligations by Roche" and under the Guaranty 
in the event of the occurrence of an Insolvency Event. See "The Amended         
Governance Agreement -- The Agency Agreement."                                  

Under an existing agreement between Genentech and Roche, Genentech is 
currently prohibited from effecting any redemption of the Common Stock without  
Roche's consent. Other than pursuant to the Put Rights, Genentech will continue 
to be similarly prohibited from redeeming the Special Common Stock under the    
Amended Governance Agreement, a copy of which is attached hereto as Exhibit A to
Annex A. See "The Amended Governance Agreement." Currently, holders of Common   
Stock do not have a right to require Genentech to purchase their shares. The    
Common Stock is traded on the New York Stock Exchange (the "NYSE") and the      
Pacific Stock Exchange (the "PSE"), and it is expected that the Special Common  
Stock will trade on the NYSE and the PSE. Listing of the shares of Special      
Common Stock by the NYSE is a condition to Genentech's and Roche's obligations  
to consummate the foregoing transactions.                                       

This Proxy Statement also constitutes the Prospectus of Genentech with
respect to the shares of Special Common Stock to be issued pursuant to the      
Merger. Genentech has filed a Registration Statement on Form S-4 (the           
"Registration Statement"), of which this Proxy Statement/Prospectus is a part,  
with the Securities and Exchange Commission (the "Commission") under the        
Securities Act of 1933, as amended (the "Securities Act"), covering the shares  
of Special Common Stock to be issued pursuant to the Merger.                    

The Merger Agreement also contemplates the execution by Genentech and 
Roche, immediately prior to effectiveness of the Merger, of an Amended and      
Restated Governance Agreement (the "Amended Governance Agreement") pursuant to  
which, among other things, the principal terms of the Governance Agreement,     
dated as of September 7, 1990, between Roche and Genentech (the "Existing       
Governance Agreement") will be modified in certain respects and otherwise       
extended and remain in effect. If the Merger is consummated, an affiliate of    
Roche, F. Hoffmann-La Roche Ltd ("HLR"), will enter into a licensing agreement  
(the "Licensing Agreement") with Genentech pursuant to which HLR will have the  
right to market certain Genentech products on an exclusive basis outside of the 
United States and have an option on a product-by-product basis to develop and   
market on an exclusive basis outside of the United States all other Genentech   
products developed within the 10 years following execution of the Licensing     
Agreement. See "The Licensing Agreement." The transactions contemplated by the  
Merger Agreement, the Amended Governance Agreement and the Licensing Agreement, 
are hereinafter collectively referred to as the "Proposed Transactions."        

     If Genentech's future growth and/or market conditions were to warrant a per
share valuation of Genentech prior to June 30, 1999 in excess of the redemption 
prices applicable under the Call Rights, the existence of the Call Rights under 
the Special Common Stock will prevent the Special Common Stock from trading     
above its applicable redemption price. If the Special Common Stock were to be   
redeemed, holders of the Special Common Stock would participate in any increased
valuation of Genentech only to the extent permitted by the applicable redemption
price. Holders of Special Common Stock will, however, benefit from the ability  
to put their shares of Special Common Stock at a price of $60.00 per share for  
30 business days beginning in July 1999 (unless such right is accelerated       
following the occurrence of certain Insolvency Events) if the Call Rights have  
not been exercised. The Special Committee of the Genentech Board (consisting of 
all directors of Genentech at the time of formation of such Committee other than
the two Roche designees) (the "Special Committee") believes that the redemption 
prices of the Call Rights leave substantial room for future growth of the       
Company to be recognized in its stock price and that the "downside protection"  
afforded by the Put Rights is a significant advantage to the Genentech public   
stockholders which mitigates any "upside limitations" that may result from the  
existence of the Call Rights.                                                   

GENENTECH'S BOARD OF DIRECTORS (OTHER THAN THE DIRECTORS DESIGNATED BY
ROCHE, WHO DID NOT PARTICIPATE IN THE DELIBERATIONS) HAS DETERMINED THE PROPOSED
TRANSACTIONS TO BE FAIR TO AND IN THE BEST INTERESTS OF GENENTECH AND ITS       
STOCKHOLDERS (OTHER THAN ROCHE), HAS UNANIMOUSLY APPROVED AND DECLARED ADVISABLE
THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE PROPOSAL AND          
RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE PROPOSAL.                 

  Under Genentech's Certificate of Incorporation, approval of the Proposal
requires the affirmative vote of the holders of at least a majority of the      
outstanding shares of Common Stock held by persons other than Roche or any of   
its affiliates. ACCORDINGLY, THE PROPOSAL WILL NOT BE APPROVED UNLESS THE       
HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK HELD BY PERSONS 
OTHER THAN ROCHE AND ITS AFFILIATES VOTE IN FAVOR OF THE PROPOSAL. Thus, the    
failure to                                                                      

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submit a proxy card (or vote in person at the Special Meeting) or the abstention
from voting by a stockholder will have the same effect as a vote "Against" the  
Proposal.                                                                       

   Under the Merger Agreement, Roche, which currently owns approximately 65%
of the outstanding shares of Common Stock, has agreed, for purposes of the vote 
required by the Delaware General Corporation Law (the "Delaware Law") (i.e., a  
majority of the stock outstanding and entitled to vote), to vote all shares     
owned by it or any of its affiliates in favor of the Proposal.                  

This Proxy Statement/Prospectus is first being mailed to Genentech's  
stockholders on or about September   , 1995.                                    

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY  
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS, AND, IF GIVEN  
OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING 
BEEN AUTHORIZED. UNDER THE RULES AND REGULATIONS OF THE COMMISSION, THE PROPOSAL
TO APPROVE THE MERGER CONSTITUTES AN OFFER OF SPECIAL COMMON STOCK TO HOLDERS OF
COMMON STOCK. THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS DOES NOT          
CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO PURCHASE, THE   
SECURITIES OFFERED HEREBY OR A SOLICITATION OF A PROXY IN ANY JURISDICTION WHERE
SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR THE ISSUANCE OF ANY SECURITIES HEREUNDER SHALL UNDER   
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE   
AFFAIRS OF GENENTECH SINCE THE DATE AS OF WHICH INFORMATION IS FURNISHED OR THE 
DATE HEREOF.                                                                    

NEITHER THE SPECIAL COMMON STOCK TO BE ISSUED PURSUANT TO THE MERGER NOR THE    
PROPOSED TRANSACTIONS HAVE BEEN APPROVED OR DISAPPROVED BY THE SECURITIES   
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION. NEITHER THE 
SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES           
COMMISSION HAS PASSED UPON THE FAIRNESS OR MERITS OF THE PROPOSED 
TRANSACTIONS NOR UPON THE ACCURACY OR ADEQUACY OF THE           
INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS.     
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. 

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AVAILABLE INFORMATION 

 As permitted by the rules and regulations of the Commission, this Proxy
Statement/Prospectus omits certain information contained in the Registration    
Statement. For such information, reference is made to the Registration Statement
and the exhibits thereto. Genentech is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in 
accordance therewith, files reports, proxy statements and other information with
the Commission. The Registration Statement of which this Proxy                  
Statement/Prospectus forms a part, as well as reports, proxy statements and     
other information filed by Genentech, can be inspected and copied at the        
Commission's Public Reference Room, Room 1024, 450 Fifth Street, N.W.,          
Washington, D.C. 20549; at the public reference facilities maintained by the    
Commission at its regional offices located at Suite 1400, Northwestern Atrium   
Center, 500 West Madison Street, Chicago, Illinois 60661; at 7 World Trade      
Center, 13th Floor, New York, New York 10048; and at Suite 500, East Tishman    
Building, 5757 Wilshire Blvd., Los Angeles, California 90036. Copies of such    
materials can be obtained at prescribed rates from the Public Reference Section 
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Common 
Stock is listed on the NYSE and the PSE, and such reports, proxy statements and 
other information concerning Genentech should be available for inspection at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.                 

  THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS THAT
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN     
EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED  
BY REFERENCE INTO THE INFORMATION INCORPORATED HEREIN) ARE AVAILABLE WITHOUT    
CHARGE, UPON ORAL OR WRITTEN REQUEST BY ANY PERSON RECEIVING THIS PROXY         
STATEMENT/PROSPECTUS, FROM THE CORPORATE SECRETARY OF GENENTECH, INC., 460 POINT
SAN BRUNO BOULEVARD, SOUTH SAN FRANCISCO, CALIFORNIA 94080, (415) 225-1706. IN  
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY 
OCTOBER 18, 1995.                                                               

 All information contained in this Proxy Statement/Prospectus concerning
Roche, Roche Holding and HLR was provided by Roche. Genentech assumes no        
responsibility for the accuracy of such information.                            

INCORPORATION OF DOCUMENTS BY REFERENCE 

  The following documents previously filed with the Commission pursuant to
the Exchange Act are hereby incorporated by reference in this Proxy             
Statement/Prospectus:                                                           

     (a) Annual Report on Form 10-K of Genentech for the year ended December 31,
1994;                                                         

    (b) Annual Report to Stockholders of Genentech for the year ended December
31, 1994;                                                     

    (c) Quarterly Report on Form 10-Q of Genentech for the quarter ended March
31, 1995;                                                     

   (d) Quarterly Report on Form 10-Q of Genentech for the quarter ended June
30, 1995;                                                     

     (e) Proxy Statement of Genentech in connection with Genentech's 1995 Annual
Meeting of Stockholders;                                      

  (f) The description of the Special Common Stock contained in Genentech's
    Registration Statement filed pursuant to the Exchange Act, and any
         amendment or report filed for the purpose of updating such description;
and                                                           

  (g) Genentech's Current Reports on Form 8-K dated July 10, 1995 and July
18, 1995.                                                     

  All documents filed by Genentech pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the Special
Meeting shall be deemed to be incorporated by reference herein and to be a part 
hereof from the date of filing thereof. Any statement contained in a document   
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Proxy Statement/Prospectus to the
extent that a statement contained herein, or in any other subsequently filed    
document that also is or is deemed to be incorporated by reference herein,      
modifies or supersedes such statement. Any such statement so modified or        
superseded shall not be deemed, except as so modified or superseded, to         
constitute a part of this Proxy Statement/Prospectus. At and immediately after  
the time that the Proposal is approved and adopted, Genentech will continue to  
be required to file periodic reports, proxy statements and other information    
with the Commission pursuant to the Exchange Act; however, based on Genentech's 
current capitalization, if Roche should elect to cause Genentech to exercise the
Call Rights, Genentech will no longer be, or, if Roche does not so elect,       
depending on the number, if any, of holders of Special Common Stock who exercise
their Put Rights and upon other factors, it is possible that Genentech may no   
longer be, required to file such reports. See "Summary and Special              
Factors -- Possible Effects of Exercise of Put Rights on Market for Special     
Common Stock."                                                                  

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TABLE OF CONTENTS 

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                                                                                         PAGE 
                                                                                       ------ 
                                                                                              
AVAILABLE INFORMATION..................................................................     iv
INCORPORATION OF DOCUMENTS BY REFERENCE................................................     iv
SUMMARY AND SPECIAL FACTORS............................................................      1
     The 1990 Merger...................................................................      1
     The Existing Governance Agreement.................................................      1
     Terms of the Proposed Transactions................................................      2
     Genentech's Reasons for the Proposed Transactions.................................      4
     Advantages and Disadvantages of the Proposal to Genentech Stockholders............      6
     Effects of a Failure to Approve the Proposal......................................      7
     Possible Effects of Exercise of Put Rights on Market for Special Common Stock.....      8
     Composition of Genentech's Board of Directors Following the Proposed                     
      Transactions.....................................................................      9
     Certain Rights of Roche Following the Proposed Transactions.......................      9
     Roche's Reasons for the Proposed Transactions.....................................     10
     Interests of Certain Persons in the Proposed Transactions.........................     11
     Guaranty of Roche Holding.........................................................     11
     Licensing Agreement...............................................................     12
     Certain Federal Income Tax Considerations.........................................     13
     Stockholder Litigation............................................................     14
     Merger Subsidiary.................................................................     15
GENERAL INFORMATION....................................................................     16
     Purpose of Special Meeting........................................................     16
     Record Date; Voting Rights; Proxies...............................................     16
     Solicitation of Proxies...........................................................     16
     Quorum............................................................................     16
     Required Vote.....................................................................     16
     No Appraisal Rights...............................................................     17
BUSINESS OF GENENTECH..................................................................     17
MARKET PRICES OF AND DIVIDENDS ON THE REDEEMABLE COMMON STOCK AND THE COMMON STOCK.....     18
SELECTED HISTORICAL FINANCIAL DATA.....................................................     19
THE PROPOSED TRANSACTIONS..............................................................     20
     Background of the Proposed Transactions...........................................     20
     Purpose and Structure of the Transactions.........................................     32
     Recommendation of the Board of Directors; Fairness of the Transactions............     33
     Opinions of Financial Advisors....................................................     36
     Interests of Certain Persons in the Proposed Transactions.........................     51
     Source of Funds; Expenses.........................................................     52
     Stockholder Litigation............................................................     52
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS AND ACCOUNTING TREATMENT.....................     54
     Certain Federal Income Tax Consequences...........................................     54
     Accounting Treatment..............................................................     55
THE MERGER AGREEMENT...................................................................     56
     General...........................................................................     56
     The Merger........................................................................     56
     Effective Time....................................................................     56

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     Conversion and Exchange of Common Stock and Merger Subsidiary Common Stock........     56
     Exchange of Stock Certificates....................................................     56
     Additional Covenants and Agreements...............................................     57
     Conditions to Consummation of the Merger..........................................     59
     Termination of the Merger Agreement...............................................     60
     Additional Provisions of the Merger Agreement.....................................     60
THE CHARTER AMENDMENT; DESCRIPTION OF THE SPECIAL COMMON STOCK.........................     60
     Authorized Shares.................................................................     61
     Voting Rights.....................................................................     61
     Dividends; Reclassifications; Mergers.............................................     61
     Liquidation.......................................................................     61
     Call Rights.......................................................................     62
     Put Rights........................................................................     63
     Adjustments.......................................................................     63
     Condition to the Company's Obligations............................................     64
     Enforcement of Roche Obligations..................................................     64
     Payment...........................................................................     64
     Default and Acceleration of Put Rights............................................     65
     Conversion........................................................................     65
     Legend............................................................................     65
     Class Vote........................................................................     66
     Put and Call Not Business Combinations............................................     66
     Certain Definitions...............................................................     66
ARTICLE ELEVENTH OF THE CERTIFICATE OF INCORPORATION...................................     67
THE AMENDED GOVERNANCE AGREEMENT.......................................................     68
     Redemption of Special Common Stock................................................     68
     Put Rights with Respect to Special Common Stock...................................     68
     Suspension of Obligations.........................................................     68
     Indemnification...................................................................     68
     Options...........................................................................     69
     Further Acquisitions of Securities of Genentech by Roche..........................     69
     Capital Contribution and Assumption of Put Obligations by Roche...................     70
     The Agency Agreement..............................................................     71
     Board of Directors................................................................     72
     Certain Approval Rights...........................................................     73
     Affiliation Arrangements..........................................................     74
     Certain Agreements of Roche as to Voting..........................................     74
     Restrictions on Transfers of Common Stock by Roche................................     74
     Registration Rights...............................................................     76
     Certain Covenants.................................................................     76
     Amendments; Termination...........................................................     76
GUARANTY OF ROCHE HOLDING..............................................................     77
     General...........................................................................     77
     Covenants.........................................................................     77
THE LICENSING AGREEMENT................................................................     77
     Licenses, Options, Know-how and Trademarks........................................     77
     Commercialization Committees......................................................     78
     Development and Marketing.........................................................     78
     Production and Supply.............................................................     79
     Royalties and Other Payments......................................................     79
     Transition Provisions.............................................................     80
     Term and Termination..............................................................     80
HOLDERS OF GENENTECH'S DEBENTURES AND WARRANTS.........................................     80
CERTAIN PROJECTIONS OF FUTURE OPERATIONS AND OTHER INFORMATION.........................     81
     April Information.................................................................     81
     September Information.............................................................     82

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     Certain Significant Considerations................................................     84
CERTAIN INFORMATION CONCERNING ROCHE AND ROCHE HOLDING.................................     85
     Financial Information of the Roche Group..........................................     86
CONDUCT OF GENENTECH'S BUSINESS AFTER COMPLETION OF THE PROPOSED TRANSACTIONS; ROCHE'S        
  PLANS WITH RESPECT TO GENENTECH......................................................    111
PRINCIPAL STOCKHOLDERS OF GENENTECH....................................................    111
SECURITY OWNERSHIP OF MANAGEMENT.......................................................    112
     Amount and Nature of Beneficial Ownership.........................................    112
CERTAIN INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.........    114
     Executive Officers................................................................    114
     Directors.........................................................................    115
     Transactions in Securities of Genentech During the Last 60 Days...................    117
CERTAIN INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF ROCHE AND ROCHE        
  HOLDING..............................................................................    118
     Directors and Executive Officers of Roche.........................................    118
     Directors and Executive Officers of Roche Holding.................................    119
     Transactions in Securities of Genentech During the Last 60 Days...................    120
     Transactions in Securities of Genentech During the Last Two Years.................    121
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.........................................    121
OTHER MATTERS..........................................................................    123
AUDITORS' REPRESENTATIVES..............................................................    123
LEGAL MATTERS..........................................................................    124
EXPERTS................................................................................    124
ANNEX A -- Agreement and Plan of Merger Among Roche Holdings, Inc., HLR (U.S.) II, Inc. and   
           Genentech, Inc., dated May 23. 1995, as amended and restated (including a Form of  
           Amended and Restated Governance Agreement (Exhibit A), a Form of Guaranty (Exhibit 
           B) and a Form of Amendment to the Certificate of Incorporation (Exhibit C)).       
ANNEX B -- Opinion of Lehman Brothers.                                                        
ANNEX C -- Opinion of Morgan Stanley.                                                         

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  INDEX OF DEFINED TERMS

                                                                [Download Table]

                                            PAGE NO. 
                                            ---------
                                                     
1990 Merger................................       1  
1990 Merger Agreement......................       1  
1990 Merger Subsidiary.....................       1  
Action.....................................      14  
ADSs.......................................     108  
Agency Agreement...........................      71  
Agent......................................      ii  
alpha......................................     121  
Amended Article Third......................      60  
Amended Governance Agreement...............      ii  
Article Eleventh...........................      67  
Article Third..............................      60  
Assumed Discount Rate......................      48  
Bankruptcy Code............................      65  
Base Terms.................................      24  
Benchmark Multiples........................      42  
beta.......................................     121  
Biotech Companies..........................      47  
Biotech Index..............................      48  
Business Day...............................      66  
Business Combination.......................      67  
Call Notification..........................      63  
Call Rights................................   cover  
Canada Products............................      77  
Certificates...............................      57  
Code.......................................      13  
Collaborative Countries....................     122  
Commission.................................      ii  
Common Stock...............................   cover  
Company....................................   cover  
Comparable P/E to Growth Rate                        
  Multiple.................................      40  
Comparable Transactions....................      42  
Comparable Universe........................      38  
Conversion Date............................      65  
Debentures.................................      80  
Delaware Law...............................     iii  
Depositary.................................      66  
Discounted Cash Flow Analysis..............      43  
DNase......................................      77  
E 32.......................................      86  
EBIT.......................................      42  
Effective Time.............................      11  
Enforcement Amount.........................      71  
EPS........................................      37  
Equity Security............................      69  
Exchange...................................      54  
Exchange Act...............................      iv  
Exchange Agent.............................      56  
Exchange Fund..............................      57  
ESP........................................     118  
Existing Governance Agreement..............      ii  
FAS........................................      87  
Final Call Price...........................      48  
Fluor......................................     117  
Forward P/E Multiples......................      37  
Future Share Prices........................      48  
Future Standalone Values...................      39  
Future Unaffected Share Price..............      47  
Genentech..................................   cover  
Genentech Board............................       1  
Genentech Countries........................     123  
Genentech Products.........................      77  
Guaranty...................................      ii  
HLR........................................      ii  
HLR/Roche..................................     122  
Hoffmann-LaRoche...........................     121  
IAS........................................      86  
IASC.......................................      86  
IBES.......................................      38  
IDEC.......................................      77  
IDEC Product...............................      77  
Indenture..................................      80  
Independent Committee......................      29  
Independent Directors......................       1  
In-Licensed Product........................      12  
Insolvency Event...........................      65  
Investor Directors.........................      72  
IRR........................................      40  
LCPS.......................................     100  
Licensing Agreement........................      ii  
Liquidating Sale...........................      75  
LTM........................................      42  
Merger.....................................   cover  
Merger Agreement...........................   cover  
Merger Subsidiary..........................   cover  
Morgan Stanley.............................       5  
Named Executive Officers...................     112  
NHL........................................      96  
Noninvestor Directors......................      72  
NYSE.......................................      ii  
NYSE Excluded Holdings.....................       8  
Option.....................................      11  
Option Plans...............................      11  
Optout Option..............................     123  
P/E Ratio..................................      47  
Pharma Companies...........................      47  
Pharma Index...............................      48  
Preferred Stock............................      61  
Proposal...................................   cover  
Proposed Transactions......................      ii  
Proxy Statement/Prospectus.................   cover  
PSE........................................      ii  
Put Notice.................................      66  
Put Notification...........................      66  
Put Obligation.............................      54  
Put Period.................................      66  
Put Price..................................      63  
Put Rights.................................   cover  
RBL........................................      96  
Receiving Stockholder......................      54  
Record Date................................      16  
Redeemable Common Stock....................   cover  
Redemption Date............................      62  
Registration Statement.....................      ii  
Roche......................................   cover  
Roche Finance..............................      85  
Roche Group................................      15  
Roche Holding..............................       1  
Roche Holding's Voting Interest............      70  
Roche Shares...............................      56  
Roche Territory............................      12  
ROW Countries..............................     123  
S&P 400 Index..............................      48  
Scios Nova.................................      77  
Scios Product..............................      77  
Securities Act.............................      ii  
Sfr........................................      87  
Small Molecule Products....................      13  
Special Committee..........................      ii  
Special Common Stock.......................   cover  
Special Meeting............................   cover  
Standalone Values..........................      37  
Stockholder Litigation.....................      29  
Stockholder Meeting........................      57  
Subcommittee...............................      21  
Subject Person.............................      67  
TNF........................................     121  
Termination Date...........................       1  
Triggering Disposition.....................      10  
Transaction Agreement......................      28  
Trustee....................................      80  
Unaffected Share Price.....................      47  
US GAAP....................................      86  
Voting Stock...............................      67  
Warrants...................................      81  

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SUMMARY AND SPECIAL FACTORS 

 Set forth below is a summary description of certain significant matters
stockholders should take into account prior to voting on the Proposal. Such     
description is not intended to be complete and is qualified in all respects by  
reference to the detailed information set forth elsewhere in this Proxy         
Statement/Prospectus and the Annexes thereto. Stockholders are urged to read    
this Proxy Statement/Prospectus and such Annexes in their entirety.             

THE 1990 MERGER                                                                 

    On September 7, 1990, a wholly owned subsidiary ("1990 Merger Subsidiary")
of Roche was merged with and into Genentech (the "1990 Merger") pursuant to an  
Agreement and Plan of Merger dated as of February 2, 1990 among Genentech, Roche
and 1990 Merger Subsidiary (the "1990 Merger Agreement"). Roche is a wholly     
owned subsidiary of Roche Finance Ltd, a Swiss corporation, which, in turn, is a
wholly owned subsidiary of Roche Holding Ltd, a Swiss corporation ("Roche       
Holding"). In the 1990 Merger, Genentech stockholders received, for each share  
of Common Stock that they then owned, $18 in cash and one half share of newly   
issued Redeemable Common Stock. In the 1990 Merger, Roche, in effect, acquired  
one half of the Company's then outstanding Common Stock (42,699,458 shares) from
the stockholders for $1,537.2 million in cash and also acquired 24,433,951 newly
issued shares of Common Stock directly from the Company for $487.3 million. The 
67,133,409 shares of Common Stock that Roche acquired in the 1990 Merger        
represented approximately 57% of the outstanding voting securities of the       
Company as of the Record Date (as hereinafter defined). In addition, from time  
to time since the 1990 Merger, Roche purchased shares of Redeemable Common Stock
in the open market (which shares, together with all other Redeemable Common     
Stock, were converted into Common Stock on July 1, 1995) and, as of the Record  
Date, owned approximately 76,621,009 shares of Common Stock, which represents   
approximately 65% of the Common Stock outstanding on the Record Date. See       
"Certain Information Concerning Roche and Roche Holding."                       

THE EXISTING GOVERNANCE AGREEMENT                                               

    On September 7, 1990, pursuant to the 1990 Merger Agreement, Genentech and
Roche entered into the Existing Governance Agreement, which, among other        
matters, contains terms relating to the corporate governance of the Company     
after the 1990 Merger and limitations on business combinations by the Company   
with, and the acquisition and disposition of securities of the Company by, Roche
and its affiliates.                                                             

Board of Directors                                                          

Pursuant to the Existing Governance Agreement, the Company's Board of 
Directors (the "Genentech Board") was increased from eleven to thirteen members,
and the Genentech Board elected two nominees of Roche, Dr. Jurgen Drews and Dr. 
Armin Kessler, to serve on the Genentech Board, with two nominees being the only
designees on the Genentech Board to which Roche is entitled prior to the        
Termination Date (as hereinafter defined). Dr. Franz B. Humer was elected to the
Genentech Board on June 22, 1995 to fill the vacancy created by Dr. Kessler's   
retirement.                                                                     

 The Existing Governance Agreement, as modified by the Merger Agreement,
provides that on and after the date, if any, upon which the Merger Agreement is 
terminated without the Merger being consummated (the "Termination Date"), the   
Genentech Board will include two nominees designated by Roche and two officers  
of Genentech nominated by the nominating or proxy committee of the Genentech    
Board. The remainder of the Genentech Board at such time is to be comprised of  
"Independent Directors" (defined as individuals who are neither officers of     
Genentech nor employees, directors, principal stockholders or partners of Roche,
its affiliates or any entity (other than the Company and its subsidiaries) that 
was dependent on Roche or its affiliates for more than 10% of its revenues or   
earnings in the most recent fiscal year). The Existing Governance Agreement, as 
modified by the Merger Agreement, provides, in general, that after the          
Termination Date, Roche will be entitled to designate, in addition to its two   
nominees, as described above, a portion of the total number of Independent      
Directors equal to Roche's proportional voting interest in Genentech's equity   
securities and that the Company will, to the extent necessary, increase the size
of the Genentech Board and cause the Genentech Board to fill vacancies created  
by any such increase to achieve the                                             

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called-for result. See "The Amended Governance Agreement -- Board of Directors;"
"The Merger Agreement -- Additional Covenants and Agreements -- Continued       
Applicability of the Existing Governance Agreement."                            

As indicated below, if the Proposal is approved and the Merger is     
consummated, the parties will enter into the Amended Governance Agreement, under
which Roche would continue to have the right to designate two directors of      
Genentech, and its right to nominate Independent Directors, on the same terms as
would be applicable under the Existing Governance Agreement, as modified by the 
Merger Agreement, on and after the Termination Date, would be postponed until   
the expiration of the Put Period (as hereinafter defined) and payment of the Put
Price in respect of shares of Special Common Stock with respect to which the Put
Rights have been properly exercised. Thus, following the end of the period      
during which the Put Rights may be exercised, or if the Merger Agreement is     
terminated by reason of not being approved by stockholders (or if the           
Termination Date otherwise occurs), Roche, based on its current holdings of     
Common Stock, on and after the Termination Date, will have the right to         
designate more than a majority of the members of the Genentech Board, with all  
but two of such Roche designees being Independent Directors. See "The Amended   
Governance Agreement -- Board of Directors."                                    

Limitations on Business Combinations with and Acquisitions of Additional    
Genentech Securities by Roche                                               

Under the Existing Governance Agreement, as modified by the Merger    
Agreement, until the Termination Date, Roche will not be permitted to propose   
business combinations (as described in the Company's Certificate of             
Incorporation) between the Company and Roche or any affiliate of Roche unless a 
majority of the Independent Directors determines that there has been a          
sustained, substantial impairment of the business, prospects or financial       
viability of Genentech and its subsidiaries, taken as a whole, since September  
7, 1990. No such determination has been made by the Independent Directors, and  
none is contemplated. Unless such a determination, as described in the preceding
sentence, is made with respect to the Company, Roche may not propose any such   
business combination during the period commencing on the Termination Date, if   
any, and terminating on the first anniversary of the Termination Date at a price
per share to the unaffiliated holders of the Common Stock of less than $60.00   
per share.                                                                      

  Under Genentech's Certificate of Incorporation, any business combination
between Genentech and Roche or any affiliate of Roche (other than by exercise of
the Call Rights or the Put Rights), whether or not prior to the first           
anniversary of the Termination Date, must also be approved by the affirmative   
vote of a majority of the Independent Directors and the holders of a majority of
the Company's equity securities not beneficially owned by Roche or its          
affiliates. The Existing Governance Agreement prohibits the Independent         
Directors from taking into account any possible discount due to the fact that   
Genentech is a subsidiary of Roche when considering the fairness of any such    
transaction to Genentech's minority stockholders.                               

The Existing Governance Agreement also prohibits Roche from purchasing
equity securities of the Company if such purchase would result in Roche owning  
in the aggregate in excess of 75% of the voting power of the Company's equity   
securities on a fully diluted basis.                                            

TERMS OF THE PROPOSED TRANSACTIONS                                              

     Pursuant to the Merger Agreement, among other things, (i) Merger Subsidiary
will be merged with and into Genentech, with Genentech being the surviving      
corporation, (ii) the Certificate of Incorporation of Genentech will be amended 
to authorize the issuance by Genentech of Special Common Stock, (iii) each      
outstanding share of Common Stock (other than shares of Common Stock held by    
Roche and its affiliates) will be converted into one share of Special Common    
Stock, (iv) each outstanding share of Common Stock held by Roche and its        
affiliates will be cancelled, and (v) the outstanding common stock of Merger    
Subsidiary will be converted into shares of Common Stock representing the same  
number of shares of Common Stock held by Roche and its affiliates immediately   
prior to the Merger. See "The Merger Agreement."                                

Pursuant to the current Genentech Certificate of Incorporation, at the
close of business on June 30, 1995, each outstanding share of Redeemable Common 
Stock was converted automatically into one share of Common Stock. As noted      
above, in the Merger, such Common Stock (other than Common Stock held by        

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Roche or its affiliates) will be converted into Special Common Stock. The       
purpose of the Merger and of the resulting conversion of such Common Stock into 
Special Common Stock is to, among other matters, (i) provide for the Call       
Rights, which establish a four-year period during which the publicly traded     
stock of Genentech is subject to redemption by Genentech at the option of Roche,
with such redemption during such four-year period being at specified prices per 
share ranging from $62.50 during the quarter ending December 31, 1995 increasing
$1.25 per share for the next six quarters and $1.50 per share for the next eight
quarters to $82.00 during the quarter ending June 30, 1999 (with each of such   
redemption prices being increased by $0.50, to a final price of $82.50, upon    
final court approval of the settlement of the Stockholder Litigation), and (ii) 
provide for the Put Rights, which afford the holders of Special Common Stock the
right to require the purchase of all or a portion (at the election of the       
holder) of their shares of such stock at a price of $60.00 per share in the     
event that Roche does not cause the exercise of the Call Rights. The Put Rights 
will be exercisable during the 30-business day period following the expiration  
of the Call Rights or during a 60-business day period following certain         
Insolvency Events of the Company. The Merger will have the effect of amending   
the Certificate of Incorporation of Genentech to create the Special Common      
Stock. For a detailed description of such amendment and of the terms of the     
Special Common Stock, see "The Charter Amendment; Description of the Special    
Common Stock." A vote in favor of the Proposal is therefore also a vote to amend
the Genentech Certificate of Incorporation.                                     

    The Company's obligation to pay the Put Price to stockholders who properly
exercise their Put Rights will be conditioned upon Genentech's having received  
from Roche, or an affiliate of Roche, the funds required to be contributed to   
the Company by Roche under the Amended Governance Agreement. See "The Charter   
Amendment; Description of the Special Common Stock -- Put Rights;" "-- Condition
to the Company's Obligations;" "The Amended Governance Agreement -- Put Rights  
with Respect to the Special Common Stock;" "-- Capital Contribution and         
Assumption of Put Obligations by Roche" and "Certain Information Concerning     
Roche and Roche Holding." Under the Amended Governance Agreement, Roche has     
agreed to either (i) contribute to Genentech (in exchange for Common Stock) the 
funds required to satisfy the Put Rights and certain other liabilities of the   
Company or (ii) elect to purchase directly from Genentech's stockholders the    
shares of Special Common Stock which such stockholders elect to have purchased  
pursuant to their exercise of the Put Rights. See "The Amended Governance       
Agreement -- Capital Contribution and Assumption of Put Obligations by Roche"   
and "Certain Information Concerning Roche and Roche Holding." Such obligations  
of Roche are guaranteed by Roche Holding. See "Guaranty of Roche Holding."      
Amended Article Third provides that Genentech will take (and will have no       
authority not to take) all necessary action to enforce, and to cause the        
performance of, Roche's and Roche Holding's obligations with respect to payment 
of the Put Price under the Amended Governance Agreement and the Guaranty and to 
ensure that Roche and Roche Holding otherwise comply with their respective      
obligations described under "The Amended Governance Agreement -- Capital        
Contribution and Assumption of Put Obligations by Roche" and under the Guaranty.
See "Guaranty of Roche Holding." Genentech has appointed the Agent to enforce   
the respective obligations of Roche and Roche Holding described under "The      
Amended Governance Agreement -- Capital Contribution and Assumption of Put      
Obligations by Roche" and under the Guaranty in the event of the occurrence of  
an Insolvency Event. See "The Amended Governance Agreement -- The Agency        
Agreement."                                                                     

If the Merger receives the requisite stockholder approval and if the  
Proposed Transactions are effected prior to final court approval of the         
settlement of the Stockholder Litigation, the redemption prices per share of    
Special Common Stock applicable under the Call Rights will be as follows:       

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                                                                [Download Table]

                PERIOD                                                PRICE 
                ------                                                ----- 
                                                                            
October 1, 1995 to December 31, 1995................................  $62.50
January 1, 1996 to March 31, 1996...................................  $63.75
April 1, 1996 to June 30, 1996......................................  $65.00
July 1, 1996 to September 30, 1996..................................  $66.25
October 1, 1996 to December 31, 1996................................  $67.50
January 1, 1997 to March 31, 1997...................................  $68.75
April 1, 1997 to June 30, 1997......................................  $70.00
July 1, 1997 to September 30, 1997..................................  $71.50
October 1, 1997 to December 31, 1997................................  $73.00
January 1, 1998 to March 31, 1998...................................  $74.50
April 1, 1998 to June 30, 1998......................................  $76.00
July 1, 1998 to September 30, 1998..................................  $77.50
October 1, 1998 to December 31, 1998................................  $79.00
January 1, 1999 to March 31, 1999...................................  $80.50
April 1, 1999 to June 30, 1999......................................  $82.00

 Upon final court approval of the proposed settlement of the Stockholder
Litigation, each of the redemption prices applicable pursuant to the Call Rights
set forth above will be increased by $0.50 per share of Special Common Stock to 
a final price of $82.50, as provided by the settlement. If such final court     
approval occurs after payment of the applicable redemption price pursuant to the
Call Rights, such $0.50 increase will be promptly thereafter paid by Genentech  
to such person to whom payment of the applicable redemption price was previously
made.                                                                           

After June 30, 1999, the Call Rights will expire.                               

   Under the Amended Governance Agreement, Roche will be required to, if the
Call Rights are exercised, pay to the Depositary (as hereinafter defined)       
sufficient funds to satisfy the Company's obligations in respect of the Call    
Rights. See "The Amended Governance Agreement -- Redemption of Special Common   
Stock."                                                                         

The Amended Governance Agreement extends and modifies the Existing    
Governance Agreement. In particular, under the modified governance arrangements,
the limit on Roche's ability to make open market purchases would be increased   
such that Roche could own, following any such purchase, 79.9%, rather than 75%, 
of the voting power of the Company's equity securities on a fully diluted basis.
If the Merger is consummated, HLR will enter into the Licensing Agreement with  
Genentech pursuant to which HLR will have the right to market certain Genentech 
products on an exclusive basis outside of the United States and will have an    
option on a product-by-product basis to develop and market on an exclusive basis
outside of the United States all other Genentech products which conclude Phase  
II clinical trials within the 10 years following execution of the Licensing     
Agreement. For a description of the terms of the agreements relating to the     
Proposed Transactions, see "The Merger Agreement;" "The Charter Amendment;      
Description of the Special Common Stock;" "The Amended Governance Agreement;"   
"Guaranty of Roche Holding" and "The Licensing Agreement."                      

GENENTECH'S REASONS FOR THE PROPOSED TRANSACTIONS                               

     The Special Committee (which, as indicated above, consists of all directors
of Genentech at the time of formation of such Committee other than the two Roche
designees), based on the reports, presentations and discussions described under 
"The Proposed Transactions -- Background of the Proposed Transactions," believes
that, regardless of whether the Company was willing to extend Roche's option to 
cause the Company to redeem the Company's publicly traded shares, the Redeemable
Common Stock, prior to June 30, 1995, Roche was unlikely to exercise its then   
existing option. Further, on the same basis, the Special Committee concluded    
that the market price of Genentech's publicly traded shares would decline       
substantially if Roche's right to cause redemption of such shares were to expire
unexercised at June 30, 1995 or if Roche were to publicly announce its intention
not to exercise its right in advance of such date. The Special Committee also   
believes that a substantial decline in the value of the Company's publicly      
traded stock would, in addition to the                                          

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immediate resulting diminution of stockholder value, have material adverse      
effects on the Company's relations with its employees and on Genentech's ability
to attract and retain talented scientists, which, in turn, would likely further 
adversely affect stockholder value. The Special Committee's conclusion in these 
latter regards is based on its belief that (i) the failure by Roche to cause the
Company to redeem the Redeemable Common Stock would signal a lack of confidence 
by Roche in the Company and (ii) the economic incentive for the Company's       
scientists to remain with the Company would be substantially reduced or         
eliminated if the value of the Company's publicly traded stock were to decline  
as significantly as the analysis done by Lehman Brothers, the Special           
Committee's financial advisors, would suggest. See "The Proposed                
Transactions -- Opinions of Financial Advisors -- Lehman Brothers."             

 The Special Committee, based on the advice of Lehman Brothers, believes
that the existence of Roche's previous right to cause redemption of the         
Redeemable Common Stock had the effect of supporting the price at which the     
Redeemable Common Stock traded and that if the Merger is approved by the        
shareholders of Genentech, the potential decline in the price of the Company's  
publicly traded stock could be significantly mitigated by the Put Rights and the
Call Rights. The Special Committee's belief in this regard was subsequently also
supported by the advice of Morgan Stanley & Co. Incorporated ("Morgan Stanley") 
rendered on July 6 and 7, 1995. See "The Proposed Transactions -- Background of 
the Proposed Transactions" and "-- Opinions of Financial Advisors -- Morgan     
Stanley."                                                                       

     If Genentech's future growth and/or market conditions were to warrant a per
share valuation of Genentech prior to June 30, 1999 in excess of the redemption 
prices applicable under the Call Rights, however, the existence of the Call     
Rights under the Special Common Stock will prevent such stock from trading above
its applicable redemption price. If the Special Common Stock were to be         
redeemed, holders of the Special Common Stock would participate in any increased
valuation of Genentech only to the extent permitted by the applicable redemption
price. Holders of Special Common Stock will, however, benefit from the ability  
to put their shares of Special Common Stock at a price of $60.00 per share for  
30 business days beginning in July 1999 (unless such right is accelerated       
following the occurrence of certain Insolvency Events) if the Call Rights have  
not been exercised. The Special Committee believes that the redemption prices of
the Call Rights leave substantial room for future growth of the Company to be   
recognized in its stock price and that the "downside protection" afforded by the
Put Rights is a significant advantage to the Genentech public stockholders which
mitigates any "upside limitations" that may result from the existence of the    
Call Rights. See "The Proposed Transactions -- Background of the Proposed       
Transactions" and "-- Opinions of Financial Advisors."                          

    The Special Committee also believes that the Existing Governance Agreement
and the formerly outstanding Redeemable Common Stock facilitated, and the       
Proposed Transactions will continue to facilitate, achievement of certain       
objectives the Genentech Board initially formulated prior to the 1990 Merger.   
These objectives include: (a) the contractual preservation of Genentech's       
existing work environment, which the Genentech Board and senior management view 
as critical to Genentech's ability to retain the highly talented scientific and 
technical staff that is essential to Genentech's future and (b) the further     
development of opportunities for synergistic relations between Genentech and a  
major participant in the global pharmaceutical industry, particularly with      
respect to the marketing of Genentech's products on a global basis. The Special 
Committee also believes that the payment by Roche of 50% of certain of          
Genentech's development expenses (including costs previously incurred) pursuant 
to the Licensing Agreement with respect to those products that Roche elects to  
develop and market outside the United States will allow Genentech to take a     
larger number of promising research projects into development, increasing the   
likelihood that Genentech will have more medically and commercially significant 
marketed products over the next several years. In addition to the benefits to be
derived by Genentech from the royalties and manufacturing margin to be paid by  
Roche under the Licensing Agreement, the terms of the Licensing Agreement will  
also mitigate certain potential losses of the Company. For example, should Roche
elect to exercise its option under the Licensing Agreement at the conclusion of 
Phase II trials with respect to a particular product and should that product    
then fail during Phase III, the adverse effects on the Company of such failures 
would be mitigated because Roche would generally have been required to pay one  
half of the development costs with respect to such product. See " -- Advantages 
and Disadvantages of the Proposal to Genentech Stockholders". See also "The     
Proposed                                                                        

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Transactions -- Background of the Proposed Transactions;" "-- Purpose and       
Structure of the Transactions;" "-- Recommendation of the Board of Directors;   
Fairness of the Transaction;" and "-- Opinions of Financial Advisors."          

  The Special Committee also took into account the Independent Committee's
(as hereinafter defined) report that, although no investigation would           
necessarily reveal whether the request for personal financial assistance from   
Roche by G. Kirk Raab, the Company's former President and Chief Executive       
Officer, had tainted his conduct in the negotiations with Roche, its inquiry had
not revealed any evidence that Mr. Raab had not attempted to negotiate the best 
possible transaction for Genentech and its stockholders. See "The Proposed      
Transactions -- Background of the Proposed Transactions." The Special Committee 
considered the Independent Committee's report that it had no reason to question,
and that it did not in fact question, the independence and integrity of Lehman  
Brothers, which participated in the negotiation of the Proposed Transactions, or
of the analysis prepared, and the opinion rendered, by Lehman Brothers at the   
April 29 and 30 meetings of the Genentech Board and that the impartiality of    
Lehman Brothers, and the conclusion it had reached, gave substantial comfort    
that the negotiations had been vigorously conducted on behalf of the Company.   

  The Special Committee also took into account the Independent Committee's
report that Lehman Brothers had stated that nothing had come to its attention   
that would cause it to modify its April 30, 1995 opinion with respect to the    
Proposed Transactions and that Morgan Stanley was rendering its opinion on July 
7, 1995 as to the fairness of the Proposed Transactions from a financial point  
of view. The Special Committee and the Genentech Board concluded on July 7, 1995
that the reasons that had led the Special Committee and the Genentech Board to  
recommend the Proposed Transactions in the first instance continued to be valid 
and that they believed the Proposed Transactions to be the best available       
alternative for Genentech and its stockholders other than Roche. See "The       
Proposed Transactions -- Background of the Proposed Transactions" and           
"-- Recommendation of the Board of Directors; Fairness of the Transaction."     

ADVANTAGES AND DISADVANTAGES OF THE PROPOSAL TO GENENTECH STOCKHOLDERS          

The Special Committee believes that the principal advantages of the   
Proposed Transactions to Genentech's stockholders are that the Proposed         
Transactions should significantly mitigate a decline in the market price of the 
Company's publicly traded stock that would be expected to occur as a result of  
Roche's having elected not to exercise its right to cause the Redeemable Common 
Stock to be redeemed by June 30, 1995. Lehman Brothers has advised the Special  
Committee that the escalating redemption prices for the Redeemable Common Stock 
set forth in the Company's Certificate of Incorporation have likely had the     
effect of helping to support the prices at which the Redeemable Common Stock    
traded in the market. Lehman Brothers has advised the Special Committee that,   
after June 30, 1995, when the Redeemable Common Stock automatically converted to
Common Stock and was no longer subject to redemption, in the absence of the     
Proposed Transactions, a significant decline in the trading price of such stock 
could be expected to occur. Based on Lehman Brothers' advice, the Special       
Committee believes that such potential price decline could be significantly     
mitigated by virtue of the inclusion of the Put Rights in the Special Common    
Stock. If the Proposed Transactions are not consummated, the price that holders 
of such stock could receive after such date upon sale of their shares would be  
set by market forces without the holder being guaranteed the ability to sell    
such shares at a fixed price at a future date and cannot be predicted with any  
degree of certainty.                                                            

 Also based upon Lehman Brothers' advice, the Special Committee believes
that the Call Rights inherent in the Special Common Stock may have a supporting 
or elevating effect upon the market price of such stock, although it has been   
advised that such supporting effect may not be as significant as is the case    
with respect to the redemption right formerly applicable to the Redeemable      
Common Stock because of the market's possible perception of the reasons for a   
determination by Roche not to exercise its existing rights prior to July 1,     
1995, and the corresponding lack of market conviction that Roche would exercise 
an extended option. The beliefs of the Special Committee described in this      
paragraph and in the immediately preceding paragraph were subsequently also     
supported by the advice of Morgan Stanley rendered on July 6 and July 7. See    
"The Proposed Transactions -- Background of the Proposed Transactions" and      
"-- Opinions of Financial Advisors."                                            

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    NOTWITHSTANDING THE FOREGOING, HOWEVER, LEHMAN BROTHERS AND MORGAN STANLEY
BOTH ADVISED THE SPECIAL COMMITTEE, AND THE SPECIAL COMMITTEE BELIEVES, THAT    
TRADING PRICES OF SECURITIES ARE BASED UPON A VARIETY OF FACTORS, MANY OF WHICH 
ARE BEYOND THE CONTROL OF THE GENENTECH BOARD AND THE COMPANY. NONE OF LEHMAN   
BROTHERS, MORGAN STANLEY OR THE SPECIAL COMMITTEE CAN PREDICT THE ACTUAL PRICES 
AT WHICH THE SPECIAL COMMON STOCK WILL TRADE OR THE ACTUAL PRICES AT WHICH THE  
COMMON STOCK WILL TRADE IF THE PROPOSAL IS NOT ADOPTED. NOTHING IN THIS PROXY   
STATEMENT/PROSPECTUS SHOULD BE UNDERSTOOD TO CONSTITUTE SUCH A PREDICTION OR    
ASSURANCE OF ACTUAL FUTURE PRICES OR VALUES.                                    

    The Special Committee also concluded that, other than exercise by Roche of
the redemption right, which expired on June 30, 1995, approval and consummation 
of the Proposed Transactions would be the most favorable transaction for the    
employees of Genentech, almost all of whom are stockholders of the Company. The 
Special Committee believes that, given the current circumstances, the best means
for Genentech to attract and retain distinguished scientists would be to enter  
into the Proposed Transactions. The Special Committee believes that attracting  
and retaining scientists is in the Company's and its stockholders' best         
interests because the Company's scientific personnel are essential to its       
economic success. The extent to which the stockholders of the Company can       
participate in increased earnings, if any, of the Company is highly dependent on
the success of the Company's present and future scientific endeavors.           

  Another advantage of the Proposed Transactions considered by the Special
Committee is the effect of such transactions on the Company's research and      
development efforts. If Roche's redemption right were to have expired           
unexercised without the Genentech Board having approved the Proposed            
Transactions and if the price of Genentech's stock were to decline              
significantly, the Company could be forced to reduce research and development   
spending in order to increase earnings over the short term. Because ongoing     
research and development efforts are essential to the Company's future prospects
and such decrease in spending could have an adverse effect on the Company's     
development of new products, the Special Committee concluded that the Proposed  
Transactions (because they could have the effect of alleviating pressure on the 
Company to decrease research and development spending) were the best available  
alternative for Genentech and its stockholders. In fact, as noted above, the    
terms of the Licensing Agreement which call for Roche to pay 50% of Genentech's 
development expenses in certain circumstances is likely to allow the Company to 
develop more products than it otherwise could have.                             

The Special Committee believes that the principal disadvantage of the 
Proposed Transactions to Genentech's stockholders is that, as was the case under
the Existing Governance Agreement and the terms of the Redeemable Common Stock, 
the Genentech stockholders' ability to realize gains in their investment will be
limited by the Call Rights. Thus, if Genentech's future growth and/or market    
conditions were to warrant a per share valuation of Genentech prior to June 30, 
1999 in excess of the redemption prices applicable under the Call Rights, the   
existence of the Call Rights will prevent the Special Common Stock from trading 
above its applicable redemption price. If the Call Rights were to be exercised, 
holders of the Special Common Stock would participate in such increased         
valuation only to the extent permitted by the applicable redemption price.      

   For information with respect to the reasons for the Proposed Transactions
and the recommendation of the Genentech Board, see "The Proposed                
Transactions -- Background of the Proposed Transactions,"                       
" -- Recommendation of the Board of Directors; Fairness of the Transaction" and 
" -- Opinions of Financial Advisors."                                           

EFFECTS OF A FAILURE TO APPROVE THE PROPOSAL                                    

BASED UPON THE ADVICE OF ITS FINANCIAL ADVISORS, THE GENENTECH BOARD  
BELIEVES THAT IF THE PROPOSAL IS NOT APPROVED BY GENENTECH'S STOCKHOLDERS, THE  
MARKET PRICE OF GENENTECH'S PUBLICLY TRADED STOCK COULD BE EXPECTED TO DECLINE  
SIGNIFICANTLY. SEE "THE PROPOSED TRANSACTIONS -- RECOMMENDATION OF THE BOARD OF 
DIRECTORS; FAIRNESS OF THE TRANSACTION" AND " -- OPINIONS OF FINANCIAL          
ADVISORS."                                                                      

If the Proposal is not approved by the Genentech stockholders at the  
Special Meeting, the Common Stock will remain outstanding and will not be       
subject to the Call Rights nor have the benefit of the Put Rights. Under the    
Existing Governance Agreement, as modified by the Merger Agreement, until the   
Termination Date, Roche will not be permitted to propose business combinations  
(as described in the Company's                                                  

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Certificate of Incorporation) between the Company and Roche or any affiliate of 
Roche unless a majority of the Independent Directors determine that there has   
been a sustained, substantial impairment of the business, prospects or financial
viability of Genentech and its subsidiaries, taken as a whole, since September  
7, 1990. No such determination has been made by the Independent Directors, and  
none is contemplated. Unless such a determination, as described in the preceding
sentence, is made with respect to the Company, under the existing Governance    
Agreement, Roche may not propose any such business combination during the period
commencing on the Termination Date and terminating on the first anniversary of  
the Termination Date at a price per share to the unaffiliated holders of the    
Common Stock of less than $60.00 per share.                                     

 Before and after the first anniversary of the Termination Date, Roche's
ability to effect business combinations with Genentech will continue to be      
subject to the provisions of Genentech's Certificate of Incorporation, which    
provides, as indicated above, that any business combination between Genentech   
and Roche or any affiliate of Roche (other than by exercise of the Call Rights  
or the Put Rights), whether or not prior to the first anniversary of the        
Termination Date, must also be approved by the affirmative vote of a majority of
the Independent Directors and the holders of a majority of the Company's equity 
securities not beneficially owned by Roche or its affiliates. The Existing      
Governance Agreement prohibits the Independent Directors from taking into       
account any possible discount due to the fact that Genentech is a subsidiary of 
Roche when considering the fairness of any such transaction to Genentech's      
minority stockholders. As indicated above, if the Proposal is not approved by   
stockholders (or if, for any other reason, the Merger is not consummated), Roche
will be able to designate a majority of the Independent Directors.              

The Existing Governance Agreement also prohibits Roche from purchasing
equity securities of the Company if such purchase would result in Roche owning  
in the aggregate in excess of 75% of the voting power of the Company's equity   
securities on a fully diluted basis. See "The Amended Governance Agreement --   
Further Acquisitions of Securities of Genentech by Roche."                      

POSSIBLE EFFECTS OF EXERCISE OF PUT RIGHTS ON MARKET FOR SPECIAL COMMON STOCK   

   If Roche's right to cause redemption of the Special Common Stock pursuant
to the Call Rights expires unexercised, holders of Special Common Stock will, in
accordance with the terms thereof, be permitted to exercise the Put Rights.     
Exercise by holders of their Put Rights would, to the extent of such exercises, 
have the effect of reducing the number of publicly traded shares of Special     
Common Stock. It is not possible to predict at the present time how many shares 
of Special Common Stock might be redeemed by the Company pursuant to exercise of
the Put Rights. As of September 14, 1995, there were more than [20,500] holders 
of record of Common Stock. If a sufficiently large number of holders of Special 
Common Stock were to exercise their Put Rights, it is possible that the Special 
Common Stock would cease to meet the listing requirements of the NYSE, would    
fail to meet the listing requirements of any other national securities exchange 
and, consequently, would cease to be listed on any securities exchange.         
According to the NYSE's published guidelines, the NYSE would consider delisting 
the shares of Special Common Stock if, among other things, the number of record 
holders of at least 100 shares of Special Common Stock should fall below 1,200, 
the number of publicly-held shares of Special Common Stock (exclusive of        
holdings of officers, directors, their immediate families and other concentrated
holdings of 10% or more ("NYSE Excluded Holdings")) should fall below 600,000 or
the aggregate market value of publicly-held shares of Special Common Stock      
(exclusive of NYSE Excluded Holdings) should fall below $5,000,000. The market  
for, and the value of, Genentech's stock could be adversely affected if such    
stock ceases to be listed on a national securities exchange.                    

    In the event that the shares of Special Common Stock were no longer listed
or traded on the NYSE, it is possible that the shares of Special Common Stock   
would trade on another securities exchange or in the over-the-counter market and
that price quotations would be reported by such exchange, through the National  
Association of Securities Dealers Automated Quotation System or other sources.  
Such trading and the availability of such quotations would, however, depend upon
the number of shareholders and/or the aggregate market value of the shares of   
Special Common Stock remaining at such time, the interest in maintaining a      
market in the shares of Special Common Stock on the part of securities firms,   
the possible termination of registration of the shares of Special Common Stock  
under the Exchange Act, as described below, and other factors.                  

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     If delisting occurs, there can be no assurance that a liquid trading market
for such securities would remain. In the event fewer than 300 holders of record 
of Special Common Stock were to remain following the exercise of the Put Rights,
Genentech may cease filing periodic reports, proxy statements and other         
information with the Commission pursuant to the Exchange Act. Genentech does not
have any current plans to cease filing such reports. A reduction in the number  
of publicly traded shares could also adversely affect the trading market for and
liquidity of such shares, which could in turn have an adverse effect upon the   
market value of such securities.                                                

COMPOSITION OF GENENTECH'S BOARD OF DIRECTORS FOLLOWING THE PROPOSED            
TRANSACTIONS                                                                    

    Pursuant to the Existing Governance Agreement, in 1990 the Genentech Board
was increased from eleven to thirteen members, and the Genentech Board elected  
two nominees of Roche, Dr. Jurgen Drews and Dr. Armin Kessler, to serve on the  
Genentech Board, with two nominees being the only designees on the Genentech    
Board to which Roche is entitled prior to the Termination Date. Dr. Franz B.    
Humer was elected to the Genentech Board on June 22, 1995 to fill the vacancy   
created by Dr. Kessler's retirement.                                            

 The Existing Governance Agreement, as modified by the Merger Agreement,
provides that on and after the Termination Date, the Genentech Board will       
include two nominees designated by Roche and two officers of Genentech nominated
by the nominating or proxy committee of the Genentech Board. The remainder of   
the Genentech Board at such time is to be comprised of Independent Directors.   
The Existing Governance Agreement, as modified by the Merger Agreement,         
provides, in general, that after the Termination Date, Roche will be entitled to
designate, in addition to its two nominees, as described above, a portion of the
total number of Independent Directors equal to Roche's proportional voting      
interest in Genentech's equity securities and that the Company will, to the     
extent necessary, increase the size of the Genentech Board and cause the        
Genentech Board to fill vacancies created by any such increase to achieve the   
called-for result. See "The Amended Governance Agreement -- Board of Directors" 
and "The Merger Agreement -- Additional Covenants and Agreements -- Continued   
Applicability of the Existing Governance Agreement."                            

As indicated below, if the Proposal is approved and the Merger is     
consummated, the parties will enter into the Amended Governance Agreement, under
which Roche would continue to have the right to designate two directors of      
Genentech, and its right to nominate Independent Directors, on the same terms as
would be applicable under the Existing Governance Agreement, as modified by the 
Merger Agreement, on and after the Termination Date, would be postponed until   
the expiration of the Put Period and payment of the Put Price in respect of     
shares of Special Common Stock with respect to which the Put Rights have been   
properly exercised. Thus, following the end of the period during which the Put  
Rights may be exercised, or if the Merger Agreement is terminated by reason of  
not being approved by stockholders (or if the Termination Date otherwise        
occurs), Roche will have the right to designate more than a majority of the     
members of the Genentech Board, with all but two of such Roche designees being  
Independent Directors. See "The Amended Governance Agreement -- Board of        
Directors."                                                                     

 Under both the Existing Governance Agreement and the Amended Governance
Agreement, in any election of directors, Roche is obligated to vote its         
Genentech stock for all nominees to the Genentech Board in proportion to the    
votes cast by the other holders of Genentech stock, with certain exceptions;    
provided, however, that Roche may cast all of its votes in favor of any nominee 
to the Genentech Board designated by Roche as set forth above.                  

CERTAIN RIGHTS OF ROCHE FOLLOWING THE PROPOSED TRANSACTIONS                     

   The Amended Governance Agreement, like the Existing Governance Agreement,
provides that Roche will have effective veto power over certain actions         
involving Genentech, including material acquisitions by Genentech, sales or     
other dispositions outside the ordinary course of business of all or any        
substantial portion of the business or assets of Genentech, issuances of equity 
securities by Genentech (subject to certain limitations and exceptions), and    
repurchases of equity securities by Genentech. The Amended Governance Agreement 
provides, as does the Existing Governance Agreement, in effect that, unless the 
majority of the Independent Directors have made a contrary determination in good
faith, an acquisition will be deemed material, and the sale or other disposition
will be deemed to involve such substantial portion, if it would                 

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constitute or involve a portion of the business or assets of the Company        
accounting for 10% or more of the consolidated total assets or contribution to  
net income or revenues of the Company and its consolidated subsidiaries. Except 
as provided in the Licensing Agreement, as is the case under the Existing       
Governance Agreement, the Amended Governance Agreement also prohibits Genentech 
from entering into any material licensing or marketing agreement with respect to
Genentech's products or technology unless Genentech first negotiates in good    
faith with Roche with respect thereto for a reasonable period of not less than  
three nor more than six months. If Roche chooses not to exercise its options    
under the Licensing Agreement, Genentech would be free to enter into marketing  
and licensing arrangements with unrelated third parties without first pursuing  
such negotiations with Roche. The rights of Roche described in the first two    
sentences of this paragraph, as well as Roche's right to cause Genentech to     
exercise the Call Rights, would terminate upon the sale or transfer of any      
shares of Common Stock by Roche in an underwritten public offering or a sale    
pursuant to Rule 144 of the Securities Act prior to April 30, 2004 (such        
offering or sale, a "Triggering Disposition"). See "The Amended Governance      
Agreement -- Certain Approval Rights;" "-- Restrictions on Transfers of Common  
Stock by Roche" and "The Licensing Agreement."                                  

ROCHE'S REASONS FOR THE PROPOSED TRANSACTIONS                                   

Since the completion of the 1990 Merger, Roche has monitored the      
performance and financial and operating results and prospects of Genentech and  
has, from time to time, considered whether exercising its right to cause        
Genentech to redeem the formerly outstanding Redeemable Common Stock would be in
the best interests of Roche.                                                    

    Roche believes that the extension of the Call Rights will permit Genentech
to maintain independent operations in a climate of entrepreneurial and          
intellectual creativity, and that the extension of the Call Rights will permit  
Roche to continue to evaluate the progress of Genentech and its own interests in
the biotechnology field in light of future developments while enabling Genentech
to preserve its independence, and entrepreneurial culture and affording other   
holders of Genentech stock the opportunity to continue to participate as        
investors in Genentech. Roche believes that the terms of the Special Common     
Stock offer such investors protection from market and other risks of an         
investment in Genentech.                                                        

     As described in detail below under "The Proposed Transactions -- Background
of the Proposed Transactions," representatives of Genentech and Roche began, in 
late January 1995, to discuss the possibility of extending Roche's right to     
require Genentech to redeem the formerly outstanding Redeemable Common Stock    
because Roche had not decided whether it would exercise its redemption option   
prior to June 30, 1995. Roche believed that it would be more beneficial at this 
time to Roche, Genentech and Genentech's stockholders if Genentech could        
continue to maintain its operations in a climate of entrepreneurial and         
intellectual creativity as a more independent company than if Genentech were to 
become, by virtue of exercise of the existing option, a wholly-owned subsidiary 
of Roche at this time. Roche believed that maintaining a significant number of  
shares of Genentech outstanding in the hands of the public would provide more   
significant independence for Genentech than would be enjoyed as a wholly-owned  
subsidiary and would also provide employees of Genentech, particularly its key  
scientists, whose compensation includes options for shares of Genentech stock,  
important incentives to improve the current and future operations and           
performance of Genentech, which, in turn, would directly benefit the Company and
its stockholders, including Roche. In the view of Roche, if the Proposal is     
approved, Genentech and its stockholders will have the opportunity to           
participate, subject to the Call Rights, in any increase in the value of        
Genentech.                                                                      

   Similarly, Roche agreed to the addition of the Put Rights because the Put
Rights provide additional economic protection for the investment by non-Roche   
stockholders in Genentech stock. The effect of the Put Rights will be to create 
a "floor" value for the public's Genentech stock and thus afford stockholders a 
minimum return on their investment in Genentech over a four-year period.        

Roche considered, and after discussion Genentech agreed, that Roche's 
ability to purchase Genentech's stock should be increased from the current level
of 75% to 79.9% because Roche believed that the ability of Roche to purchase    
additional shares of Genentech stock would permit Roche, by means of open market
purchases, to purchase Genentech stock at attractive prices, mitigating (if     
Roche chose to make such                                                        

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purchases) the effect of any declines in the market price of the stock, to the  
benefit of all Genentech stockholders.                                          

     As described under "The Proposed Transactions -- Background of the Proposed
Transactions," the terms of the Merger Agreement and Proposed Transactions were 
negotiated between Roche and the Company. Roche did not independently consider  
the fairness of the Proposed Transactions to the stockholders of the Company.   
Based exclusively on the evaluation of the Proposed Transactions by the         
Genentech Board, its Special Committee, its Independent Committee and their     
financial advisors, including a review of the information and factors considered
by each of them in concluding that the Merger Agreement and Proposed            
Transactions are fair to and in the best interests of the Company and its other 
stockholders, Roche believes that the Proposed Transactions are indeed fair to  
and in the best interests of the Company and its other stockholders.            

Roche did not receive any report, opinion or appraisal from an outside
party which is materially related to the Merger Agreement or the Proposed       
Transactions. In particular, Roche did not receive any report, opinion or       
appraisal relating to the fairness of the Merger Agreement or the Proposed      
Transactions to the Company or any of its stockholders, including Roche.        

 Roche acquired a 60% equity interest in Genentech in 1990 because Roche
believed that the acquisition presented Roche with an opportunity to expand its 
investment in biotechnology with a leading biotechnology                        
enterprise -- Genentech. It continues to be the view of the board of directors  
of Roche that its investment in Genentech, together with the opportunity to     
acquire the remaining equity interest in Genentech at set prices prior to July  
1, 1999, is a worthwhile, long-term investment. The board of directors of Roche 
also believes that the Licensing Agreement provides an opportunity for Roche and
Genentech both to benefit from enhanced development and marketing of Genentech's
products outside the United States and that Genentech's innovative products can 
increasingly benefit from Roche's global marketing, development and sales       
resources.                                                                      

INTERESTS OF CERTAIN PERSONS IN THE PROPOSED TRANSACTIONS                       

The Merger Agreement provides, and the Company has agreed to take all 
action necessary to ensure, that, at the effective time of the Merger (the      
"Effective Time"), each outstanding option to purchase shares of Common Stock   
(each, an "Option"), issued pursuant to the Company's stock option plans        
(collectively, the "Option Plans") (whether or not vested or exercisable) will, 
without any action by the holder thereof, constitute an option to acquire, on   
the same terms and conditions as were applicable under such Option immediately  
prior to the Effective Time, that number of shares of Special Common Stock equal
to the number of shares of Common Stock subject to such Option immediately prior
to the Effective Time, at the price or prices per share in effect pursuant to   
the terms of such Option immediately prior to the Effective Time. Holders of    
Options include officers and directors of the Company who were involved in the  
negotiation, and approval by the Genentech Board and the Special Committee, of  
the Proposed Transactions. To the extent that the Proposed Transactions would   
have a positive effect upon the trading price of the shares underlying such     
Options or would, as a result of the Put Rights, place a "floor" on the value of
such underlying shares, holders of such Options, as is the case with the        
underlying shares held by stockholders of the Company, would receive those same 
benefits.                                                                       

GUARANTY OF ROCHE HOLDING                                                       

Roche Holding, which has undertaken to guarantee Roche's payment      
obligations under the Amended Governance Agreement relating to Roche's          
obligations to provide funds in connection with the Put Rights, had (together   
with its subsidiaries) approximately 14.3 billion Swiss Francs ($10.9 billion   
converted at a rate of Sfr 1.31 per U.S.$1.00 as of December 31, 1994) in cash  
and marketable securities as of December 31, 1994. See "Guaranty of Roche       
Holding." For further information concerning Roche and Roche Holding see        
"Certain Information Concerning Roche and Roche Holding."                       

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LICENSING AGREEMENT                                                             

Licenses, Options, Know-how and Trademarks                                      

    Pursuant to the Licensing Agreement, at the Effective Time, Genentech will
agree to grant to HLR an exclusive patent, know-how and trademark license to    
use, sell and, under certain conditions, make various products of Genentech in  
Canada and Pulmozyme(R) outside the United States (the "Roche Territory").      
Genentech has also agreed to grant to HLR an option for an exclusive patent,    
know-how and trademark license in the Roche Territory, on a product-by-product  
basis, to use, sell and, under certain conditions, make other Genentech products
for which Genentech had rights as of April 12, 1995 or for which Genentech      
subsequently acquires rights. For certain products in-licensed from (x) Scios   
Nova Inc. and (y) IDEC Pharmaceuticals Corporation, Genentech will also grant to
HLR an option for an exclusive patent and know-how license outside the United   
States and Canada on a product-by-product basis to use, sell and, under certain 
conditions, make such products. For other human pharmaceutical products for     
which Genentech acquires rights in the Roche Territory by means of a patent     
and/or know-how license from a third party ("In-Licensed Product"), subject to  
the terms and conditions of the relevant license agreements relating to such    
products and HLR's acceptance of those terms and conditions, Genentech will     
grant to HLR an option for an exclusive patent and know-how license in the Roche
Territory on a product-by-product basis to use, sell and, under certain         
circumstances, make such In-Licensed Products. See "The Licensing               
Agreement -- Licenses, Options, Know-how and Trademarks."                       

Prior to the completion of the first Phase II trial for a particular  
product, Genentech retains authority to discontinue sole development of a       
product and, subject to the Amended Governance Agreement, to license such       
product to a third party. See "The Amended Governance Agreement -- Affiliation  
Arrangements." Upon the completion of Phase II for a product, HLR must either   
exercise or waive its option to be granted an exclusive license in the Roche    
Territory for such product. See "Licensing Agreement -- Licenses, Options,      
Know-how and Trademarks." If HLR waives its option, Genentech is free to develop
and sell the product itself or with another party. If Genentech and HLR mutually
agree, the options granted in the Licensing Agreement can be exercised prior to 
the completion of Phase II.                                                     

   The options granted in the Licensing Agreement expire ten years after the
Effective Date. Any option exercised by HLR during the ten-year term remains in 
effect for the full term of the license (generally from the date the product is 
first licensed to HLR until the later, in each country, of the expiration of    
Genentech patents or 25 years from first commercial introduction) and any       
unexercised option at the end of the ten-year period terminates. See "The       
Licensing Agreement -- Royalties and Other Payments" and "-- Term and           
Termination."                                                                   

     Under the Licensing Agreement with respect to the current Genentech and HLR
collaborations on IIbIIIa antagonists and ras farnesyltransferase inhibitors,   
Genentech has the sole right in the United States, and HLR has the sole right in
the Roche Territory, to use and sell such products. All research efforts on     
these products will continue to be shared in an equal manner, and no royalties  
on sales shall be due from either party to the other. See "Certain Relationships
and Related Transactions."                                                      

Development and Marketing                                                       

    Under the Licensing Agreement, Genentech will have sole responsibility and
full autonomy for the development and marketing of its products in the United   
States, and also in the Roche Territory with respect to products for which HLR  
does not exercise its option for a license. HLR will have sole responsibility   
for the development and marketing of products in the Roche Territory for which  
it has been granted an exclusive license or exercised its option for a license. 

  Under the Licensing Agreement, HLR will, in general, reimburse Genentech
for 50%, except in connection with certain products for which HLR is granted a  
license with respect to Canada, for which reimbursement is 10%, of Genentech's  
development costs incurred in connection with a product for which HLR has been  
granted a license or for which HLR has exercised its option for a license, and  
for IIbIIIa antagonists and ras farnesyltransferase inhibitors.                 

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Production and Supply                                                           

    Pursuant to the Licensing Agreement, Genentech will manufacture and supply
to HLR clinical requirements of Genentech products at cost and commercial       
requirements at cost plus a margin of 20% on such cost. HLR will manufacture and
supply to Genentech clinical requirements of synthetic molecules other than     
peptides or proteins ("Small Molecule Products") at cost and commercial         
requirements at cost plus a margin of 20% on such cost. In-Licensed Products    
will be manufactured and supplied to HLR in a manner consistent with the license
agreement for that product. HLR will pay 50% of Genentech's costs associated    
with developing a manufacturing process for products licensed by HLR. Genentech 
will pay that proportion of HLR's costs associated with developing a            
manufacturing process for a Small Molecule Product licensed by HLR that         
Genentech's expected revenues for sales of that product in the United States    
bears to expected worldwide sales of that product.                              

Royalties and Other Payments                                                    

Genentech will receive various royalties on product sales from HLR,   
ranging, in general, from 12.5% to 20% on such sales. See "The Licensing        
Agreement -- Royalties and Other Payments."                                     

Transition Provisions                                                           

The operations of Genentech Canada, Inc., Genentech Europe Limited and
Genentech Ltd. (Japan) will be transferred to HLR as soon as possible following 
consummation of the Merger but no later than January 1, 1996. HLR will assume   
any real property leases of those organizations as well as any other liabilities
that have arisen in the normal course of business, with the exception of a line 
of credit to Genentech Canada, Inc. used to purchase Activase(R) rights and     
severance costs relating to not more than six employees of Genentech Europe     
Limited. See "The Licensing Agreement -- Transition Provisions."                

Term and Termination                                                            

     The Licensing Agreement expires with respect to any individual product when
royalties are no longer payable by HLR to Genentech on sales of such product.   
Other termination provisions include the following: (1) HLR has the right to    
terminate a license for a product upon six-months notice if it has completed at 
least one Phase III clinical trial and the results of that trial are unable to  
support the registration of that product, or the results of other trials        
establish that further development would not provide data sufficient to support 
registration, and, in such case, all rights to the product revert to Genentech; 
(2) if HLR fails to use its best efforts to commercialize a product in a country
and fails to take adequate remedial measures, Genentech may (i) terminate the   
agreement with respect to that product in that country if a registration has not
been initiated or (ii) convert the exclusive license for that product in that   
country to a nonexclusive one if registration has been initiated; (3) Genentech 
may terminate its development or commercialization at any time for any product  
which has been licensed to HLR, and such product shall then be subject to the   
provisions of the Amended Governance Agreement, provided that if such           
termination is for reasons other than safety concerns, Genentech will have an   
obligation for up to two years to provide HLR's clinical and commercial         
requirements; (4) either party may terminate the Licensing Agreement for the    
breach of a material obligation of the other; and (5) Genentech may terminate   
HLR's option for a license for products if Roche's equity ownership in Genentech
is less than 50% at any time. See "Licensing Agreement -- Term and Termination."

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS                                       

   For United States Federal income tax purposes, each share of Common Stock
held by a stockholder prior to the Effective Time will be considered to have    
been exchanged with the Company for a share of Special Common Stock. Although   
the issue is not free from doubt, a stockholder whose shares of Common Stock are
exchanged for Special Common Stock by virtue of the Merger should not recognize 
gain or loss with respect to each share so exchanged.                           

     If the Special Common Stock were treated as preferred stock for purposes of
Section 305 of the Internal Revenue Code of 1986, as amended (the "Code"), a    
holder of Special Common Stock would be required,                               

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during the period starting at the Effective Time and ending at the conclusion of
the Put Period, to include currently in gross income, to the extent of the      
Company's applicable earnings and profits, for each share of Special Common     
Stock, a portion (determined by analogy to the original issue discount rules for
debt instruments) of the excess of the Put Price over the fair market value of  
such share at issuance. While there is no authority directly on point and the   
issue is not free from doubt, counsel to the Company believes that the Special  
Common Stock should not be recharacterized as preferred stock for this purpose, 
and the Company intends to treat it accordingly. See "Certain Federal Income Tax
Considerations and Accounting Treatment."                                       

STOCKHOLDER LITIGATION                                                          

The Company, its directors (other than Dr. Levinson), Roche, former   
director Dr. Armin Kessler and former director and Chief Executive Officer G.   
Kirk Raab are named as defendants in several shareholder class action and       
derivative complaints, pending in the Court of Chancery of the State of Delaware
in and for New Castle County consolidated under the caption In re Genentech,    
Inc. Shareholders Litigation, Cons. C.A. No. 14265 (the "Action"). Plaintiffs in
the Action, who purport to represent the public shareholders of Genentech and,  
in the derivative actions, the Company, as a nominal plaintiff, allege, among   
other things, that: the terms of the Proposed Transactions are unfair, and were 
imposed by Roche for Roche's own benefit; the prices at which Roche would be    
able to cause redemption of the Special Common Stock are unfairly low, and that 
the trading price of such shares would be higher if the trading prices were not 
"capped" by the existence of the Call Rights option; that the directors of      
Genentech breached their fiduciary duties by negotiating and agreeing to the    
Proposed Transactions; and that the election of directors at Genentech's regular
Annual Meeting on April 13, 1995 was void because the disclosures in connection 
with such meeting did not disclose that the Genentech Board was negotiating the 
terms of the Proposed Transactions with Roche. As relief, the complaints in the 
Action seek, among other things, a preliminary and permanent injunction against 
consummation of the Proposed Transactions, including against any exercise by    
Roche of its right to cause redemption and against any exercise by the holders  
of Special Common Stock of the Put Rights; an order voiding the Proposed        
Transactions in the event it is approved by the vote of the stockholders; and   
damages in an unspecified amount.                                               

   On July 7, 1995, counsel for defendants and counsel for plaintiffs in the
Action entered into an agreement in principle contemplating the settlement of   
the Action. Subject to final court approval, the settlement provides that the   
prices to be paid by Roche if the Call Rights are exercised will be $0.50 per   
share higher in each period than would otherwise be applicable pursuant to the  
terms of the Proposed Transactions, resulting in a final price of $82.50. See   
"The Charter Amendment; Description of the Special Common Stock -- Call Rights" 
for a description of the circumstances under which court approval, if any, would
become final. In addition, the proposed settlement provides that the terms of   
the Licensing Agreement shall be amended to provide that the Company (rather    
than HLR) shall be responsible for the cost, if incurred, of termination of up  
to six Genentech Europe Limited employees. The agreement in principle further   
provides for the review by plaintiffs' counsel of draft proxy materials and for 
the amendments to the Certificate of Incorporation of the Company to be adopted 
pursuant to the Proposed Transactions to include a provision reflecting the     
terms of the Governance Agreement relating to the exercise of the Call Rights.  
The agreement in principle further recognizes that the Independent Committee was
created and that the Independent Committee engaged in the review and            
consideration described under "The Proposed Transactions -- Background of the   
Proposed Transactions." The agreement in principle, the terms of which are      
reflected in a memorandum of understanding, is further subject to the completion
of discovery procedures by plaintiffs' counsel, and certain other conditions. In
the event that a definitive stipulation of settlement is entered into in        
connection with the proposed settlement and such settlement is approved by the  
court, the terms of such settlement are contemplated to include the settlement, 
release and bar of all claims against the defendants and certain other claims   
which have been or could have been asserted relating to the Proposed            
Transactions, the actions of Roche and the other defendants relating to the     
Proposed Transactions, including without limitation any claims with respect to  
Mr. Raab's request for personal financial assistance from Roche Holding and any 
related discussions, communication and action, this Proxy Statement/Prospectus  
or any of the transactions, disclosures, facts and allegations that are or could
be (insofar as such transactions, disclosures, facts and allegations relate to  
the Proposed Transactions) the subject of the Action. In addition, the agreement
in principle                                                                    

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provides that the defendants will not oppose any application that plaintiffs'   
counsel may make in connection with the proposed settlement for an award from   
the court of counsel fees and expenses in an amount not to exceed $3.5 million. 
Any such court-awarded counsel fees and expenses will be paid by the Company. If
the settlement is presented to the court for approval, shareholders of the      
Company will receive a detailed written notice describing the background of the 
settlement, the terms of the settlement and the effect of judicial approval of  
the settlement upon the future assertion of claims against the defendants.      

    There can be no assurance that the settlement submitted for court approval
will be approved by the court. In the event that the settlement is not approved,
the parties would be placed in the same positions they would have held had the  
parties not agreed in principle to the proposed settlement of the Action.       

   Although plaintiffs' counsel have been given an opportunity to review and
comment upon draft proxy materials pursuant to the agreement in principle,      
plaintiffs' counsel does not assume responsibility for the accuracy of this     
Proxy Statement/Prospectus.                                                     

MERGER SUBSIDIARY                                                               

    Merger Subsidiary was incorporated in the State of Delaware in May of 1995
and has never carried on any independent business activities other than those   
incident to its formation and the Merger. For these reasons, no meaningful      
financial data are available with respect to Merger Subsidiary. Merger          
Subsidiary owns no physical properties and has no subsidiaries. There are no    
pending legal proceedings to which Merger Subsidiary is a party or which relate 
to the property of Merger Subsidiary.                                           

    Merger Subsidiary is an indirect wholly owned subsidiary of Roche Holding,
which, together with its subsidiaries (collectively the "Roche Group"), engages 
primarily in the development and manufacture of pharmaceuticals, vitamins and   
fine chemicals, diagnostics, flavors and fragrances and in the business of      
analytical laboratory services. Certain financial information regarding the     
Roche Group is set forth below under "Certain Information Concerning Roche and  
Roche Holding."                                                                 

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GENERAL INFORMATION 

   This Proxy Statement/Prospectus is furnished to stockholders of Genentech
in connection with the solicitation of proxies by and on behalf of the Genentech
Board for use at the Special Meeting to be held on Wednesday, October 25, 1995, 
at 10:00 a.m., local time, at the [location] and any adjournment or postponement
thereof. This Proxy Statement/Prospectus and the related form of proxy are first
being mailed to stockholders of Genentech on or about September   , 1995.       

PURPOSE OF SPECIAL MEETING                                                      

At the Special Meeting, the stockholders of Genentech will be asked to
consider and vote upon the Proposal.                                            

RECORD DATE; VOTING RIGHTS; PROXIES                                             

   The Genentech Board has fixed the close of business on September 14, 1995
(the "Record Date") for determining holders of outstanding shares of Common     
Stock of Genentech entitled to notice of and to vote at the Special Meeting.    
Only holders of record of Common Stock on the records of Genentech at the close 
of business on the Record Date will be entitled to notice of and to vote at the 
Special Meeting or any adjournments or postponements thereof. As of the Record  
Date, there were           shares of Common Stock issued and outstanding, each  
of which entitles the holder thereof to one vote. All shares of Common Stock    
represented by properly executed proxies will, unless such proxies have been    
previously revoked, be voted in accordance with the instructions indicated in   
such proxies. As of the Record Date, there were       holders of Common Stock.  
IF NO INSTRUCTIONS ARE INDICATED, SUCH SHARES WILL BE VOTED FOR APPROVAL OF THE 
PROPOSAL AND IN THE DISCRETION OF THE PROXY HOLDER AS TO OTHER MATTERS, IF ANY, 
INCIDENTAL TO THE CONDUCT OF THE SPECIAL MEETING. A stockholder who has given a 
proxy may revoke it at any time prior to its exercise by giving written notice  
thereof to the Secretary of Genentech, by signing and returning a later dated   
proxy or by voting in person at the Special Meeting; however, mere attendance at
the Special Meeting will not itself have the effect of revoking the proxy.      

SOLICITATION OF PROXIES                                                         

  Genentech will bear the cost of solicitation of proxies on behalf of the
Genentech Board. In addition to soliciting proxies by mail, directors, officers 
and employees of Genentech, without receiving additional compensation therefor, 
may solicit proxies by telephone, by telegram or in person. Arrangements will   
also be made with brokerage firms and other custodians, nominees and fiduciaries
for the forwarding of solicitation materials to the beneficial owners of Common 
Stock held of record by such persons. Genentech will reimburse such brokerage   
firms, custodians, nominees and fiduciaries for reasonable out-of-pocket        
expenses incurred by them in connection therewith. Genentech has retained D.F.  
King & Co., Inc. to aid in the solicitation of proxies. It is estimated that the
fee for D.F. King & Co. will not exceed $15,000 plus out-of-pocket costs and    
expenses.                                                                       

QUORUM                                                                          

The presence at the Special Meeting, in person or by properly executed
proxy, of holders of a majority of the outstanding shares of the Common Stock is
necessary to constitute a quorum. Because Roche owns in excess of a majority of 
the outstanding shares of Common Stock and will be present at the meeting, a    
quorum is assured.                                                              

REQUIRED VOTE                                                                   

  Under Genentech's Certificate of Incorporation, approval of the Proposal
requires the affirmative vote of the holders of at least a majority of the      
outstanding shares of Common Stock held by persons other than Roche or any of   
its affiliates. ACCORDINGLY, THE PROPOSAL WILL NOT BE APPROVED UNLESS           

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THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK HELD BY     
PERSONS OTHER THAN ROCHE AND ITS AFFILIATES VOTE IN FAVOR OF THE PROPOSAL. Thus,
the failure to submit a proxy (or vote in person at the Special Meeting) or the 
abstention from voting by a stockholder will have the same effect as a vote     
"Against" the Proposal.                                                         

Under Delaware Law, approval of the Proposal will also require the    
affirmative vote of holders of a majority of the shares of Common Stock         
outstanding and entitled to vote. Such vote is assured because Roche has agreed 
to vote all shares of Common Stock owned by it or any of its affiliates in favor
of the Proposal.                                                                

     As of the Record Date, shares of Common Stock (representing approximately %
of the outstanding shares of Common Stock) were beneficially owned by directors 
and executive officers of Genentech (excluding options and warrants to purchase 
Genentech stock in the future and shares owned by Roche). As of the Record Date,
Roche owned 76,621,009 shares of Common Stock, representing approximately 65% of
the outstanding Common Stock. THE DIRECTORS OF GENENTECH HAVE INDICATED TO      
GENENTECH THAT THEY INTEND TO VOTE ANY SHARES THEY OWN FOR APPROVAL OF THE      
PROPOSAL.                                                                       

NO APPRAISAL RIGHTS                                                             

    There are no appraisal or dissenters' rights applicable in connection with
the Proposed Transactions. Accordingly, holders of Common Stock who do not vote 
in favor of the Proposed Transaction will not be entitled to exercise any       
appraisal or dissenters' rights in connection with the Proposed Transactions.   

     THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE
TO THE STOCKHOLDERS OF GENENTECH. ACCORDINGLY, STOCKHOLDERS ARE URGED TO READ   
AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY                  
STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE       
ENCLOSED PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE.                           

BUSINESS OF GENENTECH 

   Genentech is a leading biotechnology company focusing on the development,
manufacture and marketing of human pharmaceuticals produced by recombinant DNA  
technology. Genentech was organized in 1976 as a California corporation, and    
changed its state of incorporation to Delaware in 1987. The principal executive 
offices of Genentech are located at 460 Point San Bruno Boulevard, South San    
Francisco, California 94080 and its telephone number at that address is (415)   
225-1000. In 1994, the Company had revenues of $795.4 million and earnings of   
$124.4 million or $1.04 per share. Genentech currently markets five products:   
Activase(R), a tissue plasminogen activator; Protropin(R) and Nutropin(R),      
growth hormones; Pulmozyme(R), DNase (as hereinafter defined); and Actimmune(R),
interferon gamma-lb.                                                            

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MARKET PRICES OF AND DIVIDENDS

ON THE REDEEMABLE COMMON STOCK AND THE COMMON STOCK 

   Prior to its conversion into Common Stock on July 1, 1995, the Redeemable
Common Stock was listed and traded on the NYSE and the PSE under the symbol     
"GNE." Since July 3, 1995, the Common Stock has been listed and traded on the   
NYSE and the PSE under the symbol "GNE." The following table provides           
information as to the quarterly high and low closing prices of the Redeemable   
Common Stock prior to June 30, 1995, and, thereafter, for the Common Stock, in  
each case for the calendar quarters indicated.                                  

                                                                [Download Table]

                                                          HIGH       LOW  
                                                          -----           
                                                                          
1993:                                                                     
     First Quarter...................................... $39 3/4   $31 7/8
     Second Quarter.....................................  44        31 1/4
     Third Quarter......................................  44 7/8    40 1/2
     Fourth Quarter.....................................  50 1/2    42 5/8
1994:                                                                     
     First Quarter......................................  51 3/8    41 3/4
     Second Quarter.....................................  51 5/8    43 1/4
     Third Quarter......................................  52 1/2    48 1/8
     Fourth Quarter.....................................  53 1/2    42 1/8
1995:                                                                     
     First Quarter......................................  51        44 1/2
     Second Quarter.....................................  51 7/8    46 7/8
     Third Quarter (through September 6, 1995)..........  48 3/4    46 5/8

     No dividends have been paid on the Common Stock or Redeemable Common Stock.
On April 28, 1995, the last full trading day prior to the announcement that the 
Transaction Agreement (as hereinafter defined) had been executed, the closing   
price per share of Redeemable Common Stock, as reported on the NYSE Composite   
Tape, was $50 3/8. On September   , 1995, the last full trading day for which   
quotations were available at the time of printing of this Proxy                 
Statement/Prospectus, the closing sale price per share of Common Stock, as      
reported on the NYSE Composite Tape, was $  . STOCKHOLDERS ARE URGED TO OBTAIN  
CURRENT QUOTATIONS FOR THE COMMON STOCK. See "Summary and Special               
Factors -- Possible Effects of Exercise of Put Rights on Market for Special     
Common Stock." For a description of the analysis by the financial advisors to   
the Special Committee of the effects of the provisions of the Redeemable Common 
Stock (and the Special Common Stock) on its trading, and potentially expected   
trading, price, see "The Proposed Transactions  -- Opinions of Financial        
Advisors."                                                                      

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SELECTED HISTORICAL FINANCIAL DATA

   The following table sets forth selected historical consolidated financial
data for Genentech for each of the fiscal years ended December 31, 1992, 1993   
and 1994 and for the quarters and the six-month periods ended June 30, 1994 and 
1995. The selected historical consolidated financial data for Genentech for the 
three years shown below have been derived from the audited consolidated         
financial statements and for the quarterly periods have been derived from the   
unaudited quarterly information of Genentech. The historical data are not       
necessarily indicative of results to be expected in the future and should be    
read in conjunction with the consolidated financial statements and notes thereto
of Genentech incorporated herein by reference.                                  

GENENTECH SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA 

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                        [Enlarge/Download Table]

                                  THREE MONTHS              SIX MONTHS                                                  
                                 ENDED JUNE 30,           ENDED JUNE 30,                YEAR ENDED DECEMBER 31,         
                              ---------------------  -------------------------  ----------------------------------------
                                1995         1994       1995           1994        1994           1993           1992   
                              --------     --------  ----------     ----------  ----------     ----------     ----------
                                                                                                                        
INCOME STATEMENT DATA:                                                                                                  
Revenues:                                                                                                               
Product sales...............  $161,236     $152,574  $  323,303     $  300,372  $  601,064     $  457,360     $  390,975
Royalty income..............    49,424       26,099      96,573         59,778     126,022        112,872         91,682
Other revenues..............    22,393       16,249      52,144         33,642      68,304         79,517         61,608
                              --------     --------  ----------     ----------  ----------     ----------     ----------
        Total revenues......   233,053      194,922     472,020        393,792     795,390        649,749        544,265
Costs and expenses:                                                                                                     
Cost of sales...............    24,312       24,565      51,062         46,696      95,829         70,514         66,824
Research and development....    87,167       73,008     182,126        147,384     314,322        299,396        278,615
Marketing, general and                                                                                                  
  administrative............    67,814       60,817     132,137        120,928     248,604        214,410        172,486
Special charge (merger                                                                                                  
  related)..................     8,000           --       8,000             --                                          
Interest expense............     2,039        1,754       3,910          3,532       7,058          6,527          4,406
                              --------     --------  ----------     ----------  ----------     ----------     ----------
        Total costs and                                                                                                 
          expenses                                                                                                      
          (including cost of                                                                                            
          sales)............   189,332      160,144     377,235        318,540     665,813        590,847        522,331
                              --------     --------  ----------     ----------  ----------     ----------     ----------
Income before taxes.........    43,721       34,778      94,785         75,252     129,577         58,902         21,934
Income taxes................     6,558        1,391      14,218          3,010       5,183             --          1,097
                              --------     --------  ----------     ----------  ----------     ----------     ----------
Net income..................  $ 37,163     $ 33,387  $   80,567     $   72,242  $  124,394     $   58,902     $   20,837
                              ========     ========   =========      =========   =========      =========      =========
Net income per share........  $   0.31     $   0.28  $     0.67     $     0.61  $     1.04     $     0.50     $     0.18
                              ========     ========   =========      =========   =========      =========      =========
Weighted average number of                                                                                              
  shares used in computing                                                                                              
  per share amounts:........   120,899      119,041     120,696        118,924     119,465        117,106        113,992
BALANCE SHEET DATA:                                                                                                     
Current assets..............                         $1,077,571     $  831,379  $  997,116     $  885,337     $  580,499
Total assets................                          1,890,829      1,575,676   1,745,124      1,468,800      1,305,131
Current liabilities.........                            228,435        189,773     220,499        190,748        133,543
Total liabilities...........                            426,646        352,435     396,340        351,995        297,810
Stockholders' equity........                          1,464,183      1,223,241   1,348,784      1,116,805      1,007,321

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THE PROPOSED TRANSACTIONS 

BACKGROUND OF THE PROPOSED TRANSACTIONS                                         

In late 1994, an analyst's report published by a Swiss bank raised the
subject of the expiration on June 30, 1995 of the redemption period applicable  
to the Redeemable Common Stock and analyzed various alternatives, including     
exercise, extension and expiration of the redemption rights then applicable to  
the Redeemable Common Stock. The Company's management became aware that such    
report had come to the attention of Dr. Henri B. Meier, the Chief Financial     
Officer of Roche Holding.                                                       

  On January 30, 1995, Dr. Meier and Frederick Frank of Lehman Brothers, a
financial advisor to the Company, discussed the subject of extending Roche's    
right to cause Genentech to redeem the Redeemable Common Stock. Dr. Meier       
indicated at that time that Roche had not decided whether it would exercise its 
right to cause such redemption. Mr. Frank indicated to Dr. Meier that a decision
not to exercise the redemption right could have a material adverse effect on the
market price of the Redeemable Common Stock and thus on the Company's ability to
motivate and retain its highly talented technical and scientific staff, and     
urged Roche to consider exercising its then existing redemption rights. Dr.     
Meier indicated that, if the Company was prepared to do so, Roche would be      
willing to discuss the terms upon which an extension of Roche's option might be 
agreed. At a meeting requested by the Company's Senior Vice President and Chief 
Financial Officer, Louis J. Lavigne, Jr., and held in Basel, Switzerland on     
February 1, 1995, Dr. Meier discussed with Mr. Lavigne the alternatives set     
forth in the Swiss bank report, including an extension of Roche's redemption    
right. At that meeting, Dr. Meier stated that Roche would be willing to discuss 
the parameters of an extension of the option and that it had not made a decision
as to whether it would exercise the then existing option prior to June 30, 1995.

     During the first week of February 1995, there were additional conversations
between Mr. Frank and Dr. Meier and between G. Kirk Raab, then the Company's    
President and Chief Executive Officer, and Fritz Gerber, Chairman of the Board  
of Directors of Roche Holding, concerning the matters previously raised by Dr.  
Meier. Mr. Raab and Dr. Meier spoke on February 3, 1995, and, as a result of    
that conversation, Mr. Raab requested that Mr. Frank travel to Switzerland to   
meet with Dr. Meier.                                                            

   At a meeting on February 5, 1995 in Basel between Mr. Frank, on behalf of
the Company, and Dr. Meier, Dr. Meier and Mr. Frank discussed an extension of   
the redemption option applicable to the Redeemable Common Stock for a period of 
three and one-half years at increasing prices of $1.25 per share for the first  
eight quarters, $1.50 per share for the next four quarters and $2.00 per share  
for the last two quarters, with an ending price of $80 per share in December    
1998. Dr. Meier proposed that the limit on Roche's ability to purchase          
Genentech's stock be increased from the current level of 75% to 80% to permit   
Roche, if it so chose, to mitigate the effect of any declines in the market     
prices of Genentech stock.                                                      

On February 9, 1995, the Genentech Board met to consider the issues   
relating to Roche's option to cause the Redeemable Common Stock to be redeemed, 
the possibility of Roche's effecting or not effecting redemption, and issues    
relating to the possibility of entering into arrangements with Roche to extend  
such option. At that meeting, the Genentech Board resolved to form the Special  
Committee consisting of all of the directors of Genentech, except the two       
designees of Roche, Drs. Kessler and Drews. After Drs. Kessler and Drews excused
themselves from the meeting, the Special Committee resolved to retain Lehman    
Brothers as the Special Committee's financial advisor and to retain Wachtell,   
Lipton, Rosen & Katz as its legal counsel. At the February 9th meeting, the     
Special Committee discussed the terms of the Existing Governance Agreement      
between Genentech and Roche and reviewed the matters that had been discussed    
among Messrs. Raab, Frank, Lavigne and Gerber and Dr. Meier during the preceding
weeks.                                                                          

    At the February 9th meeting, Lehman Brothers advised the Special Committee
that the Redeemable Common Stock had traded in the market at prices             
substantially higher than those that are implied by applying a comparable       
company price earnings multiple to Genentech's historical and projected earnings
and that, based on the foregoing, (1) the existence of the Roche option had a   
substantial buttressing effect on the price of the Redeemable Common Stock and  
that, absent such option, the Redeemable Common Stock would be expected to have 
traded in the market at significantly lower prices, (2) the price of the        
Redeemable Common                                                               

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Stock would be expected to decline significantly if Roche were to decide not to 
exercise its existing option and (3) extension of the option would significantly
mitigate this decline. The Special Committee was also advised by Lehman Brothers
that the supporting effect of an extension of Roche's redemption option might   
not be as significant as had been the case with respect to the redemption right 
then applicable to the Redeemable Common Stock because of the market's possible 
perception of the reasons for a determination by Roche not to exercise its      
existing rights prior to June 30, 1995, and the corresponding lack of market    
conviction that Roche would exercise an extended option. The analysis presented 
by Lehman Brothers at the February 9th meeting was substantially similar to the 
comparable analysis presented by Lehman Brothers at the meetings of the         
Genentech Board and the Special Committee held on April 29 and 30, 1995. See    
"--Opinions of Financial Advisors -- Lehman Brothers" below. The Special        
Committee also considered Lehman Brothers' advice that a primary reason to      
consider an extension of the Roche redemption right was that such an extension, 
assuming acceptable terms could be arrived at, would be more favorable to the   
Company and its stockholders than expiration of the right on June 30, 1995. The 
Special Committee therefore concluded that the preferable approach to take in   
the Company's discussions with Roche would be first to urge exercise of the     
existing redemption right by Roche, but also to pursue a contingency plan of    
extending the redemption right (assuming acceptable terms could be agreed) in   
order to minimize the adverse impact on the Company and its stockholders which  
it believed would arise as a result of expiration of the redemption right.      

Also at the February 9th meeting, the Special Committee appointed a   
subcommittee (the "Subcommittee") consisting of Mr. Raab and two other members  
of the Genentech Board, Messrs. J. Richard Munro and Thomas Perkins, to urge    
Roche to exercise its existing redemption option. As an alternative, should     
Roche be unwilling to cause the Redeemable Common Stock to be redeemed, the     
Subcommittee was to explore a possible extension of Roche's redemption option on
terms beneficial to Genentech and its stockholders. In adopting this strategy,  
the Special Committee was aware that informing Roche of its willingness to      
consider an extension of the redemption right could affect Roche's decision with
respect to its exercise of the right, but it concluded that the benefits to the 
Company and its stockholders of such a strategy outweighed the possible         
detriments thereof.                                                             

     The Subcommittee met with Mr. Gerber on February 22, 1995. The Subcommittee
expressed to Mr. Gerber the Special Committee's desire that Roche exercise its  
existing option with respect to the Redeemable Common Stock. Messrs. Raab,      
Perkins and Munro presented Mr. Gerber with the financial and operational       
rationales which, in Genentech's view, supported a decision by Roche to cause   
Genentech to redeem the Redeemable Common Stock. In addition, the members of the
Subcommittee expressed to Mr. Gerber their view that the continuing uncertainty 
with respect to Roche's decision whether or not to exercise its option would    
pose operational problems for Genentech in the development of its international 
infrastructure. Such problems also related to the possible effect of the        
uncertainty on whether key employees of Genentech would remain with the Company.
Mr. Raab indicated to Mr. Gerber that it was his belief that the culture and    
productivity of Genentech could be preserved if Roche exercised its current     
redemption right so long as Roche took certain steps to maintain the            
independence of Genentech, particularly with respect to research and            
development. Mr. Gerber expressed concern about maintaining Genentech's         
productivity and culture in the event that Roche exercised its current          
redemption right.                                                               

During the course of the February 22nd meeting, the members of the    
Subcommittee suggested to Mr. Gerber that if Roche was not going to exercise its
current right of redemption, the Subcommittee was prepared to consider two      
possible alternatives. The first alternative was a one-year extension of the    
redemption option at increasing prices with a commitment by Roche to cause      
redemption of the remainder of the outstanding Redeemable Common Stock during   
the period of the extension. The second alternative was a three-year extension  
of the redemption right with increasing prices and a commitment by Roche to     
purchase additional Genentech stock in the open market in order to bring its    
ownership interest up to 79% of the Genentech stock. The Subcommittee further   
suggested that if Roche did not exercise its option to redeem the outstanding   
Redeemable Common Stock by the end of the three-year extension, then Roche would
lose certain approval and negotiation rights under the Existing Governance      
Agreement. Under either alternative, Roche's right to nominate additional       
representatives to the Genentech Board pursuant to the Existing Governance      
Agreement would be suspended for the period of the extension.                   

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At the conclusion of the February 22nd meeting, Mr. Gerber advised the
members of the Subcommittee that he wanted to consider their points, that he had
serious concerns with the alternatives discussed, that he wanted to discuss the 
matter with his associates, and that he would call Mr. Raab on March 13, 1995.  
Mr. Gerber also asked to meet with Dr. Arthur D. Levinson, then a Senior Vice   
President and, effective July 7, 1995, President and Chief Executive Officer, of
Genentech, to discuss with Dr. Levinson how scientists at Genentech might react 
and be affected if Roche exercised, or received an extension of, its right to   
cause the Company to redeem the Redeemable Common Stock.                        

On February 23, 1995, Mr. Raab met again with Mr. Gerber. Mr. Gerber  
reiterated to Mr. Raab his concerns with respect to the alternatives discussed  
the previous day.                                                               

  On February 27, 1995, the Special Committee held a telephonic meeting at
which Messrs. Raab, Munro and Perkins informed the Special Committee of the     
details of the meeting with Mr. Gerber held on February 22nd. The Subcommittee  
reported that Roche had expressed an unwillingness to decide whether it should  
exercise its right to cause the Redeemable Common Stock to be redeemed prior to 
June 30, 1995. At the conclusion of the Special Committee's discussion of the   
contacts with Roche, the Special Committee decided to meet again telephonically 
on March 13, 1995.                                                              

   On March 8 and 9, 1995, Dr. Levinson met with Mr. Gerber and Dr. Meier in
Basel. At those meetings Mr. Gerber and Dr. Meier solicited Dr. Levinson's views
on the question of exercising or extending the redemption right and on the      
potential reaction of the scientists at Genentech to such redemption or         
extension. Dr. Levinson indicated that he believed the preferable course of     
action from the standpoint of the Company's ability to attract and retain       
distinguished scientists was for Roche to cause the Redeemable Common Stock to  
be redeemed and to maintain the independence of Genentech as an operating       
matter. He expressed his concerns that an extension of the redemption right     
would not be the best solution to the issues that had been discussed between the
Company and Roche. Mr. Gerber and Dr. Meier expressed their view that the       
Company should consider an extension of the redemption period along the lines   
previously proposed by Roche.                                                   

     On March 13, 1995, the Special Committee held a telephonic meeting at which
Dr. Levinson reported his conversations with Mr. Gerber and Dr. Meier. In       
addition, Mr. Raab reported that he had not yet received a call from Mr. Gerber 
informing him of Roche's intentions with respect to the exercise of the         
redemption right. Mr. Raab indicated that the members of the Subcommittee were  
of the view that an extension of the redemption right on the terms proposed by  
the Subcommittee on February 22nd was not under active consideration by Roche.  
At the March 13th meeting, Mr. Perkins informed the Special Committee that he   
would be resigning effective immediately as a director of the Company (and,     
accordingly, of the Subcommittee and Special Committee).                        

     Following the March 13th meeting of the Special Committee, Dr. Meier called
Mr. Raab in the afternoon on March 13th to indicate that there had been a       
misunderstanding between Messrs. Raab and Gerber and that no decision would be  
made by Roche at that time concerning exercise or non-exercise of the redemption
right. Later, in the evening on March 13th, Mr. Raab and Mr. Gerber discussed   
having another meeting between Roche and Genentech concerning the exercise or   
extension of the redemption right. A meeting was scheduled for Zurich,          
Switzerland on April 3, 1995.                                                   

    On March 16 and 17, Dr. Franz B. Humer, currently a member of the Board of
Directors and the executive committee and head of the Pharmaceuticals Division  
of Roche Holding and a Director of Genentech, visited Genentech. At the end of  
that visit, Mr. Raab related to Dr. Humer the history of discussions with Roche 
to date and suggested that the best course for Roche was to exercise its then   
current right of redemption and to maintain Genentech's operational             
independence.                                                                   

Prior to the April 3, 1995 meeting, Mr. Frank, of Lehman Brothers,    
described to Dr. Meier in a telephone call several of the concepts expected to  
be considered at the meeting including the concept of a stockholder put. Also in
advance of the April 3, 1995 meeting, a "charter" describing future             
relationships between Genentech and Roche in the event that Roche exercised its 
right to cause a redemption of the Redeemable Common Stock was sent by Mr. Raab 
to Mr. Gerber and Dr. Humer. In general, the charter proposed that Genentech    
maintain its operational independence with respect to research and development, 
manufacturing                                                                   

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and sales and marketing in the United States and collaborate with Roche on the  
development and commercialization of Genentech products outside the United      
States. On April 3, 1995, Messrs. Raab and Frank met in Zurich with Mr. Gerber  
and Drs. Humer and Meier, who indicated that they were interested in the        
framework reflected in the "charter". Messrs. Raab and Frank and the Roche      
representatives discussed the benefits and the risks of the redemption and      
expiration scenarios, and the terms that any possible extension of the          
redemption right might take.                                                    

At the April 3rd meeting, two extension proposals were discussed. The 
first, considered only for a short period of time, was a three and a half year  
extension of the redemption right at increasing prices ending at $80 per share  
with an increase in Roche's limit on open market purchases of Genentech stock   
from 75% to 79.5%. Under this approach, Roche would commit to purchase such     
number of shares of Genentech as would bring its ownership level up to 75% of   
the outstanding Genentech stock. Also, Roche's right to nominate additional     
members of the Genentech Board would be postponed until after the expiration of 
the extended redemption period. Most of the meeting was spent discussing the    
second alternative, under which there would also be a three and half year       
extension of the redemption right at increasing prices ending at $80 per share  
and an increase in Roche's limit on purchases to 79.5%, but there would be no   
requirement for Roche to purchase the difference between the percentage of      
Genentech stock then owned by Roche and 75% of the outstanding Genentech stock. 
In this latter scenario, Roche would offer a put option to Genentech            
stockholders at $65 per share exercisable at the end of the redemption period,  
Roche would be granted certain rights to develop and commercialize on an        
exclusive basis Genentech's existing products outside the United States, and an 
option, on a product-by-product basis, to develop and commercialize products    
developed by Genentech in the future outside the United States on an exclusive  
basis, in return for payment by Roche of 50% of Genentech's development expenses
with respect to new indications for those products it markets or those products 
it exercises the right to develop and market and the payment by Roche of a 15%  
to 20% royalty on sales of such products. As in the first alternative, Roche's  
right to nominate additional Genentech Board members would be postponed until   
the end of the put period.                                                      

   Roche rejected the proposed put price of $65 per share as being too high.
By the end of the April 3rd meeting, the parties were focusing on three         
alternatives: (1) Roche would cause redemption of the remainder of Genentech's  
stock by June 30, 1995; (2) Roche would not cause redemption of the rest of     
Genentech's stock by June 30, 1995 and its right to do so would expire; or (3) a
three and one half year extension of the option at increasing prices ending at  
$80 per share would be effected; an increase in Roche's limit on open market    
purchases of Genentech stock to 79.5% would be permitted; a put for Genentech   
stockholders, at a price per share then still under discussion by the parties,  
exercisable at the end of the redemption period would be granted; Roche would be
granted rights to develop and commercialize on an exclusive basis Genentech's   
existing products outside the United States, and an option, on a                
product-by-product basis, to develop and commercialize products developed by    
Genentech in the future outside the United States on an exclusive basis, in     
return for paying 50% of Genentech's development expenses with respect to new   
indications for those products it markets or those products it exercises the    
right to develop and market and would be obligated to pay a royalty of 15%, with
a higher royalty to be negotiated on the sales of currently marketed products   
outside the United States; a Genentech obligation to supply products to Roche   
would be agreed, and a postponement of Roche's right to nominate additional     
Board members until the end of the put period would be added to the current     
governance arrangements between the companies.                                  

  At the conclusion of the April 3rd meeting, Mr. Gerber indicated that he
wished to consider the matter and submit it to Roche's board of directors for   
approval and would call Mr. Raab to advise him of Roche's decision on April 28, 
1995. Mr. Raab stated to Mr. Gerber that while the "buy" and "no-buy"           
alternatives were solely within Roche's control, the third alternative approach 
would be subject to approval by the Special Committee and, ultimately, by the   
stockholders of Genentech not affiliated with Roche.                            

   Later on that same day, Mr. Raab met with Dr. Humer to discuss additional
details relating to the Licensing Agreement. They developed a framework under   
which Roche would have an option to acquire a license for rights to Genentech's 
products outside the United States in return for payment of 50% of Genentech's  
development expenses and royalties on product sales ranging from 12.5% to 20%.  
They discussed the concept that Roche would be required to exercise this option 
by the end of Phase II trials and that, if                                      

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exercised, the reimbursement for expenses would include those already incurred. 
Mr. Raab and Dr. Humer also discussed possible royalty rates for various types  
of products and acknowledged that additional discussion was needed to deal with 
the appropriate royalty rates for currently marketed products.                  

   On April 6, 1995, Dr. Meier advised Mr. Frank, and then Mr. Lavigne, that
Roche believed that a $60 per share price for the put, which had been proposed  
by Genentech, was too high. Correspondence was exchanged between Messrs. Frank  
and Meier and among Messrs. Raab, Gerber and Frank during the period of April 6 
to 11, 1995 concerning potential extensions of the Roche redemption right.      

In a fax of April 7, 1995, Mr. Gerber suggested to Mr. Raab that four 
extension alternatives, described below, were acceptable to Roche and solicited 
Genentech's response as to which appeared most attractive to Genentech. The four
extension alternatives suggested in Roche's fax were: (1) a three and one half  
year extension of the redemption right at increasing prices ending at $80 per   
share, an increase in the limit on Roche's open market purchases of Genentech's 
outstanding stock to 79.5% and a postponement of Roche's right to nominate      
additional Genentech Board members (such three elements being referred to herein
as the "Base Terms"); (2) the Base Terms, plus a right on the part of the       
Genentech stockholders to put their stock at $51 per share exercisable at the   
end of the redemption period, and a grant of rights to Roche to develop and     
commercialize Genentech's products outside the United States in exchange for    
Roche's payment of 50% of Genentech's development expenses and a 15% royalty on 
such sales; (3) the Base Terms, except that there would be a four year (rather  
than a three and one half year) extension of the redemption right at increasing 
prices up to $82 (rather than $80) per share, plus a right on the part of       
Genentech's stockholders to put their stock at $55 per share (rather than $51   
per share as in alternative (2) above) exercisable at the end of the redemption 
period, and (as in alternative (2) above) a grant of rights to Roche to develop 
and commercialize Genentech's products outside the United States in exchange for
Roche's payment of 50% of Genentech's development expenses and a 15% royalty on 
such sales; or (4) the Base Terms, except that there would be a five year       
extension of the redemption right at increasing prices ending at $85 per share, 
plus a right on the part of Genentech's stockholders to put their stock at $60  
per share exercisable at the end of the redemption period, and a grant of rights
to Roche to develop and commercialize Genentech's products outside the United   
States in exchange for Roche's payment of 50% of Genentech's development        
expenses and a 15% royalty on such sales. It continued to be the strong view of 
Roche that a put price in excess of $55 at the end of a four-year extension     
would be too high.                                                              

     On April 9, 1995, Mr. Raab sent a fax to Mr. Gerber emphasizing that it was
important to have a common understanding of the terms of any proposal to extend 
the redemption right before the upcoming meeting of the Special Committee and   
the Genentech Board, that the rights to Genentech's products outside the United 
States were worth more than the value that Roche was apparently ascribing to    
them, and that Roche should have a clear understanding of the obligation of the 
Genentech Board in evaluating offers from Roche to purchase the remainder of    
Genentech after June 30, 1995. In his April 9th letter, Mr. Raab stated that he 
believed "that the soundest decision continues to be for you to exercise your   
option and the riskiest is not to exercise. The extension offers good potential 
for a compromise and the inclusion of the put under appropriate conditions the  
most effective way to do it."                                                   

 On April 10, 1995, Mr. Raab sent another fax to Mr. Gerber defining the
term "development costs" (of which Roche would reimburse 50% in the event that  
Roche exercised its option for a license under the proposed Licensing           
Agreement), proposing a 20% royalty on sales of the currently marketed products 
in Canada and expressing a desire for Roche to share some of the costs of       
acquiring Boehringer Ingelheim's rights to tPA in Canada. Mr. Raab also proposed
a 15-20% royalty on sales of DNase in Europe depending on the approved          
indications and suggested that Genentech would supply products to Roche for     
which Roche exercised its option at fully burdened manufacturing costs plus a   
margin to be negotiated. During this period, Roche continued to reserve its     
decision on whether to exercise the existing option or negotiate an extension.  
Moreover, Roche continued to emphasize its view that a put price in excess of   
$55 at the end of the four-year term could not be justified.                    

On April 12, 1995, Mr. Gerber sent a letter to Mr. Raab proposing the 
following terms: (a) a four year extension of the redemption right at increasing
prices ending at $82 per share; (b) an increase in the limit on Roche's open    
market purchases of Genentech's outstanding stock to 79.5%; (c) a stockholder   
put at $60 per                                                                  

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share exercisable beginning at the end of the redemption period for thirty days;
(d) Roche's absorption of Genentech Canada, Inc. and payment of a 20% royalty on
sales of Hgh, tPA and DNase in Canada; (e) Roche's absorption of Genentech      
Europe Limited and payment of a 20% royalty on sales of DNase for cystic        
fibrosis and a 15% royalty on sales of DNase in Europe when it is approved for  
chronic obstructive pulmonary disease; (f) a grant of an option to Roche for    
rights to other products outside the United States which would have to be       
exercised by the end of Phase II trials and for which Roche would pay 50% of    
Genentech's development expenses, including reimbursement for incurred expenses,
a royalty of 12.5% on aggregate sales up to $100 million and a 15% royalty on   
aggregate sales above $100 million; and (g) a Genentech obligation to supply    
Roche at cost plus a margin to be negotiated.                                   

On April 12 and 13, 1995, the Special Committee met to consider, among
other matters, the discussions that had taken place between Roche and the       
Company. Mr. Raab described the events that had transpired since the March 13th 
meeting and described Mr. Gerber's most recent proposal. The Special Committee  
discussed the apparent likelihood that Roche would not exercise its then current
right to cause redemption of the Redeemable Common Stock prior to June 30, 1995,
at which time such right would expire, and expressed concern with respect to the
adverse effects that a decision by Roche not to exercise the redemption right   
would have on the market price of the Genentech stock. The Special Committee's  
conclusion with respect to Roche's apparent unwillingness to exercise its       
redemption right was based in part upon the Subcommittee's and Mr. Frank's      
reports of their discussions with Roche and upon Roche's stated reluctance to   
cause the Company to redeem the Redeemable Common Stock prior to June 30, 1995. 
Based on the advice of Lehman Brothers, the Special Committee concluded that a  
public announcement on or about April 28th concerning non-exercise of the       
redemption right by Roche would have the same effect on the market price of     
Redeemable Common Stock as would expiration of the right on June 30, 1995. Based
on the foregoing, the Special Committee continued to consider the terms of, and 
to pursue, the extension of the redemption right as a contingency plan should   
Roche decide not to exercise its existing right.                                

  The Special Committee also discussed the advantages and disadvantages of
extending the redemption right; the proposed redemption prices; the term of the 
proposed extension of the redemption right; the effects of the terms of the     
stockholder put, including the timing of the stockholder put and the exercise   
price of the stockholder put; the value of Genentech's product rights outside   
the United States; the reasonableness of the terms for the development and      
commercialization of Genentech's products outside the United States; the ability
of Roche to commercialize effectively those rights and the benefits and         
detriments of sharing development expenses with Roche in return for a royalty;  
and the risks and benefits of an expansion by Genentech of its international    
operations to develop and commercialize these products itself.                  

   At that meeting, Mr. Frank reviewed his conversations with Dr. Meier. Mr.
Frank, on behalf of Lehman Brothers, also discussed various financial analyses, 
including: the relative values of the put and the extended redemption option    
under a Black-Scholes option valuation model; whether, based upon a number of   
factors, including assumed levels of Genentech's earnings and the multiples of  
earnings at which comparable stocks would be expected to trade, Roche would have
an incentive to redeem or shareholders would have an incentive to put their     
shares; the term of the extended option; the term of the put; the price of the  
extended option; the price of the put; and the value of rights to Genentech's   
products outside the United States as well as the terms of that proposed grant  
of rights to Roche. Lehman Brothers' discussion was substantially similar to the
comparable analysis presented by Lehman Brothers at the meetings of the         
Genentech Board and the Special Committee held on April 29 and 30, 1995. See    
"-- Opinions of Financial Advisors -- Lehman Brothers."                         

The Special Committee also discussed Mr. Frank's and Mr. Raab's stated
views that Roche was not likely to cause the Company to redeem the Redeemable   
Common Stock under its current option. Lehman Brothers expressed its view that  
if the option were allowed to expire unexercised on June 30, 1995 (or if a      
public announcement of Roche's decision not to exercise were made prior to that 
date), the decline in the market price of the Redeemable Common Stock would     
likely be significant. Messrs. Raab and Frank also indicated to the Special     
Committee that negotiations with Roche had been difficult and that, based on    
their extensive discussions with Roche, they did not believe that the Company   
could negotiate better terms with Roche than those that were currently under    
consideration by both parties.                                                  

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    Members of the Special Committee expressed concern as to whether Genentech
would have to decrease spending on research and development efforts to increase 
earnings over the short term if Roche's redemption right expired unexercised and
the price of Genentech's stock declined significantly. Members of the Special   
Committee also expressed concern that motivating employees might be difficult in
such circumstances and that such difficulties could affect the scientific       
excellence and productivity of the Company to the detriment of its stockholders.

At the conclusion of the April 12-13 meeting, the Special Committee   
authorized the management of Genentech and its financial and legal advisors to  
explore further and refine Roche's most recent proposals.                       

    In its correspondence with Genentech during the period following the April
12-13 meeting, Roche indicated that the Roche Board of Directors would          
deliberate on the terms of the proposed transaction at a meeting of its Board of
Directors to be held on April 27th. Roche indicated that the following terms    
would be discussed: (a) a four year extension of the redemption right at        
increasing prices ending at $82 per share; (b) a stockholder put at $60 per     
share exercisable beginning at the end of the redemption period for thirty days;
(c) a grant by Genentech to Roche of worldwide commercial product rights outside
the United States along the lines described above; and (d) an increase in the   
limit on Roche's open market purchases of Genentech's outstanding stock to      
79.9%. Roche's correspondence to Genentech during this period also indicated    
that Roche would notify Genentech on April 28th either that (i) it would        
exercise the redemption rights then applicable to the Redeemable Common Stock or
(ii) it would not exercise its right to cause the Company to redeem such stock, 
in which case it would discuss with Genentech the terms of the proposal outlined
above.                                                                          

 On April 25, John P. McLaughlin, Senior Vice President and Secretary of
Genentech, sent a letter to Dr. Meier expressing Genentech's concern that,      
because of the time required to seek stockholder approval, the transactions     
might not be completed prior to June 30, 1995, the date on which the existing   
Redeemable Common Stock would expire. Mr. McLaughlin suggested that, assuming   
the Genentech Board decided to proceed with the proposed transaction, the       
parties agree to a mechanism pursuant to which the same transactions could be   
effected even after the June 30th conversion date had passed. During the course 
of the next two days, Genentech, Roche and their respective legal advisors      
agreed on the mechanics of an alternative structure which provided that the     
Proposed Transactions could be completed after June 30, 1995 through a merger.  
On April 26th, Mr. Raab contacted Dr. Meier to discuss and agree that the merger
format would be used after June 30, 1995 if the matter was approved by the      
Genentech Board.                                                                

   On April 27th, Dr. Humer contacted Mr. Raab to suggest several changes to
the draft Licensing Agreement. Later on April 27th, representatives of Genentech
met with representatives of Roche via video-conference to discuss issues        
relating to the Licensing Agreement.                                            

     On the evening of April 28, 1995 (Pacific Time), Mr. Gerber called Mr. Raab
to inform him that Roche did not then intend to exercise its existing right to  
cause Genentech to redeem the Redeemable Common Stock. Mr. Gerber informed Mr.  
Raab that the Roche Board of Directors had authorized Roche to proceed with the 
extension transaction as discussed over the previous two weeks. Mr. Raab        
reiterated that the transaction would be subject to approval by the Special     
Committee, the Genentech Board and, ultimately, by the stockholders of Genentech
not affiliated with Roche.                                                      

     On April 29, 1995, the Special Committee and the Genentech Board (excluding
the Roche designees) held a joint meeting to discuss the Proposed Transactions  
with its legal and financial advisors. As indicated above, the Special Committee
consists of all Genentech Board members other than the two Roche designees.     
Legal counsel made presentations concerning the duties of directors and the     
terms of the agreements, including the Merger Agreement, pursuant to which the  
Proposed Transactions would be effected. Mr. Lavigne made a presentation        
regarding the Company's operations and certain projected financial information  
described under "Certain Projections of Future Operations and Other             
Information." Following Mr. Lavigne's presentation, Lehman Brothers delivered   
the presentation regarding the terms of the Proposed Transactions described     
under " -- Opinions of Financial Advisors -- Lehman Brothers." Throughout each  
of these presentations there were questions to the presenters by, and discussion
among, the members of the Special Committee. Among other matters, members of the
Special Committee asked whether, if Genentech were unwilling to extend the      
redemption rights, Messrs. Frank and Raab believed that Roche would not exercise
its                                                                             

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existing right to cause the Redeemable Common Stock to be redeemed. Messrs.     
Frank and Raab indicated that it continued to be their strong view, based on,   
among other things, the discussion they had with senior officers of Roche, that 
Roche would not exercise. In his presentation and in response to questions from 
members of the Special Committee, Mr. Frank indicated that if the then current  
option were permitted to lapse without exercise of the Roche call right and     
without the proposed extension of the call (and the grant of the related put),  
the market price of the Redeemable Common Stock would, in Lehman Brothers' view,
be expected to decline significantly below its current market value. Mr. Frank  
repeated that it was Lehman Brothers' view that, based on comparable company    
analyses, the Redeemable Common Stock was currently trading at a price that     
significantly exceeded the price at which the shares would have been expected to
trade had the then existing redemption option not been in effect. See           
" -- Recommendation of the Board of Directors; Fairness of the Transaction" and 
" -- Opinions of Financial Advisors -- Lehman Brothers -- Standalone Future     
Stock Price Analysis."                                                          

   Members of the Genentech Board also asked for Lehman Brothers' view as to
the merits of declining to enter into the Proposed Transactions in an effort to 
pressure Roche to exercise its call right on or prior to June 30, 1995. Mr.     
Frank stated that, in his view, the Proposed Transactions were the best         
alternative then available to the Company. He stated that, given the belief as  
to Roche's unwillingness to exercise its current option, declining to enter into
the Proposed Transaction posed substantial risks for Genentech and its          
stockholders. He advised that once the Redeemable Common Stock had been         
converted into Common Stock on June 30, 1995 (or once a public announcement of  
Roche's intention not to exercise had been made), the Company would be in a     
substantially less advantageous position vis-a-vis Roche to negotiate a         
transaction on terms as favorable to Genentech and its stockholders as those    
contemplated by the Proposed Transactions then before the Special Committee. In 
response to questions from the Special Committee, Mr. Frank indicated that it   
was his view that the Company should not jeopardize the currently proposed      
transaction by attempting to force Roche's hand in exercising its then current  
call right.                                                                     

     In response to questions concerning the terms of the Proposed Transactions,
Mr. Frank stated that it was Lehman Brothers' view that the limitation on the   
upper end of the range at which the Special Common Stock would trade following  
consummation of the Proposed Transactions was mitigated by the assurance that   
the price of such stock would not fall below the present value of the $60 Put   
Price payable in July 1999. Mr. Frank also indicated that he believed the       
commercial arrangements that formed an integral part of the Proposed            
Transactions were favorable to the Company given the difficulty, expense and    
uncertainty associated with building an infrastructure in Europe. He noted that 
royalties, unlike the revenues from wholly owned but newly created or expanded  
entities, result in immediate profits for the Company. He also pointed out the  
significant risks associated with product development and commercialization in  
Europe. Mr. Raab noted the risks associated with the development and            
commercialization of drugs in Japan.                                            

 In response to questions from members of the Special Committee, Messrs.
Raab and Frank also indicated that, in their view, other than exercise by Roche 
of the then current redemption right, approval and consummation of the Proposed 
Transactions would be the most favorable then available alternative for the     
employees of Genentech. Mr. Raab indicated that he believed that, given the     
current circumstances, the best means for Genentech to attract and retain       
talented scientists would be to enter into the Proposed Transactions. The joint 
meeting of the Special Committee and the Genentech Board concluded in the       
evening on April 29th, with the members of the Special Committee and the        
Genentech Board suggesting that the meeting be reconvened on April 30th to      
further consider the issues that had been raised in their deliberations to date.

    On April 30, 1995, the Special Committee and the Genentech Board again met
jointly to discuss the Proposed Transactions and to ask questions of Genentech's
management, Lehman Brothers and legal counsel. Following a discussion of the    
issues that had been raised the previous day, the Special Committee received the
oral opinion of Lehman Brothers (which Mr. Frank said would be followed by a    
written opinion to the same effect and dated April 30th) described under        
" -- Opinions of Financial Advisors -- Lehman Brothers" and resolved to         
recommend that the Genentech Board approve the Proposed Transactions. The       
written opinion of Lehman Brothers is set forth in Annex B hereto and is        
described under " -- Opinions of Financial Advisors -- Lehman Brothers."        

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Immediately after having received the opinion of Lehman Brothers, the 
Genentech Board (with Drs. Drews and Kessler, the Roche designees, not present) 
approved the Proposed Transactions and authorized the Company to submit the     
Charter Amendment to a vote of the Genentech stockholders.                      

   Those members of the Genentech Board designated by Roche were not present
for the meetings held on April 29 and 30, 1995 or otherwise with respect to the 
Proposed Transactions, did not participate in the deliberations of the Genentech
Board with respect to the Proposed Transactions, and consequently, did not cast 
any votes with respect thereto.                                                 

On May 1, 1995, Roche and Genentech publicly announced that they had  
entered into a Transaction Agreement (the "Transaction Agreement"). Under the   
Transaction Agreement, the substance of the Proposed Transactions was to be     
accomplished through an amendment to Genentech's Certificate of Incorporation.  
The Transaction Agreement provided that if, as of the close of business on June 
5, 1995, (1) a definitive copy of a proxy statement had not been mailed to the  
Company's stockholders or (2) the Special Meeting had not been scheduled to     
occur on or prior to June 30, 1995, the Transaction Agreement would be          
terminated. However, the Company and Roche also agreed that, concurrently with  
the termination of such agreement, the Company and Roche would enter into the   
Merger Agreement. The purpose of the Merger Agreement was to enable the Company 
and Roche to consummate the Proposed Transactions after June 30, 1995 -- the    
date after which the Redeemable Common Stock would convert automatically to     
Common Stock.                                                                   

  On May 23, 1995, Genentech and Roche agreed to terminate the Transaction
Agreement, and they simultaneously entered into the Merger Agreement. They did  
so (i) because they did not believe that there was a reasonable likelihood that 
the transactions contemplated by the Transaction Agreement could be consummated 
prior to June 30, 1995 and (ii) to avoid any confusion among the stockholders of
the Company which might arise as a result of preliminary circulation of a proxy 
statement addressing approval of the Charter Amendment contemplated by the      
Transaction Agreement and a subsequent proxy statement which addressed the      
Merger.                                                                         

     The effect of the Merger Agreement is substantially the same to the Company
and its stockholders as the Charter Amendment contemplated by the Transaction   
Agreement. Under the Merger Agreement, all of the Proposed Transactions would be
effected in a manner that would put the Company, Roche and the holders of       
Redeemable Common Stock in the same position as they would have held if the     
Proposed Transactions had been consummated pursuant to the Transaction          
Agreement.                                                                      

At a meeting on June 22, 1995, the Special Committee was informed that
during the period of negotiations with Roche concerning the Proposed            
Transactions, Mr. Raab, at his request, discussed with Roche a potential        
guarantee by Roche of a $2 million personal bank loan to Mr. Raab. Such contacts
between Mr. Raab and Roche began with Mr. Raab's unsolicited request, in        
February 1995, for assistance from Roche in obtaining such a loan from a bank   
and were terminated on or before April 13, with Roche declining to proceed      
further. No guarantee was ever provided by Roche. Without disclosing his        
requests to Roche to the Genentech Board, on April 13, 1995, Mr. Raab requested 
and received a personal loan of $1.5 million from the Company.                  

   After excusing Mr. Raab from the June 22nd meeting, the Special Committee
considered what further action to take, if any, with respect to the Proposed    
Transactions and with respect to Mr. Raab's leadership of the Company. Mr. Raab 
did not attend any future meetings of the Special Committee or the Genentech    
Board, other than a session of the Genentech Board later on June 22nd at which  
neither the Proposed Transactions nor Mr. Raab's conduct were discussed and a   
session of the Special Committee on the following day for the purpose of being  
advised of the formation of the Independent Committee. During the course of the 
June 22nd meeting, the Special Committee also met with two senior officers of   
the Company who had had some involvement in the negotiation of the Proposed     
Transactions, and who indicated that they were aware of no evidence that Mr.    
Raab was not vigorous in pursuing the non-Roche stockholders' interests and that
they were unaware of Mr. Raab's requests to Roche concerning his personal       
finances.                                                                       

At a meeting of the Special Committee on June 23, 1995, the Special   
Committee appointed a committee of four independent Directors: Herbert W. Boyer,
Linda Fayne Levinson, C. Thomas Smith, Jr. and David S.                         

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Tappan, Jr. (the "Independent Committee"). The Independent Committee was given  
the tasks of (i) reviewing the terms of the Proposed Transactions, (ii)         
reviewing Mr. Raab's conduct, including recommending potential successors to Mr.
Raab if the Genentech Board were to determine to request his resignation, and   
(iii) reviewing the status of the litigation pending in the Delaware Chancery   
Court arising out of the Proposed Transactions (the "Stockholder Litigation").  
See "-- The Stockholder Litigation." At the June 23rd meeting, the Special      
Committee authorized counsel to negotiate the retention of Morgan Stanley to    
assist the Independent Committee and the Special Committee.                     

   On June 26, 1995, the Independent Committee held a telephonic meeting. At
that meeting, the Independent Committee resolved to engage Morgan Stanley. See  
"-- Opinions of Financial Advisors -- Morgan Stanley." The Independent Committee
also received a report from its counsel concerning events since the meeting of  
June 23rd and contacts that had been made with counsel for the plaintiffs in the
Stockholder Litigation.                                                         

   At a meeting of the Independent Committee on June 29, 1995, the Committee
reviewed with representatives of Morgan Stanley, Lehman Brothers and counsel for
the Independent Committee the terms of the Proposed Transactions, including     
their derivation and areas in which the Independent Committee might seek        
improvement of those terms.                                                     

    In an effort to insure, to the extent feasible, that the most advantageous
terms for Genentech and its stockholders had been negotiated, the Independent   
Committee requested that representatives of Lehman Brothers and Morgan Stanley  
assist the Independent Committee in formulating a strategy to approach Roche in 
an effort to improve certain of the terms of the Proposed Transactions and the  
Independent Committee made arrangements for its representatives to meet with    
senior management of Roche to attempt to negotiate such an improvement.         
Following such discussion, arrangements were initiated for such a meeting to    
take place on July 3rd in Switzerland.                                          

    After the Independent Committee's financial advisors were excused from the
June 29th meeting, counsel reviewed with the Independent Committee its          
understanding of the facts relating to Mr. Raab's contacts with Roche concerning
the Proposed Transactions. The Independent Committee then interviewed Mr. Raab  
concerning, among other matters, his contacts with Roche and his conduct of the 
negotiations of the Proposed Transactions. During the course of Mr. Raab's      
interview, Mr. Raab indicated that he did not believe that his contacts with    
Roche concerning the requested guaranty of his personal loan were related to    
negotiations of the Proposed Transactions or had any impact on the vigor of     
those negotiations or on his attempt to negotiate the most favorable possible   
transaction for Genentech and its stockholders.                                 

At the June 29th meeting, the Independent Committee also interviewed  
several members of the Company's senior management concerning Mr. Raab and his  
leadership of the Company.                                                      

     Prior to July 3, 1995, financial experts retained by plaintiffs' counsel in
the Action discussed with the Company's financial advisors how the terms of the 
Proposed Transactions could be improved financially.                            

     On July 3, 1995, Peter N. Crnkovich, a Managing Director of Morgan Stanley,
and Mr. Frank met in Interlaken, Switzerland with Drs. Meier and Humer to       
discuss the terms of the Proposed Transactions and to attempt to negotiate an   
improvement in such terms for Genentech and its stockholders. Such attempt to   
negotiate an improvement in terms was unavailing.                               

On July 6, 1995, the Independent Committee met again to discuss the   
Proposed Transactions and Mr. Raab's status as the President and Chief Executive
Officer of the Company. The Independent Committee also received written answers 
from Mr. Gerber to questions that had previously been submitted to him by the   
Independent Committee. In his responses to the Independent Committee's          
questions, Mr. Gerber indicated, among other matters, that at no time did Roche 
consider or treat Mr. Raab's request for personal assistance to be related or   
linked in any way to the negotiation of the Proposed Transactions.              

    At the July 6th meeting, the Independent Committee again reviewed with its
counsel and with senior management of Genentech the chronology of events with   
respect to the negotiation of the Proposed Transactions and Mr. Raab's          
discussions with Roche concerning the personal loan guaranty. The Independent   

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Committee interviewed Mr. Frank concerning his participation in the negotiations
with respect to the Proposed Transactions, and Mr. Frank indicated that nothing 
had come to his attention which would indicate that Mr. Raab had not attempted  
to achieve the best possible transaction for Genentech and its stockholders. Mr.
Frank stated that the analysis and conclusion that Lehman Brothers had presented
on April 29th and 30th with respect to the Proposed Transactions had not changed
as a result of any new information that had come to light, and that Lehman      
Brothers knew of no reason to modify or withdraw its previously given formal    
opinion or any of the advice that it had previously given to the Special        
Committee.                                                                      

    Messrs. Frank and Crnkovich also reported to the Independent Committee the
results of their discussions with Roche in Interlaken on July 3rd.              

At the July 6th meeting, Morgan Stanley made a presentation to the    
Independent Committee of its financial analysis of the Proposed Transactions and
preliminarily indicated that it would be prepared to deliver an opinion to the  
Independent Committee and the Special Committee concerning the fairness from a  
financial point of view of the Proposed Transactions to the stockholders of     
Genentech other than Roche. See "-- Opinions of Financial Advisors -- Morgan    
Stanley."                                                                       

     Following Morgan Stanley's presentation, the Independent Committee received
a report concerning the ongoing settlement discussions with plaintiffs' counsel 
in the Stockholder Litigation and authorized counsel to continue to pursue such 
discussions. The Independent Committee also solicited from Dr. Humer Roche's    
views with respect to Mr. Raab's role as the Company's President and Chief      
Executive Officer and with respect to potential replacements for Mr. Raab. The  
Independent Committee also again interviewed certain members of senior          
management of the Company.                                                      

  On July 7, 1995, the Genentech Board met, with Mr. Raab not present. The
Independent Committee reported that it had investigated four principal areas:   
(i) the terms of the Proposed Transactions and the issue of whether the         
Genentech Board and the Special Committee should continue to recommend approval 
thereof by the stockholders; (ii) the Stockholder Litigation; (iii) Mr. Raab's  
conduct of the negotiations of the Proposed Transactions with Roche and his     
leadership of the Company; and (iv) potential successors to Mr. Raab should the 
Board decide to request Mr. Raab's resignation.                                 

With the Roche designees to the Genentech Board not present, the      
Independent Committee reviewed the terms of the Proposed Transactions and       
recommended that the Special Committee continue to recommend approval of the    
Merger by the stockholders of the Company. The Independent Committee noted that,
although no investigation would necessarily reveal whether Mr. Raab's request   
for personal financial assistance had tainted his conduct in the negotiations   
with Roche, its inquiry had not revealed any evidence that Mr. Raab had not     
attempted to achieve the best possible transaction for Genentech and its        
stockholders. The Independent Committee further noted that, as a result of its  
own efforts and investigation, and in light of Roche's willingness to increase  
the amount of the call prices only as part of a settlement of the Stockholder   
Litigation, it believed that the Proposed Transactions represented the best     
terms available from Roche. The Independent Committee also noted that it had no 
reason to question, and the Independent Committee did not in fact question, the 
independence and integrity of Lehman Brothers, which participated in the        
negotiation of the Proposed Transactions, or the analysis prepared, and the     
opinion rendered, by Lehman Brothers at the April 29 and 30 meeting of the      
Genentech Board and that the integrity of Lehman Brothers and the conclusion it 
had reached, gave substantial comfort that the negotiations had been vigorously 
conducted on behalf of the Company. The Independent Committee noted that its    
interviews of senior management of the Company and of the advisors to the       
Special Committee had established that none of the individuals interviewed had  
had any knowledge of Mr. Raab's discussions with Roche concerning the requested 
personal loan guaranty prior to having been informed thereof in connection with 
the June 22nd meeting of the Genentech Board.                                   

The Independent Committee reported that its efforts to negotiate an   
improvement of the terms of the Proposed Transactions with Roche had been       
unsuccessful, and members of the Independent Committee reported to the Genentech
Board the efforts of Morgan Stanley and Lehman Brothers in that regard. The     
Independent Committee also noted that Mr. Frank, of Lehman Brothers, had stated 
that nothing had come to the attention of Lehman Brothers that would cause it to
modify its April 30, 1995 opinion with respect to the                           

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Proposed Transactions and that Morgan Stanley had been engaged to, and would,   
render its own opinion as to the fairness of the Proposed Transactions from a   
financial point of view to the stockholders of Genentech (other than Roche). The
Independent Committee advised the Genentech Board that, in the view of the      
Independent Committee, the reasons that had led the Special Committee and the   
Genentech Board to recommend the Proposed Transactions in the first instance    
continued to be valid and that the Independent Committee believed the           
transaction to be the best available alternative for Genentech and its          
stockholders other than Roche. See "-- Recommendation of the Board of Directors;
Fairness of the Transaction."                                                   

  The Independent Committee and its counsel also reported to the Genentech
Board the status of the settlement negotiations with plaintiffs' counsel in the 
Stockholder Litigation. The Independent Committee indicated that Roche had      
expressed, in discussions with plaintiffs' counsel, a willingness to make       
changes to the terms of the Proposed Transactions as part of a settlement of the
Stockholder Litigation. The Independent Committee noted that it had been advised
that, as part of the settlement, Roche would be willing to increase the call    
prices applicable to the Special Common Stock by $0.50 per share per quarter so 
that the call prices would be $63.00 during the quarter ending December 31, 1995
and increase at $1.25 per quarter for six quarters and then $1.50 per quarter   
for the following eight quarters to $82.50 in the quarter ending June 30, 1999. 
See "The Charter Amendment; Description of the Special Common Stock -- Call     
Rights." The Independent Committee also noted that Roche had conditioned the    
increase in call prices upon final court approval of the settlement of the      
Stockholder Litigation and upon Genentech's agreement to amend the Licensing    
Agreement to provide that Genentech would bear severance expenses related to    
potential future severance of a maximum of six Genentech employees in Europe.   

  Following the presentation of these issues by the Independent Committee,
the Special Committee authorized counsel for the Company to negotiate the       
requisite documentation with Roche and with plaintiffs' counsel in the          
Stockholder Litigation. The memorandum of understanding subsequently entered    
into by counsel for Roche, the plaintiffs, the defendants and Mr. Raab is       
described under "-- Stockholder Litigation" below.                              

     The Independent Committee then turned to its report concerning Mr. Raab, at
which point the Roche designees on the Genentech Board were invited to join the 
meeting. The Independent Committee described for the Genentech Board the        
investigation it had conducted since June 22nd and indicated that, following its
consideration of Mr. Raab's conduct with respect to the loan guaranty and its   
review of Mr. Raab's leadership of the Company over the last several years, the 
Independent Committee had come to the conclusion that it would recommend to the 
Genentech Board that it request and accept Mr. Raab's resignation as President, 
Chief Executive Officer and a Director of the Company. The Genentech Board      
thereafter unanimously adopted the Independent Committee's recommendations with 
respect to Mr. Raab on each of the issues that had been theretofore presented to
the meeting.                                                                    

With the Roche designees on the Genentech Board again having excused  
themselves from the meeting, Morgan Stanley presented the analysis of the       
Proposed Transactions a summary of which is included under "-- Opinions of      
Financial Advisors -- Morgan Stanley" below. On July 7, 1995, after a discussion
among the members of the Genentech Board and Morgan Stanley, the Special        
Committee and the Independent Committee received the oral opinion of Morgan     
Stanley to the effect that, based upon and subject to the various considerations
set forth in the written opinion, the consideration to be received by Genentech 
and the holders of Common Stock (other than Roche and its affiliates) pursuant  
to the Proposed Transactions is fair from a financial point of view to such     
holders (which was followed by a written opinion to the same effect dated July  
7, 1995) described below under "-- Opinions of Financial Advisors -- Morgan     
Stanley." The written opinion of Morgan Stanley is set forth in Annex C hereto  
and is described under "-- Opinions of Financial Advisors -- Morgan Stanley"    
below.                                                                          

    Following a discussion among the Directors, the Special Committee ratified
the terms of the Proposed Transactions (including as contemplated to be amended 
pursuant to the settlement of the Stockholder Litigation) and resolved to       
continue to recommend approval thereof by the stockholders of the Company.      

In the afternoon on July 7th, Mr. Raab resigned as President, Chief   
Executive Officer and as a Director of Genentech.                               

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  Following a further report by the Independent Committee and discussions,
the Genentech Board, including the Roche designees, appointed Dr. Levinson to   
the positions vacated by Mr. Raab's resignation.                                

 On September 6, 1995, the Genentech Board (with the Roche designees not
present) met to set the Record Date and the date for the Special Meeting and to 
approve certain amendments to the Proposed Transactions, including the execution
of the Agency Agreement (as hereinafter defined). The amendments to the terms of
the Proposed Transactions made by the parties since the execution of the Merger 
Agreement on May 23, 1995 are in all material respects reflected in the         
description of the Proposed Transactions set forth in this Proxy                
Statement/Prospectus and/or in Annex A hereto and the Exhibits thereto. See "The
Charter Amendment; Description of the Special Common Stock;" "The Amended       
Governance Agreement;" and "Guaranty of Roche Holding." At the meeting of the   
Genentech Board on September 6th, Lehman Brothers and Morgan Stanley orally     
confirmed to the Genentech Board that the amendments to be executed by the      
parties did not affect the opinions previously delivered by each of them. See   
" -- Opinions of Financial Advisors."                                           

PURPOSE AND STRUCTURE OF THE TRANSACTIONS                                       

On May 23, 1995, in order to effect the substance of the transactions 
provided for in the Transaction Agreement, Genentech, Roche and Merger          
Subsidiary entered into the Merger Agreement, which was subsequently amended.   
Pursuant to the Merger Agreement, as subsequently amended, among other things,  
(i) Merger Subsidiary will be merged with and into Genentech, with Genentech    
being the surviving corporation, (ii) the Certificate of Incorporation of       
Genentech will be amended to authorize the issuance by Genentech of Special     
Common Stock, (iii) each outstanding share of Common Stock (other than shares of
Common Stock held by Roche and its affiliates) will be converted into one share 
of Special Common Stock, (iv) each outstanding share of Common Stock held by    
Roche and its affiliates will be cancelled, and (v) the outstanding common stock
of Merger Subsidiary will be converted into shares of Common Stock representing 
the same number of shares of Common Stock held by Roche and its affiliates      
immediately prior to the Merger.                                                

Pursuant to the current Genentech Certificate of Incorporation, at the
close of business on June 30, 1995, each outstanding share of Redeemable Common 
Stock was converted automatically into one share of Common Stock. As noted      
above, in the Merger, such Common Stock (other than Common Stock held by Roche  
and its affiliates) would be converted into Special Common Stock. The purpose of
the Merger and of the resulting conversion of Common Stock into Special Common  
Stock is to, among other matters, (i) provide for the Call Rights, which extend 
by four years the period during which the publicly traded stock of Genentech is 
subject to redemption by Genentech at the option of Roche, with such redemption 
during such four-year period being at certain specified prices per share ranging
from $62.50 during the quarter ending December 31, 1995 increasing $1.25 per    
share for the next six quarters and $1.50 per share for the next eight quarters 
to $82.00 during the quarter ending June 30, 1999 (with each of such redemption 
prices being increased by $0.50, to a final price of $82.50, upon final court   
approval of the Stockholder Litigation), and (ii) provide for the Put Rights,   
which afford the holders of Special Common Stock the right to require the       
purchase of all or a portion (at the election of the holder) of their shares of 
such stock at a price of $60.00 per share in the event that Roche does not cause
the exercise of the Call Rights. The Put Rights will be exercisable during the  
30-business day period following the expiration of the Call Rights or during a  
60-business day period following certain Insolvency Events of the Company.      

   Under the Amended Governance Agreement, Roche will be required to, if the
Call Rights are exercised, pay to a depositary sufficient funds to satisfy the  
Company's obligations in respect of the Call Rights. See "The Amended Governance
Agreement -- Redemption of Special Common Stock."                               

    The Company's obligation to pay the Put Price to stockholders who properly
exercise their Put Rights will be conditioned upon Genentech's having received  
from Roche, or an affiliate of Roche, the funds required to be contributed to   
the Company by Roche under the Amended Governance Agreement. See "the Charter   
Amendment; Description of the Special Common Stock -- Put Rights;" "-- Condition
to the Company's Obligations;" "The Amended Governance Agreement -- Put Rights  
with Respect to the Special Common                                              

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Stock;" "-- Capital Contribution and Assumption of Put Obligations by Roche" and
"Certain Information Concerning Roche and Roche Holding." Under the Amended     
Governance Agreement, Roche has agreed to either (i) contribute to Genentech the
funds required to satisfy the Put Rights and certain other liabilities of the   
Company or (ii) elect to purchase directly from Genentech's stockholders the    
shares of Special Common Stock which such stockholders elect to have purchased  
pursuant to their exercise of the Put Rights. If Roche makes the contribution   
referred to in clause (i) of the preceding sentence, Genentech will issue to    
Roche (or an affiliate of Roche) a number of shares of Common Stock equal to the
number of shares of Special Common Stock redeemed by Genentech pursuant to      
exercises of the Put Rights. See "The Amended Governance Agreement -- Capital   
Contribution and Assumption of Put Obligations by Roche" and "Certain           
Information Concerning Roche and Roche Holding." The obligations of Roche       
referred to in the second preceding sentence are guaranteed by Roche Holding.   
See "Guaranty of Roche Holding." Amended Article Third provides that Genentech  
will take (and will have no authority not to take) all necessary action to      
enforce, and to cause the performance of, Roche's and Roche Holding's           
obligations with respect to payment of the Put Price under the Amended          
Governance Agreement and the Guaranty and to ensure that Roche and Roche Holding
otherwise comply with their respective obligations described under "The Amended 
Governance Agreement -- Capital Contribution and Assumption of Put Obligations  
by Roche" and under the Guaranty. See "Guaranty of Roche Holding." Genentech has
appointed the Agent to enforce the respective obligations of Roche and Roche    
Holding described under "The Amended Governance Agreement -- Capital            
Contribution and Assumption of Put Obligations by Roche" and under the Guaranty 
in the event of the occurrence of an Insolvency Event. See "The Amended         
Governance Agreement -- The Agency Agreement."                                  

Each share of Special Common Stock outstanding following the close of 
business on the last day of the Put Period will, unless previously called for   
redemption on or prior to such date, automatically be converted into one share  
of Common Stock. See "The Charter Amendment; Description of the Special Common  
Stock -- Conversion."                                                           

    For information regarding the specific redemption prices applicable during
each quarterly period during the four years when the Call Rights will be in     
effect and for the historical redemption prices applicable under the Redeemable 
Common Stock, see "The Charter Amendment; Description of the Special Common     
Stock -- Call Rights."                                                          

    Holders of Common Stock currently do not have any rights comparable to the
Put Rights and, consequently, do not have the right to require the Company to   
purchase their shares of Common Stock.                                          

The Amended Governance Agreement extends and modifies the Existing    
Governance Agreement. In particular, under the modified governance arrangements,
the limit on Roche's ability to make open market purchases would be increased   
such that Roche could own, following any such purchase 79.9%, rather than 75%,  
of the voting power of the Company's equity securities on a fully diluted basis.
The Licensing Agreement provides for, among other matters, the grant by the     
Company to HLR of (i) the exclusive right to market certain Genentech products  
outside of the United States and (ii) an option on a product-by-product basis to
develop and market on an exclusive basis outside the United States all other    
Genentech products which conclude Phase II trials within 10 years following     
execution of the Licensing Agreement.                                           

For further information with respect to the Genentech Board's and the 
Special Committee's reasons for supporting the Proposed Transactions and        
recommending the same to stockholders, see "Summary and Special                 
Factors -- Genentech's Reasons for the Proposed Transactions;" " -- Advantages  
and Disadvantages of the Proposal to Genentech's Stockholders," " -- Effects of 
a Failure to Approve the Proposal;" "The Proposed Transactions -- Background of 
the Proposed Transactions;" " -- Recommendation of the Board of Directors;      
Fairness of the Transaction;" and " -- Opinions of Financial Advisors."         

RECOMMENDATION OF THE BOARD OF DIRECTORS; FAIRNESS OF THE TRANSACTION           

  By unanimous vote, the Genentech Board (with the two Roche designees not
present) and the Special Committee (which, as indicated above, consists of all  
directors other than the two Roche designees) have approved the Proposed        
Transactions and determined that such transactions are fair to and in the best  
interests of Genentech and its stockholders (other than Roche). Each member of  
the Genentech Board has indicated                                               

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that he or she intends to vote all shares of Common Stock that he or she owns in
favor of the Proposal. THE GENENTECH BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR
APPROVAL OF THE PROPOSAL.                                                       

At the meetings on April 29 and 30, 1995, the Genentech Board and the 
Special Committee reviewed and considered the presentation of Lehman Brothers as
to the fairness of the Proposed Transactions to holders of the Common Stock     
(other than Roche), as well as the status of negotiations between the Company   
and Roche. In reaching the determination described in the immediately preceding 
paragraph, the Genentech Board and the Special Committee gave careful           
consideration, without assigning relative weights, to a number of factors,      
including the following:                                                        

(i) The conclusion, based on the reports, presentations and 
     discussions described under "The Proposed Transactions -- Background of the
     Proposed Transactions," that, regardless of whether the Company was willing
to extend Roche's option to cause the Company to redeem the Company's 
publicly traded shares, the Redeemable Common Stock, prior to June 30,
1995, Roche was unlikely to exercise its then existing option;        

        (ii) Based on the advice of Lehman Brothers, the conclusion that the
 market price of Genentech's publicly traded shares would be expected to
   decline significantly if Roche's right to cause Genentech's redemption of
     such shares were to expire unexercised at June 30, 1995 or if Roche were to
  publicly announce its intention not to exercise that right in advance of
such date;                                                            

          (iii) The belief that a substantial decline in the market value of the
    publicly traded Genentech stock would, in addition to immediate diminution
in stockholder value, have material adverse effects on Genentech's    
relations with its employees and on Genentech's ability to attract and
    retain talented scientists, which, in turn, would likely further adversely
affect stockholder value;                                             

     (iv) The belief, based on the advice of Lehman Brothers, that the
 existence of Roche's right to cause redemption of the Redeemable Common
     Stock had the effect of supporting the price at which the Redeemable Common
Stock trades;                                                         

      (v) Lehman Brothers' advice that, if the Merger is approved by the
  stockholders of Genentech, (x) the potential decline in the price of the
     publicly traded Genentech stock could be significantly mitigated by the Put
   Rights and (y) the Call Rights will have a supporting or elevating effect
on the market price of the Special Common Stock, although the Special 
Committee has been advised that such supporting effect may not be as  
    significant as has been the case with the current redemption right because
   of the market's possible perception of the reasons for a determination by
   Roche not to exercise its then existing rights prior to July 1, 1995, and
  the corresponding lack of market conviction that Roche would exercise an
extended option;                                                      

  (vi) The presentation of Lehman Brothers, and Lehman Brothers'
opinion, to the effect that the Proposed Transactions are fair to the 
holders of shares of Common Stock (other than Roche), from a financial
   point of view, including Lehman Brothers' detailed analysis of the market
behavior of the Redeemable Common Stock, the likely impact of the     
 expiration of Roche's redemption option upon the trading prices of such
   stock, and Lehman Brothers' views as to the potential effects upon future
  trading prices of the stock of extending such option, as contemplated by
     the Call Rights inherent in the Special Common Stock. The Special Committee
     recognized, however, in considering such analysis that the trading price of
   such stock is a product of a variety of factors, many of which are beyond
the control of the Company, and that it is not possible to predict the
   actual prices at which the Special Common Stock will trade, or the actual
     prices at which the Common Stock will trade if the Proposal is not adopted;

     (vii) The advice of Lehman Brothers that the trading price of the
     Special Common Stock would be afforded "downside" protection" and that such
     price would take into account the benefits to the Genentech stockholders of
    the assurance of being able to "put" their shares at the $60 price payable
in July 1999, and the fact that Roche had agreed to contribute to the 
   Company the funds required to satisfy the Company's obligations under the
Put Rights in exchange for the issuance by the Company of a number of 
shares of Common Stock equal to the number of shares acquired by the  
Company upon exercise of the Put Rights, or to purchase Special Common
Stock directly from stockholders who                                  

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    exercise their Put Rights (with such obligations of Roche being guaranteed
   by Roche Holding, as described herein under "Guaranty of Roche Holding");

   (viii) The fact that if Genentech's future growth and/or market
     conditions were to warrant a per share valuation of Genentech prior to June
30, 1999 in excess of the redemption prices applicable under the Call 
    Rights, such redemption prices would place a cap on the price at which the
     Special Common Stock will trade and, thus, will limit the return holders of
   Special Common Stock can realize from such securities. As a result of the
    Call Rights, if Genentech's future growth and/or market conditions were to
  warrant a valuation of Genentech prior to June 30, 1999 in excess of the
    redemption prices of the Special Common Stock under the Call Rights and if
     the Special Common Stock were to be redeemed, holders of the Special Common
Stock would participate in such increased valuation only to the extent
permitted by the applicable redemption price under the Call Rights.   
Although the "upside limitations" inherent in the Call Rights are     
disadvantageous to stockholders, the Genentech Board and the Special  
  Committee believe, as discussed in item (ix) below, that the benefits of
the "downside protection" of the Put Rights mitigates any such        
disadvantages;                                                        

       (ix) The belief that the redemption prices of the Call Rights leave
   substantial room for future growth of the Company to be recognized in its
   stock price and that the "downside protection" afforded by the Put Rights
is a significant advantage to the Genentech public stockholders which 
  mitigates any "upside limitations" that may result from the existence of
the Call Rights;                                                      

         (x) The disadvantageous negotiating position that the Company and its
stockholders would have held vis-a-vis Roche had the redemption right 
expired unexercised on June 30, 1995 or had Roche made a public       
     announcement of its intention not to exercise the current redemption rights
in advance of June 30, 1995;                                          

      (xi) The projections of Genentech's future operations as described
herein under "Certain Projections of Future Operations and Other      
    Information" and the experience of the Genentech Board with respect to the
business of the Company;                                              

       (xii) The potential adverse effect upon the Company, its scientists
  and other employees and its Common Stock of continuing uncertainty as to
  exercise or non-exercise of the then existing redemption rights by Roche
   and as to the course of action that would be taken with respect to future
relations with Roche;                                                 

          (xiii) The fact that the Proposed Transactions would, in general, keep
 in place current governance arrangements between Roche and the Company,
 which the Genentech Board believes have formed the basis for a mutually
beneficial relationship;                                              

   (xiv) The belief that the payment by Roche of 50% of certain of
   Genentech's development expenses under the Licensing Agreement will allow
Genentech to take a larger number of promising research projects into 
development, increasing the likelihood that Genentech will have more  
medically and commercially significant marketed products over the next
several years;                                                        

         (xv) The fact that the terms of the Licensing Agreement will serve to
   mitigate certain potential losses of the Company because, if Roche elects
   to exercise its option under the Licensing Agreement at the conclusion of
Phase II trials with respect to a particular product, and should that 
product then fail during Phase III trials, the adverse effect on the  
   Company of such failures would be mitigated because Roche would generally
     have been required to pay one half of the development costs with respect to
such product; and                                                     

       (xvi) The fact that in accordance with the Company's Certificate of
 Incorporation and the Existing Governance Agreement, the Proposal could
    only be approved by a majority of the holders of Common Stock unaffiliated
with Roche.                                                           

 See " -- Background of the Proposed Transactions" and " -- Interests of
Certain Persons in the Proposed Transactions."                                  

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     In light of the disclosures made at the meeting of the Special Committee on
June 22, 1995 with respect to Mr. Raab's request for a loan guaranty from Roche,
the Special Committee appointed the Independent Committee to, among other       
matters, review the Proposed Transactions and report to the Special Committee   
with respect thereto. The Independent Committee, based on the investigation     
described above under "-- Background of the Proposed Transactions," reported to 
the Special Committee, and the Special Committee concluded, that the reasons    
that had led the Special Committee and the Genentech Board to recommend the     
Proposed Transactions in the first instance continued to be valid. The Special  
Committee and the Genentech Board therefore believe the Proposed Transactions to
be the best available alternative for Genentech and its stockholders. In        
reaching that conclusion, the Special Committee was assisted by Morgan Stanley, 
which rendered the advice described below under "-- Opinions of Financial       
Advisors -- Morgan Stanley."                                                    

OPINIONS OF FINANCIAL ADVISORS                                                  

LEHMAN BROTHERS                                                                 

     As indicated above, the Special Committee engaged Lehman Brothers to act as
its financial advisor in connection with the Proposed Transactions and to render
an opinion with respect to the fairness, from a financial point of view, to the 
holders of the Redeemable Common Stock (other than Roche) of the consideration  
to be received by such holders and Genentech in connection with the Proposed    
Transactions.                                                                   

In connection with the Genentech Board's and the Special Committee's  
consideration of the Proposed Transactions, Lehman Brothers made a presentation 
to the joint meeting of the Genentech Board and the Special Committee held on   
April 29 and 30, 1995 and provided the Special Committee with its oral opinion, 
subsequently confirmed in a written opinion dated April 30, 1995, to the effect 
that, as of the date of such opinion, the consideration to be received by the   
holders of the Redeemable Common Stock (other than Roche) and Genentech in      
connection with the Proposed Transactions was fair, from a financial point of   
view, to such holders.                                                          

  The full text of the written opinion of Lehman Brothers, dated April 30,
1995, which sets forth assumptions made, factors considered and limitations on  
the review undertaken by Lehman Brothers, is attached as Annex B to this Proxy  
Statement/Prospectus and is incorporated hereby by reference. Genentech's       
shareholders are urged to read such opinion carefully in its entirety.          

   No limitations were imposed by Genentech on the scope of Lehman Brothers'
investigation or the procedures to be followed by Lehman Brothers in rendering  
its opinion. In rendering its opinion, Lehman Brothers did not express an       
opinion as to the actual prices at which shares of Special Common Stock will    
trade following consummation of the Proposed Transactions.                      

   The opinion of Lehman Brothers was requested by, and was provided for the
use and benefit of, the Special Committee. The Opinion was not intended to be,  
and does not constitute, a recommendation to any holder of Genentech stock as to
how such holder should vote with respect to the Proposal.                       

    In arriving at its opinion, Lehman Brothers reviewed and analyzed: (1) the
Transaction Agreement and all of the Exhibits attached thereto (including,      
without limitation, the Merger Agreement), (2) the Certificate of Incorporation 
and By-Laws of Genentech, (3) the 1990 Merger Agreement, (4) the then existing  
governance arrangements between Genentech and Roche, (5) publicly available     
information concerning the Company which Lehman Brothers believed to be relevant
to its inquiry, including, but not limited to, the latest annual report on Form 
10-K of Genentech for the year ended December 31, 1994 and the draft of the     
latest quarterly report on Form 10-Q of Genentech for the quarter ended March   
31, 1995, (6) financial and operating information with respect to the business, 
operations and prospects of Genentech furnished to Lehman Brothers by Genentech,
(7) a trading history of Genentech's Redeemable Common Stock from 1991 to the   
time of rendering its opinion and a comparison of that trading history with     
those of other companies which Lehman Brothers deemed relevant, (8) a comparison
of the historical financial results and present financial condition of Genentech
with those of other companies which Lehman Brothers deemed relevant, (9) the    
financial terms of certain other recent transactions which Lehman Brothers      
deemed relevant,                                                                

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(10) reports of research analysts with respect to Genentech and the potential   
effect of the expiration of Roche's option on the price of the Redeemable Common
Stock, (11) valuations of the Redeemable Common Stock using various             
methodologies, (12) the financial terms of certain other commercial arrangements
between biotechnology and pharmaceutical companies which Lehman Brothers deemed 
relevant, and (13) analyses of potential pro forma effects on Genentech of the  
commercial arrangements contemplated by the Licensing Agreement. In addition,   
Lehman Brothers held discussions with the management of Genentech concerning its
business, operations, assets, financial condition and prospects and undertook   
such other studies, analyses and investigations as Lehman Brothers deemed       
appropriate.                                                                    

 In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by it     
without assuming any responsibility for independent verification of such        
information and further relied upon the assurances of the management of         
Genentech that they were not aware of any facts that would make such information
inaccurate or misleading. With respect to the financial projections of          
Genentech, upon advice of Genentech, Lehman Brothers assumed that such          
projections were reasonably prepared on a basis reflecting the best currently   
available estimates and judgments of the management of Genentech as to the      
future financial performance of Genentech and that Genentech would perform      
substantially in accordance with such projections. In arriving at its opinion,  
Lehman Brothers did not make or obtain any evaluations or appraisals of the     
assets or liabilities of Genentech. Lehman Brothers' opinion was necessarily    
based upon market, economic and other conditions as they existed on, and could  
be evaluated as of, the date of the opinion.                                    

    In connection with its presentation to the Genentech Board and the Special
Committee on April 29, 1995 and in advising the Genentech Board and the Special 
Committee of its opinion on April 30, 1995, Lehman Brothers performed certain   
financial and comparative analyses, as summarized below. The preparation of a   
fairness opinion involves various determinations as to the most appropriate and 
relevant methods of financial and comparative analysis and the application of   
those methods to the particular circumstances, and therefore such an opinion is 
not readily susceptible to summary description. Furthermore, in arriving at its 
opinion and making its presentation to the Genentech Board and the Special      
Committee, Lehman Brothers did not attribute any particular weight to any       
analysis or factor considered by it, but rather made qualitative judgments as to
the significance and relevance of each analysis and factor. Accordingly, Lehman 
Brothers believes that its analyses must be considered as a whole and that      
considering any portions of such analyses and of the factors considered, without
considering all analyses and factors, could create a misleading or incomplete   
view of the process underlying its opinion. In its analyses, Lehman Brothers    
made numerous assumptions with respect to industry performance, general business
and economic conditions and other matters, many of which are beyond the control 
of Genentech. Any estimates contained in those analyses are not necessarily     
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than as set forth therein. In addition, 
analyses relating to the value of businesses do not purport to be appraisals or 
to reflect the prices at which businesses actually may be sold.                 

The following sections are summaries of certain analyses performed by 
Lehman Brothers and reviewed by Lehman Brothers with the Special Committee and  
the Genentech Board.                                                            

HISTORICAL STOCK PRICE ANALYSIS                                                 

Introduction                                                                    

    As part of its analysis for the Genentech Board and the Special Committee,
Lehman Brothers noted the historical trading prices for the Redeemable Common   
Stock and compared those prices to a range (derived as set forth below) of      
estimated prices at which the stock could have been expected to trade had the   
redemption option applicable to the Redeemable Common Stock not existed (the    
"Standalone Values").                                                           

   The Standalone Values were determined for each of the periods by applying
the average forward price to earnings multiples ("Forward P/E Multiples") for   
the companies in the Comparable Universe (as hereinafter defined) to Genentech's
actual earnings per share ("EPS") and to analysts' estimates of Genentech's EPS 
as of February in each of the relevant years (except 1995, for which April      
estimates were used), as discussed below. The analysis yielded Standalone Values
per share of $14.04-$23.40, $6.92-$11.42, $12.40-$19.10,                        

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$14.76-$18.72 and $41.86-$44.15 for 1991, 1992, 1993, 1994 and 1995,            
respectively, compared to actual trading price ranges for the Redeemable Common 
Stock in the first quarter of the corresponding years of $21.00-$28.50,         
$26.50-$31.88, $32.25-$39.50, $44.00-$50.88 and $44.50-$51.00, respectively.    

  Lehman Brothers noted that, as indicated above, the actual trading price
ranges of the Redeemable Common Stock significantly exceeded the estimated      
Standalone Values, and concluded that the redemption rights applicable to the   
Redeemable Common Stock had therefore maintained Genentech's stock price at a   
level substantially higher than that which would have been expected had the     
Redeemable Common Stock not been subject to redemption. Lehman Brothers also    
expressed the view that the correlation of the historical price performance of  
the Redeemable Common Stock to the applicable redemption price under the        
Redeemable Common Stock had allowed Genentech to spend considerably more on     
research and development than it might have otherwise spent had the price       
performance of the Redeemable Common Stock been more closely correlated to      
Genentech's earnings results. Hence, Lehman Brothers noted that because         
Genentech may have been permitted to spend more on research and development, it 
has had the opportunity to develop more products than might have been the case  
if the price of the Redeemable Common Stock had not been supported by the       
market's assessment of the possibility that Roche might exercise its redemption 
option in respect of the Redeemable Common Stock.                               

Discussion                                                                      

The Standalone Values were derived by applying historical valuation   
benchmarks for a selected group of publicly traded United States biotechnology  
companies that Lehman Brothers considered to be appropriate (the "Comparable    
Universe") to Genentech's actual results, and to analysts' estimates of         
Genentech's results, for the corresponding period. The Comparable Universe was  
comprised of Amgen Inc., Chiron Corporation and Genzyme Corporation. For each of
the periods, Lehman Brothers calculated the Forward P/E Multiple for the        
Comparable Universe based on historical stock prices and historical mean        
earnings estimates as of February in each of the relevant years (except 1995,   
for which April estimates were used) as prepared by Institutional Brokerage     
Estimate Systems ("IBES"). The Forward P/E Multiple was then applied to the     
historical IBES mean EPS estimate and the actual EPS of Genentech for the       
corresponding years to determine the Standalone Values. For purposes of         
analysis, Lehman Brothers calculated the Standalone Values using historical data
as of February for 1991, 1992, 1993 and 1994 and data as of April for 1995 and  
compared such values to the high and low closing price of the Redeemable Common 
Stock for the first quarter of the corresponding year.                          

Based on the Standalone Values and actual trading ranges noted above, 
Lehman Brothers calculated the average percentage difference between the actual 
trading price ranges and the Standalone Values for each period. The average     
premium of the actual trading price ranges over the Standalone Values was 32.2%,
218.3%, 127.8%, 183.4% and 11.0% for 1991, 1992, 1993, 1994 and 1995,           
respectively. Lehman Brothers observed that the actual price at which the       
Redeemable Common Stock had traded was above the Standalone Values for each     
quarterly period since the Redeemable Common Stock began trading in September   
1990 and that the average premium of the actual trading prices over the         
Standalone Values for the periods analyzed was 114.5%.                          

    Lehman Brothers further noted that the historical price performance of the
Redeemable Common Stock showed stronger correlation with the redemption prices  
applicable from time to time to such stock than with Genentech's actual and     
projected earnings results. Lehman Brothers also expressed the view, as         
indicated above, that the correlation of the historical price performance of the
Redeemable Common Stock to the applicable redemption price under the Redeemable 
Common Stock had allowed Genentech to spend considerably more on research and   
development than it might have otherwise spent had the price performance of the 
Redeemable Common Stock been more closely correlated to Genentech's earnings    
results. Hence, Lehman Brothers noted that because Genentech may have been      
permitted to spend more on research and development, it has had the opportunity 
to develop more products than might have been the case if the price of the      
Redeemable Common Stock had not been supported by the market's perception that  
Roche might exercise its redemption option in respect of the Redeemable Common  
Stock. See "Market Prices of and Dividends on the Redeemable Common Stock and   
the Common Stock" and "The Charter Amendment;                                   

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Description of the Special Common Stock -- Call Rights." Genentech spent 47.4%, 
55.8%, 49.2% and 41.8% of revenues, before interest income, on research and     
development in 1991, 1992, 1993 and 1994, respectively. The average amount spent
on research and development by Genentech for the years 1991, 1992, 1993 and 1994
was 48.5% of revenues, before interest income, as compared to average research  
and development spending by companies in the Comparable Universe of 28.6% of    
revenues, before interest income, over the corresponding periods.               

STANDALONE FUTURE STOCK PRICE ANALYSIS                                          

Introduction                                                                    

    As part of its analysis for the Genentech Board and the Special Committee,
Lehman Brothers analyzed estimated future trading values of Genentech's stock   
assuming that no redemption options were applicable to such stock (the "Future  
Standalone Values"). For this purpose, Lehman Brothers assumed that Roche did   
not exercise its then existing option to cause the Redeemable Common Stock to be
redeemed, and its analysis did not give effect to the Proposed Transactions.    
Lehman Brothers also reviewed reports of research analysts with respect to      
Genentech and with respect to the potential effect of the expiration of Roche's 
option to cause redemption of the Redeemable Common Stock on the price of       
Genentech's publicly traded Common Stock.                                       

   The Future Standalone Values were determined by taking the average of two
valuation benchmarks derived from the Comparable Universe as applied to         
projections prepared by management of Genentech, excluding the impact of the    
Licensing Agreement, for the years 1995 to 1999. See "Certain Projections of    
Future Operations and Other Information." As discussed further below, the       
valuation benchmarks utilized by Lehman Brothers were the average Forward P/E   
Multiple and Comparable P/E to Growth Rate Multiple (as hereinafter defined) for
the Comparable Universe calculated as of April 25, 1995. This analysis resulted 
in Future Standalone Values per share of $31.68, $36.52, $41.59, $54.72 and     
$71.45 for the years 1995, 1996, 1997, 1998 and 1999, respectively.             

 The foregoing analysis by Lehman Brothers indicated a Future Standalone
Value as of June 1995 of $31.68 per share. Lehman Brothers compared this with a 
range of research analysts' estimates for the Redeemable Common Stock, in the   
event that Roche did not exercise its then current option to cause the          
Redeemable Common Stock to be redeemed, of $35 to $60 per share, noting that    
approximately 60% of the estimates were in the range of $35 to $45 per share.   
Lehman Brothers further noted that research analysts' estimates reflected       
earnings expectations by such analysts that were generally higher than the      
projections prepared by management of Genentech. See "Certain Projections of    
Future Operations and Other Information." Based on Lehman Brothers' analysis of,
and conclusions with respect to, Future Standalone Values and research analysts'
estimates, Lehman Brothers indicated to the Genentech Board and the Special     
Committee a range of $30 to $40 per share, as of June 1995, as a likely trading 
range for the Redeemable Common Stock in the event that Roche did not exercise  
its option to cause redemption of the Redeemable Common Stock. Lehman Brothers  
noted that this range was significantly lower than the then current trading     
price for the Redeemable Common Stock in the absence of the Proposed            
Transactions.                                                                   

Lehman Brothers noted, as discussed further below, that the Future    
Standalone Values were significantly lower through 1998 than the values derived 
by taking into consideration the Proposed Transactions. See " -- Special Common 
Stock Future Stock Price Analysis."                                             

Discussion                                                                      

In developing the Future Standalone Values, Lehman Brothers derived   
estimated trading values based on Forward P/E Multiples and Comparable P/E to   
Growth Rate Multiples for the Comparable Universe as applied to projections     
prepared by management of Genentech, excluding the impact of the Licensing      
Agreement. See "Certain Projections of Future Operations and Other Information."
The average Forward P/E Multiple for the Comparable Universe was 32.7 times 1995
estimated EPS and was based on the closing stock prices of the companies        
constituting the Comparable Universe and on EPS estimates for 1995 as provided  
by the First Call Corporation as of April 25, 1995. The Comparable P/E to Growth
Rate Multiple was 0.75 times the long term growth rate, as calculated by taking 
the ratio of the Forward P/E Multiple to the                                    

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estimated three-year EPS growth rate as provided by the First Call Corporation  
(the "Comparable P/E to Growth Rate Multiple"). Lehman Brothers noted that the  
Comparable P/E to Growth Rate Multiple equates a company's Forward P/E Multiple 
to its long term growth rate and is a commonly used valuation methodology for   
growth companies.                                                               

SPECIAL COMMON STOCK FUTURE STOCK PRICE ANALYSIS                                

Introduction                                                                    

    As part of its analysis for the Genentech Board and the Special Committee,
Lehman Brothers developed a model to calculate an estimated trading value for   
the Special Common Stock taking into consideration the potential effects of the 
Call Rights and the Put Rights on the value of such stock. The model calculated 
an estimated trading value for the Special Common Stock based on the historical 
relationship of the Redeemable Common Stock market values to the redemption     
prices applicable from time to time to the Redeemable Common Stock and compared 
those values to the potential floor value of the Special Common Stock taking    
into account the Put Rights as of the end of June for each of the years from    
1995 to 1999. See "Market Prices of and Dividends on the Redeemable Common Stock
and the Common Stock"; "The Charter Amendment; Description of the Special Common
Stock -- Call Rights" and "-- Put Rights."                                      

In calculating an estimated trading price for the Special Common Stock
based on the redemption prices applicable to the Special Common Stock under the 
Call Rights, Lehman Brothers applied certain formulas derived from an analysis  
of the historical trading relationship of the Redeemable Common Stock to the    
redemption prices applicable from time to time to the Redeemable Common Stock,  
as discussed below. This analysis resulted in estimated trading values per share
for the Special Common Stock of $39.36, $45.75, $58.53 and $67.73 for 1995,     
1996, 1997 and 1998, respectively.                                              

  Lehman Brothers then calculated the potential floor value of the Special
Common Stock taking into account the Put Rights by discounting the $60 per share
redemption price applicable under the Put Rights to the relevant period by      
applying a discount rate of 7%, which Lehman Brothers considered appropriate    
given the term of the Put Rights and the credit quality of Roche Holding, which 
has guaranteed Roche's obligations in respect of the Put Rights. See "Guaranty  
of Roche Holding." This calculation resulted in present values for the Put      
Rights of $45.77, $48.98, $52.41, $56.07 and $60.00 for 1995, 1996, 1997, 1998  
and 1999, respectively.                                                         

     Lehman Brothers observed that the Special Common Stock would be expected to
trade in a range bounded by the potential floor value of the Special Common     
Stock taking into account the Put Rights and a discount to the then prevailing  
redemption price applicable to the Special Common Stock under the Call Rights,  
with the potential floor value of the Special Common Stock taking into account  
the Put Rights representing a lower bound for the estimated trading price of the
Special Common Stock. Lehman Brothers also noted that the potential floor value 
of the Special Common Stock taking into account the Put Rights exceeded the     
Future Standalone Values from 1995 through the third quarter of 1998 and that,  
based on the historical volatility of biotechnology stocks as well as the       
general risks associated with the business of biotechnology companies, the Put  
Rights represented significant "downside protection" to investors. See "Summary 
and Special Factors -- Genentech's Reasons for the Proposed Transactions" and   
"-- Recommendation of the Board of Directors; Fairness of the Transaction."     

Discussion                                                                      

    In calculating estimated trading prices for the Special Common Stock based
on the redemption prices applicable to the Special Common Stock under the Call  
Rights, Lehman Brothers analyzed the historical relationship of the trading     
prices of the Redeemable Common Stock to the redemption prices applicable from  
time to time to the Redeemable Common Stock. Lehman Brothers' analysis was based
on calculations of the historical discount of the trading price of the          
Redeemable Common Stock to the near-term redemption price applicable to such    
stock and the historical implied internal rate of return ("IRR") of the initial 
trading price of the Redeemable Common Stock to the final redemption price      
applicable to such stock in June 1995 of $60 per share.                         

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     The historical discount of the trading price of the Redeemable Common Stock
to the near-term redemption price for 1991 to 1994 was calculated by taking the 
ratio of the trading price of the Redeemable Common Stock as of the end of June 
to the redemption price for the quarter ending June 30 for each of the years.   
The discounts were 31.3%, 29.4%, 12.0% and 10.5%, for 1991, 1992, 1993 and 1994,
respectively. Lehman Brothers applied these discounts to the redemption prices  
applicable to the Special Common Stock under the Call Rights for the quarters   
ended June 30, 1995, 1996, 1997 and 1998 to arrive at estimated values per share
of Special Common Stock of $41.22, $45.89, $61.60 and $68.02 for each of the    
years. Lehman Brothers also noted that the supporting effect of the Call Rights 
under the Special Common Stock may not be as significant as has been the case   
with respect to the redemption right previously applicable to the Redeemable    
Common Stock because of the market's possible perception of the reasons for a   
determination by Roche not to exercise its rights prior to June 30, 1995, and   
the corresponding lack of market conviction that Roche would exercise an        
extended option.                                                                

   The historical IRR from the actual trading price of the Redeemable Common
Stock to the final redemption price of $60 applicable to the Redeemable Common  
Stock was calculated from the initial trading price of the Redeemable Common    
Stock on September 10, 1990, the first trading day for the Redeemable Common    
Stock to the final redemption price applicable to the Redeemable Common Stock of
$60 per share at June 30, 1995. The resulting IRR, 21.6%, was then used to      
discount the final redemption price applicable to the Special Common Stock under
the Call Rights of $82 per share to the appropriate period. These calculations  
resulted in estimated per share values for the Special Common Stock of $37.50,  
$45.61, $55.46 and $67.43 for the quarters ended June 30, 1995, 1996, 1997 and  
1998, respectively. Lehman Brothers also noted that a perception by the market  
that Roche would cause Genentech to exercise the Call Rights prior to July 1999 
might result in a higher market value for the Special Common Stock than those   
noted above.                                                                    

Lehman Brothers then calculated the average of the two sets of values,
which resulted in estimated per share trading values for the Special Common     
Stock of $39.36, $45.75, $58.53 and $67.63 for the quarters ending June 30,     
1995, 1996, 1997 and 1998, respectively.                                        

INTERNAL RATE OF RETURN ANALYSIS OF THE EXTENSION                               

Introduction                                                                    

    As part of its analysis for the Genentech Board and the Special Committee,
Lehman Brothers compared the redemption prices applicable to the Special Common 
Stock pursuant to the Call Rights to the redemption prices applicable to the    
Redeemable Common Stock. The redemption prices were compared by calculating the 
compound growth rate of the redemption prices under the Call Rights to the      
compound growth rate applicable to the redemption prices under the Redeemable   
Common Stock, measured, in each case, from the initial redemption price to the  
final redemption price. See "The Charter Amendment; Description of the Special  
Common Stock -- Call Rights."                                                   

   Lehman Brothers noted that this analysis yielded a compound annual growth
rate of 8.1% for the redemption prices under the Call Rights, as compared to a  
10.7% compound annual growth rate for the redemption prices under the Redeemable
Common Stock, as discussed below. Lehman Brothers further noted that although   
the compound growth rate for the redemption prices under the Call Rights was    
lower than for the redemption prices under the Redeemable Common Stock, this    
difference reflected, among other factors, the differing growth characteristics 
of recent projections prepared by management of Genentech as compared to        
projections prepared at the time the 1990 Merger Agreement was entered into, as 
well as reductions in overall valuation multiples for biotechnology and         
pharmaceutical companies during this period. See "Certain Projections of Future 
Operations and Other Information."                                              

     Lehman Brothers further noted, as discussed below, that the implied rate of
return to investors of the then current trading price per share for the         
Redeemable Common Stock to the final redemption price applicable to the Special 
Common Stock under the Call Rights of $82 per share was 13.1%. Lehman Brothers  
noted that this rate of return was significantly lower than the historical      
implied rate of return of the Redeemable Common Stock as measured by the        
internal rate of return from initial trading price of the Redeemable Common     
Stock of $23.875 to the final redemption price applicable under the Redeemable  
Common Stock of                                                                 

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$60 per share at June 30, 1995, which was 21.1%. Lehman Brothers noted that the 
"downside protection" afforded by the Put Rights is a significant advantage to  
Genentech's public stockholders which mitigates any "upside limitations" that   
may result from the existence of the Call Rights.                               

Discussion                                                                      

Lehman Brothers analyzed the implied rates of return of the redemption
prices applicable pursuant to the Call Rights for the period from July 1, 1995  
to June 30, 1999 and compared those implied rates of return to the implied rates
of return of the redemption option applicable to the Redeemable Common Stock.   
Lehman Brothers noted that the redemption prices applicable pursuant to the Call
Rights imply a compound annual growth rate in such prices of 8.1%, from $60 per 
share at June 30, 1995 to $82 per share at June 30, 1999. Lehman Brothers       
compared this growth rate to a compound annual growth rate of 10.7%, derived    
from the increase from $38 per share at December 31, 1990 to $60 per share at   
June 30, 1995 for the redemption prices applicable to the Redeemable Common     
Stock.                                                                          

    Lehman Brothers analyzed the implied returns to the holders of Genentech's
publicly traded common stock in the event that Roche were to cause Genentech to 
exercise the Call Rights on June 30, 1996, 1997, 1998 and 1999 based on a       
current trading price as of April 25, 1995 of $50.125 per share. Based on the   
trading price of $50.125 per share as of April 25, 1995, the annualized internal
rate of return, assuming that Roche caused Genentech to exercise the Call Rights
on June 30, 1996, 1997, 1998 and 1999, would be 29.7%, 18.2%, 14.9% and 13.1%,  
respectively.                                                                   

Lehman Brothers also analyzed the implied returns to the holders of   
Genentech's publicly traded common stock in the event that Roche were to cause  
Genentech to exercise the Call Rights on June 30, 1996, 1997, 1998 and 1999     
based on Standalone Values of $30 to $40 per share, as discussed above. See     
"-- Special Common Stock Future Stock Price Analysis." Lehman Brothers noted    
that, at a Standalone Value of $40 per share, the implied returns would be      
62.5%, 32.3%, 23.9% and 19.7%, if Roche were to cause Genentech to exercise the 
Call Rights on June 30, 1996, 1997, 1998 and 1999, respectively. The implied    
returns for a Standalone Value of $30 per share would be 116.7%, 52.8%, 36.3%   
and 28.6%, respectively, for the same periods.                                  

COMPARABLE TRANSACTION ANALYSIS                                                 

Introduction                                                                    

As part of its presentation to the Genentech Board and the Special    
Committee, Lehman Brothers analyzed the implied control valuation for Genentech 
based on the final redemption price of $82 per share applicable pursuant to the 
Call Rights and compared this value to the implied control valuation for        
Genentech based on the final redemption price applicable to the Redeemable      
Common Stock of $60 per share and the control valuations for four selected      
acquisitions of pharmaceutical companies that Lehman Brothers considered        
appropriate (the "Comparable Transactions").                                    

In particular, Lehman Brothers calculated certain median Benchmark    
Multiples (as hereinafter defined) for the Comparable Transactions including    
total equity transaction value plus net debt as a multiple of latest twelve     
months ("LTM") revenues and LTM earnings before interest and taxes ("EBIT"),    
which were 2.49 times and 14.2 times, respectively (the "Benchmark Multiples"). 
In calculating the multiples for Genentech, Lehman Brothers based such multiples
on reported revenues and EBIT (in each case, excluding interest income) of      
Genentech. For the period ended December 31, 1994 such LTM revenues were $753   
million and such LTM EBIT was $85 million. Lehman Brothers compared the         
Benchmark Multiples to similar implied multiples derived for Genentech based on 
an acquisition value of $82 per share as of June 1999, (the final redemption    
price applicable pursuant to the Call Rights), and projected financial results  
prepared by management of Genentech for 1998, as well as an acquisition value of
$60 per share as of June 1995, (the final redemption price applicable pursuant  
to the terms of the Redeemable Common Stock) and Genentech's actual 1994        
financial results. See "Selected Historical Financial Data" and "Certain        
Projections of Future Operations and Other Information." At an $82 per share    
valuation as of June 1999, the analysis indicated implied multiples of LTM      
revenues and LTM EBIT of 7.00 times and 25.6 times, respectively. At a $60 per  

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share valuation as of June 1995, the analysis indicated implied multiples of LTM
revenues and LTM EBIT of 8.71 times and 77.1 times, respectively.               

  Lehman Brothers noted that the implied valuation multiples for Genentech
assuming acquisition prices of $82 per share as of June 1999 and $60 per share  
as of June 1995 compared favorably to the Benchmark Multiples. Lehman Brothers  
also noted that the implied valuation multiple for Genentech, based on the      
present value of the Put Rights as of June 1995 of approximately $46 per share  
compared favorably to the Benchmark Multiples. At a $46 per share valuation as  
of June 1995, the analysis indicated implied multiples of LTM revenues and LTM  
EBIT of 6.22 times and 55.1 times, respectively.                                

Discussion                                                                      

    The Comparable Transactions analyzed by Lehman Brothers were: Hoechst AG's
acquisition of Marion Merrell Dow Inc.; Glaxo plc's acquisition of Wellcome plc;
American Home Products Corporation's acquisition of American Cyanamid Company;  
and Roche Holding's acquisition of Syntex Corporation. Lehman Brothers          
considered these transactions appropriate comparisons based on the respective   
acquired companies' strong financial results, research-driven business focus and
limited product breadth. Using publicly available information, Lehman Brothers  
compared selected financial data, including total equity transaction value plus 
net debt as a multiple of LTM revenues and LTM EBIT for each of the Comparable  
Transactions. The average LTM revenue multiple was 2.49 times, and the average  
LTM EBIT multiple was 14.2 times.                                               

     Lehman Brothers indicated that, based on an acquisition price for Genentech
of $82 per share, the implied transaction value (the acquisition price times the
number of fully diluted shares outstanding of approximately 133.7 million as of 
March 31, 1995) plus net debt (based on projected net debt adjusted for option  
proceeds) was $8,951.9 million for Genentech in 1999. Based on projected results
prepared by management of Genentech for 1998, Lehman Brothers calculated implied
LTM revenue and LTM EBIT multiples of 7.00 times and 25.6 times, respectively.  
See "Certain Projections of Future Operations and Other Information." Based on  
an acquisition price of $60 per share, the implied transaction value (the       
acquisition price times the number of fully diluted shares outstanding of       
approximately 133.7 million as of March 31, 1995) plus net debt (based on net   
debt as of December 31, 1994 adjusted for option proceeds) was $6,556.4 million 
for Genentech in 1995. Based on actual 1994 results, Lehman Brothers calculated 
implied LTM revenue and LTM EBIT multiples of 8.71 times and 77.1 times,        
respectively. See "Selected Historical Financial Data."                         

    Lehman Brothers noted, however, that circumstances surrounding each of the
transactions analyzed were specific to each transaction and, because of the     
inherent differences between the business, operations and prospects of the      
selected acquired companies analyzed, Lehman Brothers believed that it was      
inappropriate to, and therefore did not, rely solely on the quantitative results
of the analysis. Accordingly, Lehman Brothers also made qualitative judgments   
concerning differences between the characteristics of these transactions and the
Proposed Transactions that would affect the acquisition value of Genentech and  
such acquired companies.                                                        

DISCOUNTED CASH FLOW ANALYSIS                                                   

Introduction                                                                    

    As part of its analysis for the Genentech Board and the Special Committee,
Lehman Brothers calculated the present value of the future streams of after-tax 
cash flows that Genentech could be expected to produce in the future (the       
"Discounted Cash Flow Analysis"). The Discounted Cash Flow Analysis was based on
projections for Genentech prepared by management for the period from 1995       
through 1999, which exclude the impact of the Licensing Agreement, and utilized 
a range of assumptions for the appropriate discount rate and terminal multiple  
to be applied to management's projections, as discussed below. See "Certain     
Projections of Future Operations and Other Information." Based on these         
assumptions, the analysis yielded a range of values as of June 1995 of $17.59 to
$27.59 per share of Genentech stock.                                            

  In connection with its presentation, Lehman Brothers also calculated the
present value of the incremental future streams of after-tax cash flows expected
to result from the Licensing Agreement. Lehman Brothers                         

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noted that the assumed impact of the Licensing Agreement was to increase        
after-tax earnings and cash flow from 1995 through 1999, the net positive effect
resulting primarily from Roche's funding of certain research and development    
projects. Lehman Brothers also noted that the assumed effect of the Licensing   
Agreement was to decrease after-tax earnings and cash flow after 1999,          
reflecting the relatively greater impact on Genentech's results of Roche's      
ownership of product rights to develop and market Genentech's products outside  
the United States. Lehman Brothers' analysis indicated that, at a discount rate 
of approximately 30% and EBIT terminal multiples of 11.0 times to 12.0 times,   
the incremental contribution to Genentech's results of the Licensing Agreement  
was approximately neutral.                                                      

   Lehman Brothers noted that the Discounted Cash Flow Analysis performed by
it yielded total values for Genentech that were significantly below the then    
trading price of the Redeemable Common Stock. Lehman Brothers also noted,       
however, the limitations of the Discounted Cash Flow Analysis, which typically  
measures the "intrinsic" value of a business and is not necessarily reflective  
of "achievable" values, which may be higher or lower depending on the specific  
circumstances.                                                                  

Discussion                                                                      

    For the purpose of the discounted cash flow analysis, Lehman Brothers used
projections prepared by management of Genentech, which exclude the effect of the
Licensing Agreement, before giving effect to the resulting capital structure of 
Genentech. After-tax cash flows were calculated as the after-tax earnings of    
Genentech, plus amortization and depreciation, less net changes in non-cash     
working capital and capital expenditures. Lehman Brothers calculated terminal   
values for Genentech by applying to projected 1999 EBIT of Genentech a range of 
multiples from 10.0 times to 14.0 times. See "Certain Projections of Future     
Operations and Other Information." These multiples were based on current trading
multiples for comparable companies that Lehman Brothers deemed appropriate and  
on Lehman Brothers' experience in mergers and acquisitions. The cash-flow       
streams and terminal values were then discounted to present values using a range
of discount rates, which were chosen based on several assumptions regarding     
factors such as the inflation rate, interest rates, the inherent business risk  
of Genentech and the cost of capital. The discount rates utilized ranged from   
25% to 40%. The resulting aggregate net present values were adjusted for net    
debt and option proceeds and divided by the fully diluted shares outstanding as 
of December 31, 1994. The analysis indicated a range of values as of June 1995  
of $17.59 to $27.59 per share of Genentech stock.                               

     In addition, Lehman Brothers analyzed the financial impact of the Licensing
Agreement by calculating the net present value of the incremental cash flows    
projected by management to result from the Licensing Agreement. In calculating  
the net present value, Lehman Brothers used the same methodologies and          
assumptions described above. The analysis indicated a range of aggregate values 
of negative ($57.2 million) to $38.3 million as of June 1995. Lehman Brothers'  
noted that, at a discount rate of approximately 30% and EBIT terminal multiples 
of 11.0 times to 12.0 times, the incremental contribution to Genentech's results
of the Licensing Agreement was approximately neutral.                           

BLACK-SCHOLES VALUATION OF THE CALL RIGHTS AND PUT RIGHTS                       

Introduction                                                                    

    As part of its analysis for the Genentech Board and the Special Committee,
Lehman Brothers calculated a range of reference values for the Call Rights and  
Put Rights based on the Black-Scholes option pricing model. The Black-Scholes   
model is an analytical tool commonly used in the financial industry to value    
options based on a number of factors including the volatility of a security's   
return, the level of interest rates, the relationship of the underlying stock   
price to the "strike price" of the option and the time remaining until the      
option expires.                                                                 

    Lehman Brothers applied a range of assumptions to the Black-Scholes model,
as discussed below, to determine a range of reference values for the Call Rights
and the Put Rights. The analysis yielded a range of reference values for the    
Call Rights of $2.56 to $17.99 per share. The analysis also yielded a range of  
reference values for the Put Right of $7.14 to $12.48 per share.                

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     Lehman Brothers noted that the Black-Scholes option pricing model is one of
several valuation methodologies currently used in option valuation. Although the
Black-Scholes model is among the most widely accepted methods of valuing        
options, it is subject to certain limitations, particularly with regard to the  
valuation of options with an exercise period of greater than one year, and is   
highly sensitive to the assumptions used, which are subject to varying          
interpretations. Lehman Brothers therefore ascribed limited relevance to this   
aspect of its overall analysis.                                                 

Discussion                                                                      

    Based on the final redemption price applicable pursuant to the Call Rights
of $82 per share, a four-year maturity, a risk-free rate of 7%, and using a     
range of volatilities from 25% to 40% and a range of possible spot prices for   
the Special Common Stock of $60, $48 and $40, Lehman Brothers estimated a range 
of reference values for the Call Rights using the Black-Scholes option valuation
model. The analysis yielded a range of reference values for the Call Rights of  
$2.56 to $17.99 per share. Lehman Brothers also calculated the total value of   
the Call Rights by multiplying per share option values by 57.225 million, which 
represents the number of shares of Redeemable Common Stock owned as of April 25,
1995 by stockholders other than Roche. This analysis yielded a range of         
aggregate values for the Call Rights of $146.8 million to $1,029 million.       

In addition, Lehman Brothers estimated a range of reference values    
attributable to the Put Rights using the Black-Scholes option valuation model.  
Assuming the strike price of $60, a risk-free rate of 7%, a four-year maturity, 
a spot price of $50.38 and a range of volatilities from 15% to 40%, the analysis
yielded a range of reference values for the Put Rights of $7.14 to $12.48 per   
share. Applying the calculated per share values of the Put Rights to the 57.225 
million shares of Redeemable Common Stock owned as of April 25, 1995 by         
stockholders other than Roche yielded a range of aggregate values for the Put   
Rights of $408.5 million to $714.4 million.                                     

ENGAGEMENT OF LEHMAN BROTHERS                                                   

Lehman Brothers is an investment banking firm engaged in, among other 
things, the valuation of businesses and their securities in connection with     
mergers and acquisitions, negotiated underwritings, competitive bids, secondary 
distributions of listed and unlisted securities, private placements, and        
valuations for corporate, estate and other purposes. The Special Committee      
selected Lehman Brothers to act as its financial advisor because of its         
expertise, reputation and familiarity with the health care industry in general  
and because its investment banking professionals have substantial experience in 
matters described above.                                                        

     Genentech has agreed to pay Lehman Brothers a fee of $500,000, which became
due upon delivery of the opinion rendered at the April 30, 1995 meeting of the  
Genentech Board and the Special Committee. Lehman Brothers will also receive a  
fee of $2.5 million upon consummation of the Merger.                            

   Pursuant to an engagement letter entered into in connection with the 1990
Merger (which letter remains in effect), Lehman Brothers will be entitled to an 
additional fee of $3 million if, following Roche's exercise of its rights,      
Genentech effects the redemption of the Special Common Stock pursuant to the    
Call Rights.                                                                    

    In connection with the Proposed Transactions, Genentech has also agreed to
reimburse Lehman Brothers for reasonable expenses and to indemnify Lehman       
Brothers for certain liabilities. Lehman Brothers has provided investment       
banking services to Genentech in the past, including, among other things, acting
as an advisor to Genentech in connection with the 1990 Merger. In the ordinary  
course of its business, Lehman Brothers actively trades in the Common Stock and 
the debt and equity securities of Roche for its own account and for the accounts
of its customers and, accordingly, may at any time hold a long or short position
in such securities.                                                             

MORGAN STANLEY                                                                  

The Independent Committee engaged Morgan Stanley to render financial  
advisory services and an opinion as to the fairness from a financial point of   
view to the holders of the Common Stock (other than                             

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Roche and its affiliates) of the consideration to be received by Genentech and  
by such holders in connection with the Proposed Transactions.                   

    In connection with the Special Committee's and the Independent Committee's
consideration of the Proposed Transactions, Morgan Stanley made a presentation  
to the Independent Committee on July 6, 1995 and to the joint meeting of the    
Genentech Board, the Special Committee and the Independent Committee on July 7, 
1995 and rendered an oral opinion to the Special Committee and the Independent  
Committee, subsequently confirmed in a written opinion dated July 7, 1995, to   
the effect that, as of the date of such opinion, the consideration to be        
received by the holders of shares of Common Stock (other than Roche and its     
affiliates) and Genentech in connection with the Proposed Transactions was fair 
from a financial point of view to such holders.                                 

   THE FULL TEXT OF MORGAN STANLEY'S OPINION, DATED JULY 7, 1995, WHICH SETS
FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE, PROCEDURES FOLLOWED AND MATTERS    
CONSIDERED, IS ATTACHED AS ANNEX C TO THIS PROXY STATEMENT/PROSPECTUS AND IS    
INCORPORATED HEREIN BY REFERENCE. GENENTECH'S STOCKHOLDERS ARE URGED TO READ THE
MORGAN STANLEY OPINION IN ITS ENTIRETY. MORGAN STANLEY'S OPINION ADDRESSES ONLY 
THE FAIRNESS OF THE CONSIDERATION FROM A FINANCIAL POINT OF VIEW TO THE HOLDERS 
OF COMMON STOCK AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF COMMON
STOCK AS TO HOW SUCH STOCKHOLDER SHOULD VOTE WITH RESPECT TO THE PROPOSED       
TRANSACTIONS. THE SUMMARY OF THE OPINION OF MORGAN STANLEY SET FORTH IN THIS    
PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF SUCH OPINION.                                                           

   In arriving at its opinion, Morgan Stanley: (i) analyzed certain publicly
available financial statements and other information of Genentech; (ii) analyzed
certain internal financial statements and other financial and operating data    
concerning Genentech prepared by the management of Genentech; (iii) analyzed    
certain financial projections prepared by the management of Genentech; (iv)     
discussed the past and current operations and financial condition and the       
prospects of Genentech with senior executives of Genentech, and analyzed the pro
forma impact of the commercial arrangements contemplated by the Licensing       
Agreement on Genentech's earnings per share; (v) reviewed the reported prices   
and trading activity for the Redeemable Common Stock and the Common Stock; (vi) 
compared the financial performance of Genentech and the prices and trading      
activity of the Redeemable Common Stock and the Common Stock with that of       
certain other comparable publicly-traded companies and their securities; (vii)  
reviewed the financial terms, to the extent publicly available, of certain      
comparable acquisition transactions and other commercial arrangements which     
Morgan Stanley deemed relevant; (viii) reviewed the Merger Agreement (together  
with all of the exhibits thereto), the 1990 Merger Agreement and the existing   
corporate governance arrangements between Genentech and Roche; and (ix)         
performed such other analyses and reviewed such other information as Morgan     
Stanley deemed appropriate.                                                     

     In arriving at its opinion, Morgan Stanley assumed and relied upon, without
independent verification, the accuracy and completeness of information reviewed 
by it for the purposes of its opinion. With respect to the financial            
projections, Morgan Stanley assumed that such projections were reasonably       
prepared on bases reflecting the best currently available estimates and         
judgments of the future financial performance of Genentech. Morgan Stanley did  
not make any independent valuation or appraisal of the assets or liabilities of 
Genentech, nor was Morgan Stanley furnished with any such appraisals. Morgan    
Stanley's opinion was necessarily based upon economic, market and other         
conditions as in effect on, and the information made available to Morgan Stanley
as of, the date of its opinion. In addition, Morgan Stanley did not express any 
opinion as to the actual price at which the Special Common Stock will trade     
following the consummation of the Proposed Transactions.                        

   In arriving at its opinion, Morgan Stanley was not authorized to solicit,
and did not solicit, interest from any party with respect to the acquisition of 
Genentech or any of its assets, nor did Morgan Stanley negotiate with any of the
parties, other than in one meeting with Roche.                                  

    The following is a summary of certain analyses performed by Morgan Stanley
and reviewed by Morgan Stanley with the Independent Committee on July 6, 1995   
and the Genentech Board, the Special Committee and the Independent Committee on 
July 7, 1995.                                                                   

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UNAFFECTED SHARE PRICE                                                          

   As part of its analysis Morgan Stanley analyzed the price at which shares
of the Common Stock may trade in the absence of the Proposed Transactions (the  
"Unaffected Share Price").                                                      

  In performing this analysis, Morgan Stanley calculated certain financial
ratios for Genentech, certain companies in the biotechnology industry (such     
companies being Amgen Inc., Biogen, Inc., Centocor, Inc., Chiron Corporation,   
Genzyme Corporation and Immunex Corporation, collectively, the "Biotech         
Companies"), and certain companies in the pharmaceutical industry (such         
companies being Abbott Laboratories, American Home Products Corporation, Amgen  
Inc., Bristol-Myers Squibb Company, Eli Lilly and Company, Johnson & Johnson,   
Merck & Co., Inc., Pfizer Inc., Rhone-Poulenc Rorer, Schering-Plough            
Corporation, The Upjohn Company and Warner-Lambert Company, collectively, the   
"Pharma Companies"). These ratios included the ratio of the closing price of    
shares of such companies on June 30, 1995 to the estimated EPS of such companies
for the calendar year ended December 31, 1996 (the "P/E Ratio"), and the        
relationship between the P/E Ratio and five-year estimated compound annual      
growth rate of EPS of such companies. The estimates of EPS and five-year        
estimated compounded annual growth rate were from IBES as of June 24, 1995.     

Morgan Stanley determined that the current Unaffected Share Price was 
likely to be in a range from $35 to $45, implying a range of P/E Ratios from 23x
to 30x based on projections of earnings prepared by Genentech's management.     

PRESENT VALUE OF FUTURE UNAFFECTED SHARE PRICES                                 

 Morgan Stanley also estimated the level at which the Common Stock might
trade in the future in the absence of the Proposed Transactions based on        
Genentech's management projections and current market conditions (the "Future   
Unaffected Share Prices") which were then discounted to the present. Estimated  
Future Unaffected Share Prices were calculated, as of June 30, 1996, 1997, 1998 
and 1999, based on P/E Ratios ranging from 14x to 30x and, assuming a mid-point 
within the range considered by Morgan Stanley, implied Future Unaffected Shares 
Prices of $41.00, $46.00, $52.50 and $67.50, as of June 30, 1996, 1997, 1998 and
1999, respectively. These Future Unaffected Share Prices were discounted back to
the present based on discount rates ranging from 17% to 25%. Based on, among    
other things, these calculations and certain assumptions regarding P/E Ratios   
and discount rates, Morgan Stanley determined that the present value of Future  
Unaffected Share Prices ranged from $32 to $38 per share.                       

PREMIUM TO UNAFFECTED SHARE PRICE                                               

   Morgan Stanley analyzed the premia over the unaffected market prices paid
in selected precedent transactions in the biotechnology and pharmaceutical      
industries and observed that such premia ranged from 14% to 101%. Morgan Stanley
also noted that the premia paid in transactions by acquirors who were also      
controlling shareholders were expected to be generally lower than the premia    
paid in transactions with non-controlling shareholders. For illustrative        
purposes, Morgan Stanley indicated that a premium of 30% to 60% over $40 per    
share, the midpoint of the range of Unaffected Share Prices, implied values of  
$52 to $64 per share of Common Stock.                                           

DISCOUNTED CASH FLOW ANALYSIS                                                   

Morgan Stanley calculated the present value of the future streams of  
after-tax cash flows implied by projections prepared by Genentech's management  
for the period from 1995 through 1999, excluding the impact of the Licensing    
Agreement. After-tax cash flows were calculated as the after-tax earnings of    
Genentech, plus amortization and depreciation, less net changes in non-cash     
working capital and capital expenditures. Morgan Stanley calculated terminal    
values for Genentech by applying a range of multiples from 18.0x to 30.0x to    
projected earnings in 2000 of Genentech. The cash-flow streams and terminal     
values were then discounted to present values using a range of discount rates   
from 15% to 23%. Morgan Stanley noted that the per share discounted cash flow   
for the Common Stock implied by discount rates ranging from 15% to 19% and      
terminal multiples of 20.0x to 25.0x ranged from $41 to $56 per share.          

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THEORETICAL VALUATION OF OPTIONS PACKAGE                                        

   Morgan Stanley analyzed the option components of the Special Common Stock
to determine the theoretical value of the options package received by Genentech 
stockholders (other than Roche) pursuant to the Merger. In performing this      
analysis, Morgan Stanley calculated the present value of the Put Rights on July 
1, 1995, assuming the exercise of the Put Rights at a price of $60 per share on 
July 1, 1999, to be $46.97 based on a discount rate of 6.31%, the rate          
applicable to 4-year AA rated bonds as of June 30, 1995 (the "Assumed Discount  
Rate"). Morgan Stanley then calculated the value of the Call Rights by          
calculating the value of a call for a share of Common Stock struck at the Put   
Price and subtracting from such value the value of a call for a share of Common 
Stock struck at $82 per share (the "Final Call Price"). The calculation was     
based on the Black-Scholes model and assumed a price per share of $35 to $45 and
volatility of 30% to 50%. Morgan Stanley noted that the value of the options    
package ranged from $47.00 to $51.50 per share.                                 

ANALYSIS OF SPECIAL COMMON STOCK FUTURE STOCK PRICE                             

As part of its analysis for the Special Committee and the Independent 
Committee, Morgan Stanley estimated the level at which the Special Common Stock 
might trade in the future taking into consideration the potential effects of the
Call Rights and the Put Rights on the value of such stock ("Future Share        
Prices").                                                                       

Historical Stock Price Analysis                                                 

   Morgan Stanley compared the performance of the Redeemable Common Stock to
the S&P 400 Index (the "S&P 400 Index"), an index consisting of the Pharma      
Companies (the "Pharma Index") and an index consisting of the Biotech Companies 
(the "Biotech Index"), from January 1, 1990 to June 30, 1995. Morgan Stanley    
noted that over this period Genentech outperformed the S&P 400 Index and the    
Pharma Index and underperformed the Biotech Index. Morgan Stanley also noted    
that over this period the Genentech stock price was less volatile and traded in 
a narrower range than the Biotech Index.                                        

Analysis of Historical Discount to Near-Term Call Price                         

As part of its analysis of the Future Share Price, Morgan Stanley     
calculated the percentage discount of the actual price per share of the         
Redeemable Common Stock to the near-term redemption prices applicable from time 
to time to the Redeemable Common Stock from January 1, 1991 to June 30, 1995.   
The discounts were 31.3%, 29.4%, 12.0%, 10.5% and 18.5% at June 30, 1991, 1992, 
1993, 1994 and 1995, respectively. Morgan Stanley applied these discounts to the
redemption prices applicable to the Special Common Stock under the Call Rights  
for the quarters ended from June 30, 1995 to June 30, 1999 to arrive at implied 
Future Share Prices of $42.11, $45.86, $61.60, $68.05 and $66.80 at July 1, 1995
and June 30, 1996, 1997, 1998 and 1999, respectively. Morgan Stanley also       
calculated the present value of the Put Rights by discounting the Put Price to  
the relevant period at the Assumed Discount Rate. Morgan Stanley determined that
the present value of the Put Rights as of June 30, 1995 was $46.97.             

Analysis of Historical Internal Rate of Return to Call Price                    

As part of its analysis of the Future Share Price, Morgan Stanley     
calculated the IRR implied by the historical relationship of the trading prices 
of the Redeemable Common Stock to the end-term redemption price of $60 per share
on June 30, 1995. The resulting IRRs were 21.5%, 23.6%, 16.8% and 21.8% at June 
30, 1991, 1992, 1993 and 1994, respectively. The average IRR over such period   
was 21.6%. Morgan Stanley applied these IRRs to the redemption prices applicable
to the Special Common Stock under the Call Rights for the quarters ended from   
June 30, 1995 to June 30, 1999 to arrive at implied Future Share Prices of      
$37.58, $43.49, $60.13 and $67.31 at July 1, 1995 and June 30, 1996, 1997 and   
1998, respectively. Morgan Stanley also applied the average IRR to the          
redemption prices applicable to the Special Common Stock under the Call Rights  
for the quarters ended from June 30, 1995 to June 30, 1999 to arrive at implied 
Future Share Prices of $37.45, $45.56, $55.42 and $67.41 at July 1, 1995 and    
June 30, 1996, 1997 and 1998, respectively.                                     

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Comparison of Historical Share Prices to Implied P/E Ratios                     

As part of its analysis of the Future Share Price, Morgan Stanley     
calculated implied Future Share Prices for the Common Stock, in the absence of  
the Proposed Transactions, at June 30, 1995, 1996, 1997, 1998 and 1999 based on 
P/E Ratios ranging from between 26x and 28x in 1995 to between 18x and 20x in   
1999, and based on Genentech's management projections of EPS as of June 30 for  
such years, excluding the impact of the Licensing Agreement, to arrive at       
midpoint implied Future Share Prices at such periods of $40.50, $41.00, $46.00, 
$52.08 and $67.45, respectively.                                                

    Morgan Stanley repeated its analysis assuming the Licensing Agreement were
in effect to arrive at midpoint implied Future Share Prices of $56.70, $54.75,  
$53.59, $53.97 and $64.22 at July 1, 1995 and June 30, 1997, 1998 and 1999,     
respectively.                                                                   

Morgan Stanley observed that, based on this analysis, the Common Stock
would generally be expected to trade in a range bounded by the present value of 
the Put Rights and the redemption prices applicable from time to time to the    
Common Stock. Morgan Stanley also noted that the present value of the Put Rights
exceeded the implied Future Share Prices from June 30, 1995 through the first   
quarter of 1997 and that, based on the historical volatility of biotechnology   
stocks as well as the general risks associated with the business of             
biotechnology companies and general market risks, the Put Rights represented    
significant "downside protection" to investors.                                 

ANALYSIS OF INTERNAL RATE OF RETURN OF THE PUT RIGHTS AND THE CALL RIGHTS       

As part of its analysis for the Special Committee and the Independent 
Committee, Morgan Stanley calculated the IRRs implied by the Redeemable Common  
Stock closing price of $48.625 on June 30, 1995, assuming the exercise of the   
Put Rights at the Put Price on July 1, 1999 and the exercise of the Call Rights 
at the Final Call Price on June 30, 1999. Morgan Stanley noted that the         
redemption prices applicable pursuant to the Call Rights imply a compound annual
growth rate in such prices of 7.6%, and observed, therefore, that the IRR is    
higher if the Call Rights are exercised sooner. Based on these assumptions,     
Morgan Stanley noted that the Final Call Price implied an IRR of 14.0% and the  
Put Price implied an IRR of 5.4%.                                               

SENSITIVITY ANALYSIS OF PREMIUMS AND MULTIPLES IMPLIED BY PROPOSED TRANSACTION  

As part of its analysis for the Special Committee and the Independent 
Committee, Morgan Stanley also calculated certain premia and multiples implied  
by the Put Rights and the Call Rights as discussed below.                       

Analysis of Premium of Present Value of Put Rights and Call Rights to June 30,  
1995 Share Price                                                                

     In performing this analysis, Morgan Stanley calculated the present value as
of June 30, 1995 of the Put Price and the Final Call Price, assuming exercise of
the Put Rights on July 1, 1999 and exercise of the Call Rights on June 30, 1999,
and calculated the premium represented by such values over the Unaffected Share 
Price. Morgan Stanley noted that the present value of the Put Price on June 30, 
1995 was $46.97 at the Assumed Discount Rate which represented a premium of 4%  
to 34% over the Unaffected Share Price range of $35 to $45. Morgan Stanley noted
that the present value of the Final Call Price on July 1, 1995 was $45.76 to    
$50.29 at discount rates of 17% and 13%, respectively, which represented a      
discount of 3% to a premium of 44% over the Unaffected Share Price range of $35 
to $45 per share.                                                               

Analysis of Call Price Premium to Unaffected Share Price                        

     Morgan Stanley calculated the premium to the estimated implied Future Share
Prices implied by the near-term call price under the Call Rights as in effect   
from time to time and ranges of estimated implied Future Share Prices of between
$39 and $42 for 1995, between $39.36 and $42.64 for 1996, between $44 and $48   
for 1997, between $49.60 and $54.56 for 1998 and between $63.90 and $71.00 for  
1999. Morgan Stanley noted that the median of the premium to implied Future     
Share Price of the near-term call price was 59.1% for the lower set of implied  
Future Share Prices and 45.8% for the higher set of implied Future Share Prices.

Call Price Implied Multiple Analysis                                            

     Morgan Stanley analyzed the P/E Ratios implied by the call prices in effect
as of July 1, 1995 and June 30, 1996, 1997, 1998 and 1999. Based on projections 
of EPS prepared by Genentech's management for 1996,                             

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1997, 1998, 1999 and 2000, Morgan Stanley calculated implied P/E Ratios of      
40.8x, 39.6x, 35.0x, 30.6x and 23.1x as of July 1, 1995 and June 30, 1996, 1997,
1998 and 1999, respectively.                                                    

LICENSING AGREEMENT                                                             

 In connection with its presentation, Morgan Stanley also calculated the
present value of the incremental future streams of after-tax cash flows expected
to result from the Licensing Agreement. Morgan Stanley noted that at discount   
rates ranging from 15% to 19% and terminal multiples ranging from 20.0x to      
25.0x, the implied incremental discounted cash flow value per share of Common   
Stock ranged from negative $(0.81) to negative $(1.50). Morgan Stanley noted    
that at discount rates ranging from 15% to 19% and terminal multiples ranging   
from 20.0x to 25.0x, assuming an annual improvement in international revenues of
between 10% to 20%, the incremental contribution of the Licensing Agreement to  
Genentech's results ranged from negative $(0.27) to negative $(1.20).           

GENERAL                                                                         

The preparation of a fairness opinion is a complex process and is not 
necessarily susceptible to a partial analysis or summary description. Morgan    
Stanley believes that its analyses must be considered as a whole and that       
selecting portions of its analyses, without considering all analyses, would     
create an incomplete view of the process underlying its opinion. In addition,   
Morgan Stanley may have given various analyses more or less weight than other   
analyses, and may have deemed various assumptions more or less probable than    
other assumptions, so that the ranges of valuations resulting from any          
particular analysis described above should not be taken to be Morgan Stanley's  
view of the actual value of Genentech.                                          

   In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and   
other matters, many of which are beyond the control of Genentech. The analyses  
performed by Morgan Stanley are not necessarily indicative of actual values,    
which may be significantly more or less favorable than suggested by such        
analyses. Such analyses were prepared solely as a part of Morgan Stanley's      
analysis of the fairness of the consideration to be received by the holders of  
shares of Common Stock (other than Roche and its affiliates) and Genentech and  
were provided to the Special Committee and the Independent Committee in         
connection with the delivery of Morgan Stanley's July 7, 1995 opinion. The      
analyses do not purport to be appraisals or to reflect the prices at which      
Genentech might actually be sold. Because such estimates are inherently subject 
to uncertainty, none of Genentech, Morgan Stanley or any other person assumes   
responsibility for their accuracy. Consequently, the Morgan Stanley analyses    
described above should not be viewed as determinative of the Special            
Committee's, the Independent Committee's or Genentech management's opinion with 
respect to the value of Genentech or of whether the Special Committee, the      
Independent Committee or Genentech management would have been willing to agree  
to different consideration.                                                     

ENGAGEMENT OF MORGAN STANLEY                                                    

     The Independent Committee retained Morgan Stanley based upon its experience
and expertise. Morgan Stanley is an internationally recognized investment       
banking and advisory firm. Morgan Stanley, as part of its investment banking    
business, is continuously engaged in the valuation of businesses and securities 
in connection with mergers and acquisitions, negotiated underwritings,          
competitive biddings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. In the      
course of its trading activities, Morgan Stanley may, from time to time, have a 
long or short position in, and buy and sell securities of, Roche and Genentech. 

The consideration to be received by the stockholders of Genentech and 
Genentech pursuant to the Proposed Transactions was determined through          
negotiations between Genentech and Roche. Morgan Stanley participated in only   
one negotiating meeting with Roche.                                             

Genentech has agreed to pay Morgan Stanley a fee of $1.4 million which
became due upon delivery of its opinion rendered on July 7, 1995. Morgan Stanley
will also receive fees of (i) $1.4 million upon consummation of the Merger and  
(ii) $2.0 million upon the acquisition by Genentech, at Roche's direction, of   
the Special Common Stock pursuant to Roche's exercise of the Call Rights.       
Genentech has also agreed to reimburse Morgan Stanley for expenses as incurred  
and to indemnify and hold harmless Morgan Stanley and                           

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certain related parties to the full extent lawful from and against certain      
liabilities and expenses, including certain liabilities under the federal       
securities laws, in connection with its engagement.                             

INTERESTS OF CERTAIN PERSONS IN THE PROPOSED TRANSACTIONS                       

   DIRECTORS AND OFFICERS.  There will be no change in Genentech's directors
or officers as a result of the Proposed Transactions.                           

   The Amended Governance Agreement will provide (as the Existing Governance
Agreement currently provides) that in any election of directors, Roche will     
continue to vote its shares of Common Stock and shares of Special Common Stock  
for all nominees in proportion to the votes cast by the other holders of Special
Common Stock (excluding, at Roche's option, any votes cast by any person or     
group that beneficially owns at least 12% of the Equity Securities (as          
hereinafter defined) not beneficially owned by Roche Holding); provided that    
Roche may cast all of its votes in favor of any nominee designated by it        
pursuant to the Amended Governance Agreement. See "The Amended Governance       
Agreement -- Certain Agreements of Roche as to Voting."                         

 The Existing Governance Agreement, as modified by the Merger Agreement,
provides that, on and after the Termination Date, the Genentech Board will      
include two nominees designated by Roche and two officers of Genentech nominated
by the nominating or proxy committee of the Genentech Board. The remainder of   
the Genentech Board at such time is to be comprised of Independent Directors.   
The Existing Governance Agreement, as modified by the Merger Agreement,         
provides, in general, that after the Termination Date, Roche will be entitled to
designate, in addition to its two nominees described above, a portion of the    
total number of Independent Directors equal to Roche's proportional voting      
interest in Genentech's Equity Securities and that the Company will, to the     
extent necessary, increase the size of the Genentech Board and cause the Board  
to fill vacancies created by any such increase to achieve the called-for result.
See "The Amended Governance Agreement -- Board of Directors" and "The Merger    
Agreement -- Additional Covenants and Agreements -- Continued Applicability of  
the Existing Governance Agreement."                                             

     If the Proposal is approved and the Merger is consummated, the parties will
enter into the Amended Governance Agreement, under which Roche would continue to
have the right to designate two directors of Genentech, and its right to        
nominate Independent Directors, on the same terms as are currently applicable   
under the Existing Governance Agreement, as modified by the Merger Agreement, on
and after the Termination Date, would be postponed until the expiration of the  
Put Period and payment of the Put Price to the Depositary. Thus, following the  
end of the period during which the Put Rights may be exercised, or if the       
Proposal is not approved by stockholders (or for any other reason the Merger is 
not consummated), Roche, based on its current holdings of Genentech stock, will 
have the right to designate more than a majority of the members of the Genentech
Board, with all but two of such Roche designees being Independent Directors. See
"The Amended Governance Agreement -- Board of Directors."                       

     OWNERSHIP OF COMMON STOCK BY OFFICERS AND DIRECTORS.  For information as to
Common Stock and securities exercisable for or convertible into Common Stock    
owned by officers and directors of Genentech, see "Security Ownership of        
Management."                                                                    

  TREATMENT OF EMPLOYEE STOCK OPTIONS.  The Merger Agreement provides that
the Company will take all action necessary to ensure that, at the Effective     
Time, each outstanding Option issued pursuant to the Option Plans (whether or   
not vested or exercisable) will, without any action by the holder thereof,      
constitute an option to acquire, on the same terms and conditions as were       
applicable under such Option immediately prior to the Effective Time, that      
number of shares of Special Common Stock equal to the number of shares of Common
Stock subject to such Option immediately prior to the Effective Time, at the    
price or prices per share in effect pursuant to the terms of such Option        
immediately prior to the Effective Time. Holders of Options include officers and
directors of the Company who were involved in the negotiation of the Proposed   
Transactions. To the extent that the Proposed Transactions would have a positive
effect upon the trading price of the shares underlying such Options or would, as
a result of the Put Rights, place a "floor" on the value of such underlying     
shares, such Options, as is the case with the underlying shares held by         
stockholders of the Company, would receive those same benefits.                 

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SOURCE OF FUNDS; EXPENSES                                                       

  Until such time, if any, as either the Call Rights or the Put Rights are
exercised, Genentech will not be obligated to pay any funds in connection with  
the exercise of such Rights. Based on the 61,868,803 shares of Common Stock     
outstanding and issuable pursuant to securities outstanding on the Record Date  
and held by persons other than Roche and its affiliates, exercise of the Call   
Rights during the quarter ending June 30, 1999 would require the payment of     
approximately $5.1 billion, and, if the Call Rights were not exercised, complete
exercise by Genentech's stockholders of the Put Rights would require the payment
of approximately $3.7 billion.                                                  

    Under the Amended Governance Agreement, Roche will, if the Call Rights are
exercised, pay to a depositary sufficient funds to satisfy the Company's        
obligations in respect of the Call Rights. See "The Amended Governance          
Agreement -- Redemption of Special Common Stock."                               

    The Company's obligation to pay the Put Price to stockholders who properly
exercise their Put Rights will be conditioned upon Genentech's having received  
from Roche, or an affiliate of Roche, the funds required to be contributed to   
the Company by Roche under the Amended Governance Agreement. See "The Charter   
Amendment; Description of the Special Common Stock -- Put Rights;" "-- Condition
to the Company's Obligations;" "The Amended Governance Agreement -- Put Rights  
with Respect to the Special Common Stock;" "-- Capital Contribution and         
Assumption of Put Obligations by Roche" and "Certain Information Concerning     
Roche and Roche Holding." Under the Amended Governance Agreement, Roche has     
agreed to either (i) contribute to Genentech the funds required to satisfy the  
Put Rights and certain other liabilities of the Company or (ii) elect to        
purchase directly from Genentech's stockholders the shares of Special Common    
Stock which such stockholders elect to have purchased pursuant to their exercise
of the Put Rights. If Roche makes the contribution referred to in clause (i) of 
the preceding sentence, Genentech will issue to Roche (or an affiliate of Roche)
a number of shares of Common Stock equal to the number of shares of Special     
Common Stock redeemed by Genentech pursuant to exercises of the Put Rights. See 
"The Amended Governance Agreement -- Capital Contribution and Assumption of Put 
Obligations by Roche" and "Certain Information Concerning Roche and Roche       
Holding." The obligations of Roche referred to in the second preceding sentence 
are guaranteed by Roche Holding. See "Guaranty of Roche Holding." Amended       
Article Third provides that Genentech will take (and will have no authority not 
to take) all necessary action to enforce, and to cause the performance of,      
Roche's and Roche Holding's obligations with respect to payment of the Put Price
under the Amended Governance Agreement and the Guaranty and to ensure that Roche
and Roche Holding otherwise comply with their respective obligations described  
under "The Amended Governance Agreement -- Capital Contribution and Assumption  
of Put Obligations by Roche" and under the Guaranty. See "Guaranty of Roche     
Holding." Genentech has appointed the Agent to enforce the respective           
obligations of Roche and Roche Holding described under "The Amended Governance  
Agreement -- Capital Contribution and Assumption of Put Obligations by Roche"   
and under the Guaranty in the event of the occurrence of an Insolvency Event.   
See "The Amended Governance Agreement -- The Agency Agreement."                 

  Genentech expects to incur certain near-term expenses in connection with
the negotiation of the Proposed Transactions, the preparation of this Proxy     
Statement/Prospectus and the payment of applicable filing fees. Such expenses   
are estimated to be $5,000,000 (legal), $5,800,000 (financial advisors),        
$500,000 (accounting), $500,000 (printing), $15,000 (solicitation), $1,000,000  
(filing) and up to $3,500,000 (settlement of Stockholder Litigation). At such   
time, if any, as the Call Rights and Put Rights are exercised, the Company is   
likely to incur additional expenses related to printing costs and filing fees,  
and possibly, legal and accounting expenses. In addition to the fees of the     
Independent Committee's and the Special Committee's financial advisors set forth
above, if Genentech effects the redemption of the Special Common Stock pursuant 
to Roche's exercise of the Call Rights, Lehman Brothers will be entitled to an  
additional fee of $3,000,000 and Morgan Stanley will be entitled to an          
additional fee of $2,000,000. See "The Proposed Transactions -- Opinions of     
Financial Advisors -- Lehman Brothers -- Engagement of Lehman Brothers"         
and -- "Morgan Stanley -- Engagement of Morgan Stanley."                        

STOCKHOLDER LITIGATION                                                          

 The Company, its directors (other than Dr. Levinson), Roche, and former
director Dr. Armin Kessler and former director and Chief Executive Officer, G.  
Kirk Raab are named as defendants in several                                    

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shareholder class action and derivative complaints, pending in the Court of     
Chancery of the State of Delaware in and for New Castle County consolidated     
under the caption In re Genentech, Inc. Shareholders Litigation, Cons. C.A. No. 
14265 (the "Action"). Plaintiffs in the Action, who purport to represent the    
public shareholders of Genentech and, in the derivative actions, the Company, as
a nominal plaintiff, allege, among other things, that: the terms of the Proposed
Transactions are unfair, and were imposed by Roche for Roche's own benefit; the 
prices at which Roche would be able to cause redemption of the Special Common   
Stock are unfairly low, and that the trading price of such shares would be      
higher if the trading prices were not "capped" by the existence of the Call     
Rights option; that the directors of Genentech breached their fiduciary duties  
by negotiating and agreeing to the Proposed Transactions; and that the election 
of directors at Genentech's regular Annual Meeting on April 13, 1995 was void   
because the disclosures in connection with such meeting did not disclose that   
the Genentech Board was negotiating the terms of the Proposed Transactions with 
Roche. As relief, the complaints in the Action seek, among other things, a      
preliminary and permanent injunction against consummation of the Proposed       
Transactions, including against any exercise by Roche of its right to cause     
redemption and against any exercise by the holders of Special Common Stock of   
the Put Rights; an order voiding the Proposed Transactions in the event it is   
approved by the vote of the stockholders; and damage in an unspecified amount.  

   On July 7, 1995, counsel for defendants and counsel for plaintiffs in the
Action entered into an agreement in principle contemplating the settlement of   
the Action. Subject to final court approval, the settlement provides that the   
prices to be paid by Roche if the Call Rights are exercised will be $0.50 per   
share higher in each period than would otherwise be applicable pursuant to the  
terms of the Proposed Transactions, resulting in a final price of $82.50. See   
"The Charter Amendment; Description of the Special Common Stock -- Call Rights" 
for a description of the circumstances under which court approval, if any, would
become final. In addition, the proposed settlement provides that the terms of   
the Licensing Agreement shall be amended to provide that the Company (rather    
than Roche) shall be responsible for the cost, if incurred, of termination of up
to six Genentech Europe Limited employees. The agreement in principle further   
provides for the review by plaintiffs' counsel of draft proxy materials and for 
the amendments to the Certificate of Incorporation of the Company to be adopted 
pursuant to the Proposed Transactions to include a provision reflecting the     
terms of the Governance Agreement relating to the exercise of the Call Rights.  
The agreement in principle further recognizes that the Independent Committee was
created and that the Independent Committee engaged in the review and            
consideration described under " -- Background of the Proposed Transactions." The
agreement in principle, the terms of which are reflected in a memorandum of     
understanding, is further subject to the completion of discovery procedures by  
plaintiffs' counsel, and certain other conditions. In the event that a          
definitive stipulation of settlement is entered into in connection with the     
proposed settlement and such settlement is approved by the court, the terms of  
such settlement are contemplated to include the settlement, release and bar of  
all claims against the defendants and certain other claims which have been or   
could have been asserted relating to the Proposed Transactions, the actions of  
Roche and the other defendants relating to the Proposed Transactions, including 
without limitation any claims with respect to Mr. Raab's request for personal   
financial assistance from Roche Holding and any related discussions,            
communication and action, this Proxy Statement/Prospectus or any of the         
transactions, disclosures, facts and allegations that are or could be (insofar  
as such transactions, disclosures, facts and allegations relate to the Proposed 
Transactions) the subject of the Action. In addition, the agreement in principle
provides that the defendants will not oppose any application that plaintiffs'   
counsel may make in connection with the proposed settlement for an award from   
the court of counsel fees and expenses in an amount not to exceed $3.5 million. 
Any such court-awarded counsel fees and expenses will be paid by the Company. If
the settlement is presented to the court for approval, shareholders of the      
Company will receive a detailed written notice describing the background of the 
settlement, the terms of the settlement and the effect of judicial approval of  
the settlement upon the future assertion of claims against the defendants.      

    There can be no assurance that the settlement submitted for court approval
will be approved by the court. In the event that the settlement is not approved,
the parties would be placed in the same positions they would have held had the  
parties not agreed in principle to the proposed settlement of the Action.       

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   Although plaintiffs' counsel have been given an opportunity to review and
comment upon draft proxy materials pursuant to the agreement in principle,      
plaintiffs' counsel does not assume responsibility for the accuracy of this     
Proxy Statement/Prospectus.                                                     

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS AND ACCOUNTING TREATMENT

CERTAIN FEDERAL INCOME TAX CONSEQUENCES                                         

    Wachtell, Lipton, Rosen & Katz, special counsel to the Company, are of the
opinion that the following are the material United States federal income tax    
consequences, under currently applicable law, of the Merger as well as of the   
ownership of the Special Common Stock, to the holders of shares of Common Stock 
who are United States citizens or resident individuals and who hold such shares 
as capital assets and will hold Special Common Stock as a capital asset. It     
should be noted that an opinion of counsel is not binding on the Internal       
Revenue Service and that no ruling will be requested from the Internal Revenue  
Service on these or any other issues. The following discussion may not be       
applicable with respect to other categories of stockholders, including corporate
and foreign stockholders and stockholders who acquired their shares of Common   
Stock pursuant to the exercise of employee stock options or otherwise as        
compensation. Such discussion does not address the tax consequences of the      
Merger to holders of Options.                                                   

    The Merger.  Each share of Common Stock held by a stockholder prior to the
Effective Time will be considered to have been exchanged with the Company for   
the Special Common Stock (the "Exchange"). Although the issue is not free from  
doubt, except as described below, a stockholder whose shares of Common Stock are
exchanged for Special Common Stock by virtue of the Merger (a "Receiving        
Stockholder") should not recognize gain or loss with respect to each share so   
exchanged, and the Receiving Stockholder's basis for the Special Common Stock   
should be equal to such stockholder's basis in the shares of Common Stock       
exchanged by virtue of the Merger for Special Common Stock. The holding period  
of the Special Common Stock received in the Exchange will include the period    
during which the stock surrendered in the Exchange was held by the Receiving    
Stockholder.                                                                    

    In connection with the Proposed Transactions, Roche and Roche Holding have
undertaken certain obligations to the Company with respect to the stockholders' 
rights to put the Special Common Stock to the Company (the "Put Obligation").   
See "The Charter Amendment; Description of the Special Common Stock -- Put      
Rights." Counsel believes that the Put Obligation should be treated as an       
integral and incidental part of the Special Common Stock and should not cause   
the Special Common Stock to be characterized as anything other than stock of the
Company for federal income tax purposes. These issues are not free from doubt,  
however. If the Put Obligation were to be considered a property right separate  
from the Special Common Stock, it could be treated as additional taxable        
consideration received by the Receiving Stockholders in the Exchange.           

    The Special Common Stock.  Distributions, if any, paid with respect to the
Special Common Stock will be taxable dividends to the extent of the Company's   
applicable earnings and profits. To the extent that distributions on the Special
Common Stock exceed the Company's applicable earnings and profits, the amount   
distributed will be applied to reduce the tax basis in such Special Common Stock
and, to the extent that any such amount distributed exceeds such tax basis, will
constitute long-term or short-term capital gain depending on the holding period 
for such Special Common Stock.                                                  

     Because of the Call Rights and Put Rights to which the Special Common Stock
is subject, the Special Common Stock could be viewed, for federal income tax    
purposes, as not "participating in corporate growth to any significant extent," 
in which case it would be treated as preferred stock for purposes of Section 305
of the Code. In that event, a holder of Special Common Stock would be required, 
during the period starting at the Effective Time and ending during the Put      
Period, to include currently in gross income, to the extent of the Company's    
applicable earnings and profits, for each share of Special Common Stock a       
portion (determined by analogy to the original issue discount rules for debt    
instruments) of the excess of (x) the per share price paid to holders upon      
exercise of the Put Rights over (y) the fair market value of such share at      
issuance. While there is no authority directly on point and the issue is not    
free from doubt, counsel believes that the Special                              

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Common Stock should not be recharacterized as preferred stock for this purpose  
and the Company intends to treat it accordingly.                                

  Gain or loss on the sale of Special Common Stock (including a redemption
pursuant to the Call Rights, or the exercise of Put Rights by the stockholder   
with respect to all the Special Common Stock a person holds or is considered to 
hold through the application of certain ownership attribution rules) should be  
long- or short-term capital gain or loss depending on such stockholder's holding
period. The redemption of the Special Common Stock pursuant to the exercise of  
Put Rights by a stockholder of less than all the Special Common Stock such      
stockholder holds or is considered to hold through the application of certain   
ownership attribution rules will be subject to the stock redemption rules of    
Section 302 of the Code. Under those rules, the entire cash proceeds received   
will be treated as a distribution taxable as a dividend (to the extent of the   
Company's available earnings and profits), unless the redemption is             
"substantially disproportionate" with respect to the stockholder or is "not     
essentially equivalent to a dividend" with respect to the stockholder.          

The Special Common Stock should not be "Section 306 stock" within the 
meaning of Section 306(c) of the Code nor should it constitute a "conversion    
transaction" within the meaning of Section 1258(c) of the Code. Consequently,   
the provisions of Sections 306 and 1258 of the Code, which, generally, would    
increase the amount of ordinary income and decrease the amount of capital gain  
recognized by a stockholder as a result of holding or disposing of the Special  
Common Stock, should not be applicable to the Special Common Stock.             

    Backup Withholding.  Under certain circumstances, a holder of Common Stock
or Special Common Stock may be subject to "backup withholding." This withholding
applies only if the holder, among other things, (i) has failed to furnish the   
Company with his or her taxpayer identification number, (ii) has furnished the  
Company with an incorrect taxpayer identification number, (iii) has failed      
properly to report interest or dividends, or (iv) under certain circumstances   
fails to provide the Company or his or her securities broker with a certified   
statement, under penalty of perjury, that he or she is not subject to           
withholding. The backup withholding rate is 31% of "reportable payments."       
Reports will be furnished to the holders of Common Stock and Special Common     
Stock and the Internal Revenue Service for each calendar year stating the amount
of reportable payments paid during such year and the amount of tax withheld, if 
any, with respect thereto.                                                      

THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME  
TAXATION THAT MAY BE RELEVANT TO A PARTICULAR STOCKHOLDER IN LIGHT OF SUCH      
HOLDER'S PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. STOCKHOLDERS SHOULD 
CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF 
THE MERGER AND THE OWNERSHIP, EXCHANGE, REDEMPTION OR SALE OF THE SPECIAL COMMON
STOCK INCLUDING THE APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS AND        
POSSIBLE FUTURE CHANGES IN FEDERAL TAX LAWS.                                    

ACCOUNTING TREATMENT                                                            

     There will be no change in the total stockholders' equity of the Company as
a result of the exchange of Common Stock for Special Common Stock. No pro forma 
presentation of the effect of transferring the operations of Genentech Canada,  
Inc., Genentech Europe Limited, and Genentech Ltd. (Japan) to Roche under the   
Licensing Agreement is presented in this Proxy Statement/Prospectus because the 
financial impact of such transfers is not material to revenues, costs and       
expenses, net income or the balance sheet of Genentech.                         

  In connection with the Proposed Transactions, Genentech expects to incur
expenses totaling approximately $21 million of nonrecurring costs, which        
includes investment banking fees and legal fees incurred in connection with the 
negotiation and implementation of the Proposed Transactions, legal fees and     
other costs incurred in connection with the Stockholder Litigation, and other   
miscellaneous expenses. See "The Proposed Transactions -- Source of Funds;      
Expenses" and "-- Stockholder Litigation."                                      

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THE MERGER AGREEMENT

GENERAL                                                                         

  THE FOLLOWING DESCRIPTION OF THE MERGER AGREEMENT DOES NOT PURPORT TO BE
COMPLETE, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE TEXT OF THE      
MERGER AGREEMENT, WHICH IS ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS ANNEX 
A AND IS INCORPORATED HEREIN BY REFERENCE.                                      

THE MERGER                                                                      

     The Merger Agreement provides that, subject to the approval and adoption of
the Merger Agreement by the stockholders of Genentech and the satisfaction or   
waiver of the other conditions to the Merger, Merger Subsidiary will be merged  
with and into Genentech in accordance with the Delaware Law, whereupon the      
separate existence of Merger Subsidiary will cease, and Genentech will be the   
surviving corporation. At the Effective Time, the conversion of Common Stock,   
and the conversion of shares of Merger Subsidiary Common Stock, will be effected
as described in "-- Conversion and Exchange of Common Stock and Merger          
Subsidiary Common Stock."                                                       

EFFECTIVE TIME                                                                  

    Following the adoption of the Merger Agreement and subject to satisfaction
or waiver of the conditions to closing, contained in the Merger Agreement, the  
Merger will become effective at such time as the Certificate of Merger is duly  
filed with the Secretary of State of Delaware or at such later date and time as 
is specified in the Certificate of Merger. It is currently anticipated that the 
filing of the Certificate of Merger will be made as soon as practicable after   
all conditions contemplated by the Merger Agreement have been satisfied or      
waived and that the Effective Time will occur on the date of the Special        
Meeting, or as soon thereafter as practicable, assuming the conditions set forth
in the Merger Agreement are fully satisfied or waived. See "-- Conditions to    
Consummation of the Merger."                                                    

CONVERSION AND EXCHANGE OF COMMON STOCK AND MERGER SUBSIDIARY COMMON STOCK      

At the Effective Time:                                                

     (a) Each share of Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares of Common Stock held by
    Roche or its affiliates (the "Roche Shares"), which shares of Common Stock
 will be cancelled, and thereupon the holders thereof will cease to have
    rights with respect thereto, and other than shares held in the treasury of
Genentech) will be converted into one share of Special Common Stock.  

        (b) The common stock, par value $.02 per share, of Merger Subsidiary
issued and outstanding immediately prior to the Effective Time will be
converted into a number of shares of Common Stock equal to, in the    
aggregate, the number of Roche Shares.                                

   (c) Each outstanding Option issued pursuant to the Option Plans
(whether or not vested or exercisable) will, without any action by the
holder thereof, constitute an option to acquire, on the same terms and
  conditions as were applicable under such Option immediately prior to the
    Effective Time, that number of shares of Special Common Stock equal to the
   number of shares of Common Stock subject to such Option immediately prior
    to the Effective Time, at the price or prices per share in effect pursuant
to the terms of such Option immediately prior to the Effective Time.  

EXCHANGE OF STOCK CERTIFICATES                                                  

    The Merger Agreement provides that, at the Effective Time, Genentech shall
make available to an exchange agent selected by it (the "Exchange Agent"), for  
the benefit of holders of Common Stock, a sufficient number of certificates     
representing shares of Special Common Stock required to effect the delivery of  
the aggregate number of shares of Special Common Stock required to be issued    
pursuant to the Merger                                                          

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Agreement (the certificates representing such shares of Special Common Stock    
being referred to herein as the "Exchange Fund").                               

 Promptly after the Effective Time, the Exchange Agent will mail to each
holder of record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Common Stock (which may be     
certificates that formerly represented shares of Redeemable Common Stock which  
were automatically converted into Common Stock after June 30, 1995) (the        
"Certificates") (i) a form of letter of transmittal (which will specify that    
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent) and  
(ii) instructions for use in effecting the surrender of the Certificates for    
exchange. Upon surrender of Certificates to the Exchange Agent, together with   
such letter of transmittal duly executed and any other required documents, the  
holder of such Certificates will be entitled to receive for the shares of Common
Stock represented by such Certificates a like number of shares of Special Common
Stock and the Certificates so surrendered will be canceled.                     

Until so surrendered, Certificates will represent solely the right to 
receive shares of Special Common Stock. No dividends or other distributions, if 
any, that are declared after the Effective Time on the Special Common Stock and 
payable after the Effective Time will be paid to persons entitled by reason of  
the Merger to receive shares of Special Common Stock until such persons         
surrender their Certificates. Upon such surrender, there will be paid to the    
person in whose name the shares of Special Common Stock are issued any dividends
or other distributions having a record date after the Effective Time and payable
with respect to such Special Common Stock between the Effective Time and the    
time of such surrender. After such surrender, there will be paid to the person  
in whose name the shares of Special Common Stock are issued any dividends or    
other distributions on such Special Common Stock which have a record date after 
the Effective Time and prior to such surrender and a payment date after such    
surrender; such payment will be made on such payment date. In no event will the 
persons entitled to receive such dividends or other distributions be entitled to
receive interest on such dividends or other distributions. If any certificate   
representing Special Common Stock is to be issued in a name other than that in  
which the Certificate surrendered in exchange therefor is registered, it will be
a condition of such exchange that the Certificate so surrendered shall be       
properly endorsed and otherwise in proper form for transfer and that the person 
requesting such exchange shall pay to the Exchange Agent any transfer or other  
taxes required by reason of the issuance of certificates for such Special Common
Stock in a name other than that of the registered holder of the Certificate     
surrendered, or will establish to the satisfaction of the Exchange Agent that   
such tax has been paid or is not applicable.                                    

   The Exchange Agent will not be entitled to vote or exercise any rights of
ownership with respect to the Special Common Stock held by it from time to time 
hereunder, except that it shall receive and hold all dividends or other         
distributions paid or distributed with respect to such Special Common Stock for 
the account of the persons entitled thereto.                                    

Any portion of the Exchange Fund which remains unclaimed by the former
holders of shares of Common Stock for one year after the Effective Time will be 
delivered to Genentech and any former holders of Common Stock will thereafter   
have the right to look only to Genentech for payment of their claim for the     
Special Common Stock issuable to them.                                          

  NO TRANSFERS OF COMMON STOCK WILL BE MADE ON THE STOCK TRANSFER BOOKS OF
GENENTECH AFTER THE CLOSE OF BUSINESS ON THE DAY PRIOR TO THE DATE OF THE       
EFFECTIVE TIME.                                                                 

   STOCKHOLDERS OF GENENTECH SHOULD NOT SEND CERTIFICATES REPRESENTING THEIR
SHARES TO GENENTECH OR TO THE EXCHANGE AGENT PRIOR TO RECEIPT OF THE LETTER OF  
TRANSMITTAL.                                                                    

ADDITIONAL COVENANTS AND AGREEMENTS                                             

    Pursuant to the Merger Agreement, the Company, Roche and Merger Subsidiary
have also agreed as follows:                                                    

Stockholder Meeting.  The Company has agreed to cause a meeting of its
stockholders (the "Stockholder Meeting") to be duly called and held as soon as  
reasonably practicable for the purpose of voting on the                         

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approval and adoption of the Merger Agreement and the Merger (including the     
amendments to the Certificate of Incorporation of the Company to be effected by 
the Merger), and the directors of the Company have agreed, subject to their     
fiduciary duties, to recommend approval and adoption of the Merger Agreement and
the Merger (including such amendments) by the Company's stockholders. In        
connection with such meeting, the Company has agreed (i) to prepare promptly and
file with the Commission, to use all reasonable efforts to have cleared by the  
Commission and to thereafter mail to its stockholders as promptly as practicable
this Proxy Statement/Prospectus, a registration statement and all other         
documents which may be required to be filed or mailed in connection with such   
meeting and the consummation of the Proposed Transactions, (ii) to, subject to  
the fiduciary duties of the Genentech Board, use all reasonable efforts to      
obtain the necessary approvals by its stockholders of the Merger Agreement and  
(iii) to otherwise comply with all legal requirements applicable to such        
meeting.                                                                        

    Registration Statement.  Genentech has agreed to prepare promptly and file
with the Commission the Registration Statement with respect to the Special      
Common Stock and has agreed to use all reasonable efforts to cause the          
Registration Statement to be declared effective as promptly as practicable.     
Genentech has also agreed to take any action required to be taken under foreign 
or state securities or Blue Sky laws in connection with the issuance of Special 
Common Stock in the Merger.                                                     

   Reasonable Efforts.  The Company and Roche have agreed to, and to use all
reasonable efforts to, cause their respective subsidiaries to: (i) promptly make
all filings and seek to obtain all authorizations required under all applicable 
laws with respect to the Merger and the Proposed Transactions and to cooperate  
with each other with respect thereto; (ii) use all reasonable efforts to        
promptly take, or cause to be taken, all other actions and do, or cause to be   
done, all other things necessary, proper or appropriate to satisfy the          
conditions set forth in the Merger Agreement and to consummate and make         
effective the Proposed Transactions as soon as practicable (including seeking to
remove promptly any injunction or other legal barrier that may prevent such     
consummation); and (iii) not take any action which might reasonably be expected 
to impair the ability of the parties to consummate the Merger at the earliest   
possible time (regardless of whether such action would otherwise be permitted or
not prohibited under the Merger Agreement).                                     

    Continued Applicability of the Existing Governance Agreement.  The Company
and Roche have agreed, from and after July 1, 1995, that the arrangements       
between the Company and Roche under the Existing Governance Agreement will      
continue to bind the parties and that the time periods therein that expired on  
June 30, 1995 would be extended from June 30, 1995 until the Termination Date or
the consummation of the transactions contemplated by the Merger Agreement, at   
which time the Amended Governance Agreement takes effect.                       

Compliance with Securities Laws.  The Company and Roche have agreed to
take, and to cause their respective affiliates to take, all actions necessary to
comply with the Securities Act and the Exchange Act and the rules and           
regulations promulgated under such statutes in connection with the Merger and   
the Proposed Transactions.                                                      

 Option Plans.  Genentech has agreed (i) to take all action necessary to
ensure that Options outstanding immediately prior to the Effective Time will    
represent, at and after the Effective Time, Options to acquire shares of Special
Common Stock on the same terms as in effect immediately prior to the Effective  
Time pursuant to such Options (and the related Option Plans) with respect to    
shares of Common Stock; (ii) to reserve for issuance a sufficient number of     
shares of Special Common Stock for delivery upon exercise of the Options; and   
(iii) to file a registration statement on Form S-8 (or any successor form) or   
another appropriate form, effective as of the Effective Time, with respect to   
the Special Common Stock subject to such Options and to use all reasonable      
efforts to maintain the effectiveness of such registration statement or         
registration statements for so long as such Options remain outstanding.         

   Additional Agreements.  The Company and Roche have agreed to execute each
of the Amended Governance Agreement and the Licensing Agreement in the forms    
attached as exhibits to the Merger Agreement, immediately prior to the Effective
Time.                                                                           

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     Voting.  Roche has agreed to vote all shares of Common Stock owned by it or
any of its affiliates in favor of the Proposal.                                 

     Certain Proceedings.  Genentech and Roche have also agreed to cooperate and
use their respective reasonable efforts to vigorously defend against and respond
to any action, suit, proceeding or investigation relating to the Merger         
Agreement or to the Proposed Transactions. See "The Proposed Transactions --    
Stockholder Litigation."                                                        

CONDITIONS TO CONSUMMATION OF THE MERGER                                        

    CONDITIONS TO THE OBLIGATIONS OF BOTH PARTIES.  The respective obligations
of each of the Company and Roche to consummate the transactions contemplated by 
the Merger Agreement are subject to the fulfillment at or prior to the Effective
Time of each of the following conditions, any or all of which may be waived in  
whole or in part by the party being benefitted thereby, to the extent permitted 
by applicable law:                                                              

   Stockholder Approval.  The Merger Agreement shall have been duly approved
or ratified by the requisite vote of holders of Genentech Common Stock in       
accordance with applicable law, the Genentech Certificate of Incorporation and  
By-Laws and the Existing Governance Agreement.                                  

    Additional Agreements.  The Amended Governance Agreement and the Licensing
Agreement shall have been executed in substantially the forms attached as       
exhibits to the Merger Agreement, and shall be in full force and effect.        

    Amendment of Certificate of Incorporation.  The amendment of Article Third
of the Genentech Certificate of Incorporation, which, among other things,       
creates the Special Common Stock, shall have been effected.                     

 No Injunction.  No provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation of the    
Merger.                                                                         

Registration Statement.  The Registration Statement shall have been   
declared effective and shall be effective at the Effective Time, and no stop    
order suspending effectiveness shall have been issued, no action, suit,         
proceeding or investigation by the SEC to suspend the effectiveness thereof     
shall have been initiated and be continuing, and all necessary approvals under  
state securities laws or the Securities Act or Exchange Act relating to the     
issuance or trading of the Special Common Stock shall have been received.       

   Listing of Special Common Shares on NYSE.  The Special Common Stock to be
issued pursuant to the Merger Agreement shall have been approved for listing on 
the NYSE, subject only to official notice of issuance.                          

   Third Party Consents.  All required authorizations, consents or approvals
of any third party, the failure to obtain which would have a material adverse   
effect on the Company and its subsidiaries taken as a whole, shall have been    
obtained.                                                                       

  CONDITION TO OBLIGATIONS OF ROCHE AND MERGER SUBSIDIARY.  The respective
obligations of Roche and Merger Subsidiary to consummate the transactions       
contemplated by the Merger Agreement are subject to the fulfillment at or prior 
to the Effective Time of the condition, which may be waived in whole or part by 
Roche and Merger Subsidiary to the extent permitted by applicable law, that the 
Company shall have performed or complied in all material respects with all      
agreements and conditions contained in the Merger Agreement required to be      
performed or complied with by it prior to or at the time of the Closing.        

   CONDITIONS TO OBLIGATIONS OF THE COMPANY.  The obligations of the Company
to consummate the transactions contemplated by the Merger Agreement are subject 
to the fulfillment at or prior to the Effective Time of the conditions, which   
may be waived in whole or in part by the Company to the extent permitted by     
applicable law, that (a) Roche shall have performed or complied in all material 
respects with all agreements and conditions contained therein required to be    
performed or complied with by it prior to or at the time of the Closing; and (b)
the Guaranty shall have been executed in substantially the form attached as an  
exhibit to the Merger Agreement and will be in full force and effect.           

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TERMINATION OF THE MERGER AGREEMENT                                             

    The Merger Agreement provides that it may be terminated and the Merger may
be abandoned at any time:                                                       

     (a) prior to the Effective Time, before or after the approval by holders of
     Common Stock, by the mutual written consent of Roche and the Company;

(b) by either the Company or Roche, upon written notice to the other  
  parties thereto, if the stockholder approval described above under
 "-- Conditions to Consummation of the Merger -- Conditions to the
  Obligations of Both Parties" is not obtained by the Company at the
Special Meeting; or                                             

   (c) by either the Company or Roche if the Effective Time has not occurred
on or prior to October 31, 1995.                                

ADDITIONAL PROVISIONS OF THE MERGER AGREEMENT                                   

 The Merger Agreement provides that each party thereto will bear its own
expenses, including the fees and expenses of any attorneys, accountants,        
investment bankers, brokers, finders or other intermediaries or other persons   
engaged by it, incurred in connection with such agreement and the transactions  
contemplated thereby.                                                           

The Merger Agreement provides that the rights and obligations of the  
parties under the Merger Agreement may not be assigned or delegated without     
prior written consent of the other party. The Merger Agreement also provides    
that such agreement is not intended to be for the benefit of and will not be    
enforceable by any person or entity who or which is not a party thereto.        

THE CHARTER AMENDMENT; DESCRIPTION OF THE 
SPECIAL COMMON STOCK

 Pursuant to the Merger Agreement and effective upon consummation of the
Merger, the Certificate of Incorporation of Genentech will be amended by        
operation of the Merger to, among other things, authorize the issuance by       
Genentech of Special Common Stock.                                              

    Under Article Third of the Certificate of Incorporation ("Article Third"),
as proposed to be amended in connection with the Merger ("Amended Article       
Third"), the rights, preferences, privileges and restrictions of the Special    
Common Stock and the Common Stock will be identical in all respects, except as  
specifically set forth in Article Third. Set forth below is a description of the
terms of the Special Common Stock, including (i) the differences between such   
terms and the terms of the Common Stock as set forth in Article Third and (ii)  
the differences between the Special Common Stock and the Redeemable Common      
Stock. THE FOLLOWING DESCRIPTION OF THE TERMS OF THE SPECIAL COMMON STOCK DOES  
NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE 
TEXT OF AMENDED ARTICLE THIRD, WHICH IS ATTACHED TO THIS PROXY                  
STATEMENT/PROSPECTUS AS EXHIBIT C TO ANNEX A AND IS INCORPORATED HEREIN BY      
REFERENCE.                                                                      

   As indicated above, Amended Article Third sets forth the terms of and the
rights and preferences with respect to the Special Common Stock. In addition, as
is the case in Article Third, it provides that Preferred Stock (as hereinafter  
defined) may be issued from time to time in one or more series. The Genentech   
Board is authorized to fix or alter the dividend rights, dividend rate,         
conversion rights, voting rights, rights and terms of redemption (including     
sinking fund provisions), the redemption price or prices, and the liquidation   
preferences of any wholly unissued series of Preferred Stock, and the number of 
shares constituting any such series and the designation thereof, or any of them;
and to increase or decrease the number of shares of any series subsequent to the
issue of shares of that series, but not below the number of shares of such      
series then outstanding. In case the number of shares of any series shall be so 
decreased, the shares constituting such decrease shall resume the status which  
they had prior to the adoption of the resolution originally fixing the number of
shares of such series. Were Roche not to own its current position in Genentech, 
the authorized but unissued shares of Preferred Stock could be used by the      
Genentech Board to make a change in control of Genentech more difficult, or to  
discourage an attempt to acquire control of Genentech. For example, the         
Genentech Board could, subject to certain limitations, authorize and issue a    
class of Preferred Stock which is                                               

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entitled to vote as a class with respect to mergers or other extraordinary      
transactions. The Genentech Board has no current intention of using the         
authorized and unissued shares of Preferred Stock for any such purposes.        

AUTHORIZED SHARES                                                               

  Article Third authorizes the issuance of 100,000,000 shares of preferred
stock ("Preferred Stock"), 100,000,000 shares of Redeemable Common Stock and    
200,000,000 shares of Common Stock. Amended Article Third would not change the  
number of authorized shares of capital stock of the Company, but would replace  
the Redeemable Common Stock with the Special Common Stock and would amend the   
terms thereof as described below.                                               

VOTING RIGHTS                                                                   

  As is the case in Article Third, Amended Article Third provides that the
holders of Special Common Stock (or Redeemable Common Stock, in the case of     
Article Third) and Common Stock are, on all matters submitted to a vote of the  
stockholders, entitled to one vote per share, voting together as a single class 
unless otherwise provided for in the Certificate of Incorporation or required by
applicable law.                                                                 

DIVIDENDS; RECLASSIFICATIONS; MERGERS                                           

  Holders of Special Common Stock and Common Stock are entitled to receive
such dividends and other distributions in cash or property as may be declared   
thereon by the Genentech Board from time to time out of assets or funds of      
Genentech legally available therefor, and shall share equally on a per share    
basis in all such dividends and other distributions. In the case of dividends or
other distributions payable in stock of Genentech other than Preferred Stock,   
including distributions pursuant to stock splits or divisions of stock of       
Genentech other than Preferred Stock, only shares of Common Stock shall be paid 
or distributed with respect to shares of Common Stock and only shares of Special
Common Stock in an amount per share equal to the amount per share paid or       
distributed with respect to shares of Common Stock shall be paid or distributed 
with respect to Special Common Stock. In the case of any combination or         
reclassification of the Special Common Stock or the Common Stock, the Special   
Common Stock or the Common Stock, as the case may be, shall also be combined or 
reclassified so that the number of shares of Common Stock outstanding           
immediately following such combination or reclassification shall bear the same  
relationship to the number of shares of Common Stock outstanding immediately    
prior to such combination or reclassification as the number of shares of Special
Common Stock outstanding immediately following such combination or              
reclassification bears to the number of shares of Special Common Stock          
outstanding immediately prior to such combination or reclassification. Amended  
Article Third would not effect any substantive amendments to this provision.    

   In the event Genentech enters into any consolidation, merger, combination
or other transaction in which the Common Stock is exchanged for or changed into 
other stock or securities, cash and/or any other property, then in any such case
each share of Special Common Stock shall at the same time be similarly exchanged
or changed into an amount per share, equal to the aggregate amount of stock or  
securities, cash and/or any other property (payable in kind), as the case may   
be, into which or for which each share of Common Stock is changed or exchanged; 
provided that any such stock may be made redeemable on terms no less favorable  
to the holder thereof than the terms upon which the Special Common Stock is     
redeemable pursuant to the Call Rights; and provided, further, that any such    
stock shall be subject to a right on the part of the holder to put such stock on
terms no less favorable to the holder thereof than the terms upon which the     
Special Common Stock is required to be redeemed by the Company pursuant to the  
Put Rights. Except for such requirements with respect to the Put Rights, Amended
Article Third would not effect any substantive amendments to this provision.    

LIQUIDATION                                                                     

   As is the case in Article Third, Amended Article Third provides that upon
any liquidation, dissolution or winding up of Genentech, no distribution shall  
be made (1) to the holders of shares of Common Stock unless, prior thereto, the 
holders of shares of Special Common Stock (Redeemable Common Stock in the case  
of                                                                              

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Article Third) shall have received $.01 per share, plus an amount equal to      
declared and unpaid dividends and distributions thereon to the date of such     
payment; provided that the holders of shares of Special Common Stock shall be   
entitled to receive an aggregate amount per share equal to the aggregate amount 
to be distributed per share to holders of shares of Common Stock, or (2) to the 
holders of stock ranking on a parity (either as to dividends or upon            
liquidation, dissolution or winding up) with the Special Common Stock, except   
distributions made ratably on the Special Common Stock and all such other parity
stock in proportion to the total amounts to which the holders of all such shares
are entitled upon such liquidation, dissolution or winding up.                  

CALL RIGHTS                                                                     

Subject to the provisions of the Amended Goverance Agreement, as such 
agreement may be amended from time to time, the Special Common Stock may, and   
where the Amended Goverance Agreement so requires, shall be redeemed, in whole  
but not in part, at the option of Genentech, during certain periods, at certain 
prices and upon certain terms and conditions. Under the Amended Governance      
Agreement (as is the case with the Existing Governance Agreement and as was the 
case with the Redeemable Common Stock), Genentech has agreed that it shall,     
subject to the provisions of the Amended Governance Agreement, redeem the       
Special Common Stock at the request of Roche and not otherwise. See "The Amended
Governance Agreement -- Redemption of Special Common Stock." Amended Article    
Third provides that the redemption price for any date of redemption (the        
"Redemption Date") during the periods set forth below (and prior to final court 
approval of the proposed settlement of the Stockholder Litigation) shall be the 
price per share set forth opposite such period in the following table, adjusted 
if necessary as described below:                                                

                                                                [Download Table]

                              PERIOD                                  PRICE 
                                                                            
October 1, 1995 to December 31, 1995..............................    $62.50
January 1, 1996 to March 31, 1996.................................    $63.75
April 1, 1996 to June 30, 1996....................................    $65.00
July 1, 1996 to September 30, 1996................................    $66.25
October 1, 1996 to December 31, 1996..............................    $67.50
January 1, 1997 to March 31, 1997.................................    $68.75
April 1, 1997 to June 30, 1997....................................    $70.00
July 1, 1997 to September 30, 1997................................    $71.50
October 1, 1997 to December 31, 1997..............................    $73.00
January 1, 1998 to March 31, 1998.................................    $74.50
April 1, 1998 to June 30, 1998....................................    $76.00
July 1, 1998 to September 30, 1998................................    $77.50
October 1, 1998 to December 31, 1998..............................    $79.00
January 1, 1999 to March 31, 1999.................................    $80.50
April 1, 1999 to June 30, 1999....................................    $82.00

    Upon final court approval of the settlement of the Stockholder Litigation,
each of the redemption prices applicable pursuant to the Call Rights set forth  
above will be increased by $0.50 per share of Special Common Stock, resulting in
a final price of $82.50, as provided by the settlement. If such final court     
approval occurs after payment of the applicable redemption price pursuant to the
Call Rights, such $0.50 increase will be promptly thereafter paid by Genentech  
to such person to whom payment of the applicable redemption price was previously
made. "Final court approval" of the settlement of the Stockholder Litigation is 
defined in the settlement papers to mean that the Delaware Court of Chancery has
entered an order approving the settlement on the terms contemplated by the      
parties, and that such order is finally affirmed on appeal or is no longer      
subject to appeal. See "The Proposed Transactions -- Stockholder Litigation."   
The applicable appeal period under Delaware law is 30 days from the entry of a  
final order approving the settlement.                                           

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     Notice of any proposed redemption of the Special Common Stock will be given
by mailing a copy of such notice (the "Call Notification") to the holders of    
record of the shares of Special Common Stock, not more than 30 or less than 10  
days prior to the date fixed for redemption.                                    

   The redemption prices for the Redeemable Common Stock from September 1990
through June 30, 1995 were as follows:                                          

                                                                [Download Table]

                               PERIOD                                 PRICE 
                                                                            
Prior to December 31, 1990..........................................  $38.00
January 1, to March 31, 1991........................................  $39.00
April 1, 1991 to June 30, 1991......................................  $40.00
July 1, 1991 to September 30, 1991..................................  $41.25
October 1, 1991 to December 31, 1991................................  $42.50
January 1, 1992 to March 31, 1992...................................  $43.75
April 1, 1992 to June 30, 1992......................................  $45.00
July 1, 1992 to September 30, 1992..................................  $46.25
October 1, 1992 to December 31, 1992................................  $47.50
January 1, 1993 to March 31, 1993...................................  $48.75
April 1, 1993 to June 30, 1993......................................  $50.00
July 1, 1993 to September 30, 1993..................................  $51.25
October 1, 1993 to December 31, 1993................................  $52.50
January 1, 1994 to March 31, 1994...................................  $53.75
April 1, 1994 to June 30, 1994......................................  $55.00
July 1, 1994 to September 30, 1994..................................  $56.25
October 1, 1994 to December 31, 1994................................  $57.50
January 1, 1995 to March 31, 1995...................................  $58.75
April 1, 1995 to June 30, 1995......................................  $60.00

PUT RIGHTS                                                                      

   Amended Article Third will provide that, unless the Call Rights have been
previously exercised, during the Put Period, each holder of the Special Common  
Stock will have (by delivery of the Put Notice (as hereinafter defined)) the    
option pursuant to the Put Rights to require the purchase of all or part of the 
Special Common Stock held by such holder at a price of $60 per share, subject to
adjustment (the "Put Price"). Holders of the Redeemable Common Stock did not    
(and the holders of Common Stock do not) have any rights comparable to the Put  
Rights.                                                                         

 At least 10 and not more than 30 days prior to the beginning of the Put
Period or, in the event of an acceleration of the Put Rights described below, as
soon as practicable following the date of the occurrence of the Insolvency Event
giving rise to such acceleration (but in no event later than the tenth day      
following such date), the Company will mail the Put Notification (as hereinafter
defined) to each holder of Special Common Stock. To facilitate the giving of the
Put Notification to the holders of Special Common Stock, the Genentech Board may
fix a record date for determination of holders of Special Common Stock entitled 
to be given the Put Notification, which record date may not be more than five   
days prior to the date the Put Notification is given pursuant to Amended Article
Third.                                                                          

ADJUSTMENTS                                                                     

  The redemption prices pursuant to the Call Rights and the Put Rights are
subject to appropriate adjustment in the case of any dividend payable in shares 
of Special Common Stock, or any subdivision or combination of the Special Common
Stock and, subject to certain exceptions, in the event of certain other         
extraordinary dividends payable in respect of the Special Common Stock.         

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CONDITION TO THE COMPANY'S OBLIGATIONS                                          

     Notwithstanding any other provision of Amended Article Third, the Company's
obligation to pay the Put Price in respect of shares of Special Common Stock    
with respect to which Put Rights have been properly exercised (and to deposit   
with the Depositary the requisite funds) will be conditioned upon Genentech's   
having received from Roche, or any affiliate of Roche, (i) funds in an amount   
equal to the product of the number of shares of Special Common Stock with       
respect to which Put Rights have been properly exercised multiplied by the Put  
Price plus (ii) such additional funds, if any, sufficient to permit the Company 
to redeem the shares of Special Common Stock with respect to which Put Rights   
has been properly exercised without violating Section 160 of the Delaware Law,  
any bankruptcy or insolvency law or other law or regulation for the protection  
of creditors.                                                                   

ENFORCEMENT OF ROCHE OBLIGATIONS                                                

   Amended Article Third provides that Genentech will take (and will have no
corporate power or capacity not to take) such action as may be necessary to     
enforce the obligations of Roche and its affiliates to pay the Put Price (and   
any other amounts payable pursuant to the provisions of the Amended Governance  
Agreement described under "The Amended Governance Agreement -- Capital          
Contribution and Assumption of Put Obligations by Roche"), including, without   
limitation, all actions required to cause Roche and its affiliates to perform   
their respective obligations described under "The Amended Governance            
Agreement -- Capital Contribution and Assumption of Put Obligations by Roche"   
and under the Guaranty. See "Guaranty of Roche Holding."                        

PAYMENT                                                                         

     CALL RIGHTS.  Under Amended Article Third, on or prior to the date any Call
Notification is first sent or given, the Company will deposit the aggregate     
redemption price (together with accrued and unpaid dividends to such date) of   
the shares to be redeemed with the Depositary, in trust for payment to the      
holders of the Special Common Stock, and deliver irrevocable written            
instructions authorizing the Depositary to apply such deposit solely to the     
redemption of the shares to be redeemed. The amount of funds required to be     
deposited in connection with the Call Rights pursuant to the foregoing sentence 
will be reduced by the aggregate redemption price of any shares of Special      
Common Stock deposited by Roche in lieu of such funds. In the case of the       
exercise of the Call Rights, each holder of shares of Special Common Stock will 
be paid the redemption price for such shares within three business days         
following the surrender of the certificate or certificates representing such    
shares to the Depositary, together with a properly executed letter of           
transmittal covering such shares. The Company's written instructions to the     
Depositary may provide that any of such deposit remaining unclaimed at the      
expiration of two years after the date fixed for redemption pursuant to the Call
Rights by the holder of any of such shares be returned to the Company and revert
to the general funds of the Company, after which return such holder will have no
claim against the Depositary but will have a claim as an unsecured creditor     
against the Company for the redemption price together with accrued and unpaid   
dividends to such redemption date, without interest. The Call Notification      
having been duly given, or the Depositary having been irrevocably authorized by 
the Company to give said notice, and the redemption price (together with accrued
and unpaid dividends to such redemption date) of the shares to be redeemed      
having been deposited, then all shares of Special Common Stock with respect to  
which such deposit will have been made pursuant to exercise of the Call Rights  
will forthwith, whether or not the date fixed for such redemption shall have    
occurred or the certificates for such shares shall have been surrendered for    
cancellation, be deemed no longer to be outstanding for any purpose, and all    
rights with respect to such shares will thereupon cease and terminate, except   
the right of the holders of such shares to receive, out of such deposit in      
trust, on the redemption date the redemption price (together with accrued and   
unpaid dividends to such redemption date) to which they are entitled, without   
interest.                                                                       

   PUT RIGHTS.  Under the terms of Amended Article Third, promptly following
the end of the Put Period, the Company (or under certain circumstances, Roche)  
will deposit or cause to be deposited with the Depositary funds in an amount    
sufficient to pay the Put Price for all shares of Special Common Stock with     
respect to which the Put Rights have been properly exercised. Each holder of    
shares of Special Common                                                        

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Stock who has properly exercised the Put Rights, and who has surrendered the    
shares of Special Common Stock with respect to which the Put Rights have been   
exercised, will be paid promptly following the end of the Put Period. In the    
event of the exercise of the Put Rights for less than all of the shares of      
Special Common Stock represented by a certificate, a new certificate            
representing the shares of Common Stock into which the shares of Special Common 
Stock not redeemed pursuant to the exercise of the Put Rights have been         
converted will be issued to the holder of such shares.                          

DEFAULT AND ACCELERATION OF PUT RIGHTS                                          

 Unless the Call Rights have been previously exercised, if, prior to the
last day of the Put Period, (i) the Company files a voluntary petition in       
bankruptcy or seeks reorganization in order to effect a plan or other           
arrangement with creditors or any other relief under the Bankruptcy Reform Act, 
Title 11 of the United States Code, as amended or recodified from time to time  
(the "Bankruptcy Code"), or under any state or federal law granting relief to   
debtors, or (ii) any involuntary petition or proceeding pursuant to the         
Bankruptcy Code or any other applicable state or federal law relating to        
bankruptcy, reorganization or other relief for debtors is filed or commenced    
against the Company and the same is not dismissed within 30 days, or the Company
files an answer admitting the jurisdiction of the court and the material        
allegations of any involuntary petition, or (iii) the Company is adjudicated a  
bankrupt, or an order for relief is entered by any court of competent           
jurisdiction under the Bankruptcy Code or any other applicable state or federal 
law relating to bankruptcy, reorganization or other relief for debtors, then,   
and upon the occurrence of such event (an "Insolvency Event"), without notice of
any kind whatsoever, the right of the holders of the Special Common Stock to    
exercise the Put Rights will accelerate, and the Put will be exercisable        
immediately upon the occurrence of such event and until the end of the Put      
Period.                                                                         

CONVERSION                                                                      

Each share of Special Common Stock outstanding following the close of 
business on the last day of the Put Period (the "Conversion Date") will, unless 
previously called for redemption on or prior to such date, automatically be     
converted into one share of Common Stock.                                       

Notice of the Conversion Date will be given by mail to the holders of 
record of the shares of Special Common Stock, not more than 30 nor less than 10 
days prior to the Conversion Date. Upon request of any holder, Genentech will   
issue and deliver to the holder as promptly, as practicable after the Conversion
Date, a replacement certificate for the number of Shares issuable upon          
conversion of such Special Common Stock. No shares of Special Common Stock will 
be issued after the Conversion Date.                                            

    Genentech will provide, free from preemptive rights, out of its authorized
but unissued shares of Common Stock, or out of shares of Common Stock held in   
its treasury, sufficient shares of Common Stock to provide for the conversion of
the Special Common Stock outstanding on the Conversion Date. Amended Article    
Third will provide that all shares of Common Stock which may be issued upon     
conversion of Special Common Stock will upon issue be fully paid and            
non-assessable by Genentech and free from all taxes, liens and charges with     
respect to the issue thereof. Amended Article Third will further provide that,  
if on the Conversion Date the Special Common Stock shall be listed on the NYSE  
or on any other national securities exchange or the NASDAQ National Market,     
Genentech will, if permitted by the rules thereof, seek to list on each such    
exchange or the NASDAQ National Market, as the case may be, all shares of Common
Stock issuable upon conversion of the Special Common Stock.                     

LEGEND                                                                          

    Each certificate representing shares of Special Common Stock will bear the
following legend:                                                               

       "The shares of Callable Putable Common Stock represented hereby are
subject to (i) redemption at the option of the corporation during the 
 periods, at the prices and on the terms and conditions specified in the
   corporation's certificate of incorporation, (ii) an option on the part of
the holder, under certain circumstances, to require the corporation to
  redeem such shares of Callable Putable Common Stock, at the price and on
the terms and conditions specified in the corporation's certificate of
incorporation and                                                     

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   (iii) conversion into Common Stock, par value $.02, of the corporation on
  the date specified, and upon the terms and conditions set forth in, such
  certificate of incorporation. After redemption the shares represented by
 this certificate shall cease to be outstanding for all purposes and the
 holder hereof shall be entitled to receive only the redemption price of
such shares, without interest. After conversion this certificate shall
represent the shares of Common Stock into which the shares of Callable
     Putable Common Stock represented hereby shall have been converted, and this
     certificate may be exchanged for a new certificate representing such shares
of Common Stock."                                                     

CLASS VOTE                                                                      

    In addition to any other affirmative vote required by law or the Genentech
Certificate of Incorporation, any amendment of the provisions of Amended Article
Third will require the affirmative vote of the holders of a majority of the     
shares of Common Stock entitled to vote and of the holders of a majority of the 
shares of Special Common Stock entitled to vote, each voting separately as a    
class. See "The Amended Governance Agreement -- Certain Agreements of Roche as  
to Voting."                                                                     

PUT AND CALL NOT BUSINESS COMBINATIONS                                          

    Amended Article Third will provide that the transactions to be consummated
pursuant to the Call Rights or the Put Rights will not be deemed to be Business 
Combinations for purposes of Article Eleventh of the Genentech Certificate of   
Incorporation. See "Article Eleventh of the Certificate of Incorporation." Thus,
other than the vote sought to be obtained in connection with the Proposal, no   
separate vote of the Company's stockholders will be required to be obtained     
prior to consummation of the transactions contemplated by the Call Rights or the
Put Rights.                                                                     

CERTAIN DEFINITIONS                                                             

For purposes of the foregoing discussion of Amended Article Third, the
following terms will have the following meaning:                                

     "Business Day" means any day which is not a Saturday, Sunday or a
federal holiday.                                                      

  "Depositary" means the bank or trust company in the Borough of
     Manhattan, the City and State of New York, having combined capital, surplus
  and undivided profits of at least $500 million which is appointed by the
Company to serve as agent for the purpose of receiving certificates   
  representing shares of the Special Common Stock upon exercise of the Put
    Rights or Call Rights, as the case may be, and distributing the Redemption
Price or the Put Price therefor, as the case may be.                  

          "Put Notice" means a written notice electing to have shares of Special
  Common Stock redeemed by the Company pursuant to the exercise of the Put
Rights.                                                               

     "Put Notification" means a written notice from the Company to the
    holders of the Special Common Stock and the holders of options to purchase
  shares of the Special Common Stock informing each such holder of (A) the
rights of such holder to cause the Company to redeem shares of Special
  Common Stock during the Put Period, (B) the date of the commencement and
termination of the Put Period, (C) the Put Price, (D) the identity and
  address of the Depositary and (E) instructions as to how to exercise the
 Put Rights. The Put Notification will, in all respects, comply with the
requirements of the Exchange Act.                                     

      "Put Period" means, subject to acceleration upon the occurrence of
     certain Insolvency Events, the period commencing on July 1, 1999 and ending
   on the close of business on the thirtieth Business Day thereafter or such
     later date as may be required under the Exchange Act; provided that, in the
event of acceleration of the Put Period following the occurrence of an
   Insolvency Event, the Put Period will be the period commencing as soon as
  practicable following the date of the occurrence of the Insolvency Event
giving rise to such acceleration (but in no event later than ten days 
following such date) and ending on the close of business on the 60th  
 Business Day thereafter or such later date as may be required under the
Exchange Act.                                                         

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ARTICLE ELEVENTH OF THE 
CERTIFICATE OF INCORPORATION

  Article Eleventh of the Genentech Certificate of Incorporation ("Article
Eleventh") will remain unchanged in the Merger.                                 

Article Eleventh will continue to provide that, in addition to any    
affirmative vote required by law or any other provision of the Genentech        
Certificate of Incorporation, any Business Combination (as hereinafter defined) 
with Roche or any affiliate of Roche (a "Subject Person") shall require (1) the 
affirmative vote of the holders of at least 50% of the voting power of the then 
outstanding shares of capital stock of Genentech entitled to vote generally in  
the election of directors (the "Voting Stock"), voting together as a single     
class, who are entitled to vote thereon (it being understood that for purposes  
of Article Eleventh, each share of Voting Stock will have the number of votes   
granted pursuant to Amended Article Third) and (2) the approval of a majority of
the members of the Genentech Board who are entitled to vote thereon in such     
capacity. For purposes of Article Eleventh, (x) no Subject Person or any member 
of a group of which a Subject Person is a member, shall be entitled to vote any 
shares of Voting Stock beneficially owned by it or any member of such group and 
(y) no person or group that beneficially owns at least 12% of the Voting Stock  
not beneficially owned by all Subject Persons shall be entitled to vote with    
respect to that portion of his or its shares of Voting Stock which exceed 12% of
the Voting Stock not beneficially owned by all Subject Persons. For purposes of 
Article Eleventh, no director will be entitled to vote on any such Business     
Combination in his capacity as director who is an officer of the corporation or 
who is an employee, director, principal stockholder or partner of a Subject     
Person or of an entity (other than Genentech or any of its subsidiaries) that   
was dependent upon a Subject Person for more than 10% of its revenues or        
earnings in its most recent fiscal year.                                        

    For the purposes of Article Eleventh, "Business Combination" is defined to
include (i) any merger or consolidation of Genentech or any majority-owned      
subsidiary with a Subject Person; (ii) any sale, lease, license, exchange,      
mortgage, pledge, transfer or other disposition (in one transaction or a series 
of transactions) to or with a Subject Person of any assets of Genentech or any  
majority-owned subsidiary of Genentech having an aggregate fair market value    
equal to or greater than 10% of Genentech's assets; (iii) the issuance or       
transfer by Genentech or any majority-owned subsidiary (in one transaction or a 
series of transactions) of any securities of Genentech or any majority-owned    
subsidiary to a Subject Person in exchange for cash, securities or other        
property (or a combination thereof) having an aggregate fair market value of $20
million or more; or (iv) any reclassification of securities (including any      
reverse stock split), or recapitalization of Genentech, or any merger or        
consolidation of Genentech with any of its majority-owned subsidiaries or any   
other transaction (whether or not with or into or otherwise involving Roche)    
which has the effect, directly or indirectly, of increasing the proportionate   
share of the outstanding shares of any class of equity or convertible securities
of Genentech or any majority-owned subsidiary which is, directly or indirectly, 
owned by a Subject Person). Amended Article Third will provide that the         
transactions to be consummated pursuant to the Call Rights or the Put Rights    
will not be deemed to be Business Combinations for purposes of Article Eleventh.
See "The Charter Amendment; Description of the Special Common Stock." Thus,     
other than the vote sought to be obtained in connection with the Proposal, no   
separate vote of the Company's stockholders will be required to be obtained     
prior to consummation of the transactions contemplated by the Call Rights or the
Put Rights.                                                                     

     Article Eleventh provides that in the event any person becomes bound by the
Amended Governance Agreement, the provisions of Article Eleventh will continue  
to be applicable, provided that each reference to Roche therein shall also be   
deemed a reference to such person.                                              

     Article Eleventh further provides that, in addition to any vote required by
law, any amendment, modification or repeal of the provisions of Article Eleventh
will require the same stockholder and Genentech Board approval as any Business  
Combination subject to Article Eleventh would require at the time of such       
amendment, modification or repeal.                                              

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THE AMENDED GOVERNANCE AGREEMENT

  The Amended Governance Agreement represents, in general, an extension of
the term of the Existing Governance Agreement between the Company and Roche, its
majority stockholder, which has been in effect since the 1990 Merger, and also  
represents, with respect to certain matters as noted below, a modification of   
the Existing Governance Agreement. The Amended Governance Agreement sets forth  
certain rights and obligations of Genentech and Roche concerning, among other   
things, the redemption of the Special Common Stock, the corporate governance of 
Genentech, future acquisitions or dispositions of securities of Genentech by    
Roche and obligations of Genentech and Roche in connection with the Put Rights. 

THE FOLLOWING DESCRIPTION OF THE AMENDED GOVERNANCE AGREEMENT DOES NOT
PURPORT TO BE COMPLETE, AND IS QUALIFIED IN ITS ENTIRETY BY THE TEXT OF THE     
AMENDED GOVERNANCE AGREEMENT, A FORM OF WHICH IS ATTACHED TO THIS PROXY         
STATEMENT/PROSPECTUS AS EXHIBIT A TO ANNEX A AND IS INCORPORATED HEREIN BY      
REFERENCE.                                                                      

REDEMPTION OF SPECIAL COMMON STOCK                                              

   In the Amended Governance Agreement, Genentech agrees that, promptly upon
receipt of a written request from Roche for the redemption of the Special Common
Stock pursuant to the Call Rights, it will designate a Depositary for such      
redemption in accordance with the terms of the Genentech Certificate of         
Incorporation and notify Roche of such designation. Upon confirmation from the  
Depositary that it has received sufficient funds from Roche to pay the aggregate
redemption price of all outstanding Special Common Stock (other than Special    
Common Stock deposited or caused to be deposited with such depositary by Roche),
Genentech will give notice of the exercise of the Call Rights and the redemption
of the Special Common Stock. Genentech will set as the Redemption Date the date 
set forth in Roche's written request for redemption; provided that such date    
shall be consistent with the notice requirements of the Genentech Certificate of
Incorporation. The Redemption Date will in no event be later than the earlier of
June 30, 1999 or such earlier date on which a Triggering Disposition occurs.    
Roche's right to cause Genentech to exercise the Call Rights terminates upon the
occurrence of a Triggering Disposition. The redemption price will be set in     
accordance with the Genentech Certificate of Incorporation.                     

PUT RIGHTS WITH RESPECT TO SPECIAL COMMON STOCK                                 

   In the Amended Governance Agreement, Genentech also agrees that, prior to
commencement of the Put Period, it will designate a Depositary for the purchase 
by the Company (or, under certain circumstances, by Roche) of shares of Special 
Common Stock pursuant to exercises of the Put Rights by holders of Special      
Common Stock in accordance with the terms of the Genentech Certificate of       
Incorporation and will notify Roche of such designation. Prior to commencement  
of the Put Period, Genentech will give notice of the availability of the Put    
Rights to holders of the Special Common Stock. The redemption price will be $60 
per share of Special Common Stock, subject to adjustment in accordance with the 
Genentech Certificate of Incorporation. Unless accelerated pursuant to an       
Insolvency Event, the Put Period will be the period commencing on July 1, 1999  
and ending on the close of business on the 30th Business Day thereafter.        

SUSPENSION OF OBLIGATIONS                                                       

The Amended Governance Agreement provides that Genentech's obligations
under the Amended Governance Agreement to effect the redemption of the Special  
Common Stock pursuant to the Call Rights or the Put Rights will be suspended    
during any period when, in the good faith judgment of the majority of           
Genentech's directors, the redemption of the Special Common Stock would be      
prohibited under the Delaware Law. During any such period, however, Roche's     
obligations in respect of the Call Rights and the Put Rights would remain in    
full force and effect. See "-- Redemption of Special Common Stock" and          
"-- Capital Contribution and Assumption of Put Obligation by Roche."            

INDEMNIFICATION                                                                 

     Roche has agreed in the Amended Governance Agreement to indemnify Genentech
and its officers and directors against all losses, claims, damages, liabilities 
and expenses (including attorneys' fees) arising out of                         

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the redemption of the Special Common Stock pursuant to the Call Rights or the   
Put Rights in accordance with the provisions of the Amended Governance Agreement
(including, without limitation, in the event of the Company's consummation of   
the redemption of Special Common Stock in contravention of Section 160 of the   
Delaware Law or any other law for the protection of creditors), other than any  
such losses, claims, damages, liabilities and expenses that result primarily    
from actions taken or omitted in bad faith by the indemnified person or from the
indemnified person's gross negligence or willful misconduct.                    

OPTIONS                                                                         

  Roche and the Company have agreed in the Amended Governance Agreement to
make appropriate provisions to assure that any options, warrants, rights or     
securities issued by the Company convertible into or exercisable or exchangeable
for Special Common Stock outstanding on the Redemption Date or the final day of 
the Put Period (whether or not convertible, vested, exercisable or exchangeable 
on such date) become convertible into or exercisable or exchangeable for        
consideration of the same type and amount as the holders thereof would have     
received had they converted, exercised or exchanged such options, warrants,     
rights or securities prior to the Redemption Date or the final day of the Put   
Period. The Amended Governance Agreement provides, however, that such provision 
will not be deemed or construed as a waiver of any other rights that a holder of
any such securities may have.                                                   

FURTHER ACQUISITIONS OF SECURITIES OF GENENTECH BY ROCHE                        

 The Amended Governance Agreement provides that Roche will not, prior to
June 30, 1999 (as opposed to June 30, 1995 under the Existing Governance        
Agreement), propose any Business Combination (as defined under "Article Eleventh
of the Certificate of Incorporation") with Roche or any affiliate of Roche      
unless a majority of the Independent Directors determine that there has been a  
sustained, substantial impairment of the business, prospects or financial       
viability of Genentech and its subsidiaries, taken as a whole, since the        
Effective Time (as opposed to September 7, 1990 under the Existing Governance   
Agreement). Unless such a determination is made, Roche will not propose any such
Business Combination during the period commencing on July 1, 1999 and           
terminating on June 30, 2000, at a price per share for the unaffiliated holders 
of the Common Stock into which shares of Special Common Stock will have been    
converted on June 30, 1999 less than the price per share at which shares of     
Special Common Stock could have been redeemed on such date, adjusted for any    
event occurring since such date as if the Special Common Stock had continued to 
be outstanding. In addition, any Business Combination with Roche or any         
affiliate of Roche, whether or not prior to June 30, 2000, must be approved by  
the affirmative vote of the Independent Directors and the holders of a majority 
of the Equity Securities not beneficially owned by Roche or its affiliates. See 
"Article Eleventh of the Certificate of Incorporation."                         

     The Amended Governance Agreement provides that for purposes of the approval
of the Genentech Board required under Article Eleventh for any Business         
Combination permitted by the Amended Governance Agreement, the Independent      
Directors will consider whether the Business Combination is fair to the minority
stockholders of Genentech without taking into account any possible discount due 
to the fact that there exists a controlling stockholder of Genentech.           

Except pursuant to the Call Rights, the Put Rights and Business       
Combinations described in the second succeeding paragraph, Roche has also agreed
in the Amended Governance Agreement that it will not, directly or indirectly,   
purchase or otherwise acquire, or propose or offer to purchase or acquire, any  
Equity Security of Genentech, whether by tender offer, market purchase,         
privately negotiated purchase, merger or otherwise, except that Roche may       
acquire Equity Securities such that Roche Holding's Voting Interest (as         
hereinafter defined) in Genentech would not immediately after such acquisition  
exceed 79.9%. Roche has agreed that in no event will it, directly or indirectly,
prior to June 30, 2000, make any tender offer for Equity Securities of Genentech
without the consent of the majority of the Independent Directors other than as  
permitted in connection with the exercise of the Put Rights. For purposes of the
Amended Governance Agreement, (i) "Equity Security" means any (A) voting stock  
of Genentech (other than shares of voting stock not having the right to vote    
generally in any election of directors of Genentech), (B) securities of         
Genentech convertible into or exchangeable for such stock, and (C) options,     
rights and warrants issued by Genentech to acquire such                         

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stock; (ii) "Roche Holding's Voting Interest" means the percentage of votes for 
elections of directors of Genentech generally controlled, directly or           
indirectly, by Roche Holding, assuming the conversion, exchange or exercise into
or for voting stock of all Equity Securities other than voting stock and not    
taking into account any voting agreements or arrangements granting to a third   
party control over the voting of voting stock (including those contained        
therein) beneficially owned by Roche Holding; and (iii) "Independent Director"  
means a director of Genentech who would be entitled for purposes of Article     
Eleventh of the Certificate of Incorporation to vote on a Business Combination  
with Roche. See "Article Eleventh of the Certificate of Incorporation."         

CAPITAL CONTRIBUTION AND ASSUMPTION OF PUT OBLIGATIONS BY ROCHE                 

  Pursuant to the Amended Governance Agreement, Roche has agreed to, or to
cause one or more of its affiliates to, contribute to the Company, immediately  
prior to the time that any amounts become due and payable to the holders of     
Special Common Stock pursuant to the Put Rights, (i) funds in an amount equal to
the product of the number of shares of Special Common Stock with respect to     
which the Put Rights have been properly exercised multiplied by the Put Price   
plus (ii) such additional funds, if any, sufficient to permit the Company to    
redeem the shares of Special Common Stock with respect to which the Put Rights  
have been properly exercised without violating Section 160 of the Delaware Law, 
any bankruptcy or insolvency law or other law or regulation for the protection  
of creditors. In exchange for such payment, the Company has agreed to issue to  
Roche (or to its designated affiliate) a number of duly authorized and validly  
issued shares of Common Stock equal to the number of shares of Special Common   
Stock acquired thereby by the Company. Notwithstanding the foregoing, Roche's   
obligation to make any such payment to the Company shall be void and of no      
further force and effect if, in lieu thereof, Roche shall (or shall cause one of
its affiliates to) elect to purchase, and make all arrangements necessary       
(including compliance by Roche, or any such affiliate or affiliates, with the   
Securities Act, the Exchange Act and any other applicable federal or state      
securities laws) to purchase, at the expiration of the Put Period, directly from
the holders of Special Common Stock at the Put Price the shares of Special      
Common Stock which such holders elect to have purchased.                        

Notwithstanding any other term or provision of the Amended Governance 
Agreement, the Merger Agreement, the Licensing Agreement, the Guaranty, Amended 
Article THIRD, the Amended Governance Agreement provides that Roche will either 
(i) make (or cause one or more of its affiliates to make) the aggregate payments
described in the first sentence of the immediately preceding paragraph or (ii)  
if such payments are not made for any reason, make (or cause one of its         
affiliates to make) the election to purchase referred to in the third sentence  
of the immediately preceding paragraph and comply (or cause one of its          
affiliates to comply) fully with such sentence; provided, however, that if an   
Insolvency Event occurs, Roche will, within 10 days after the occurrence of such
Insolvency Event, either (x) contribute (or cause one or more of its affiliates 
to contribute) to the Company an amount equal to the aggregate amount that would
be required to be contributed to the Company under the first sentence of the    
immediately preceding paragraph assuming (for purposes of clause (i) of such    
sentence) that the holders of all of the then outstanding shares of Special     
Common Stock (on a fully diluted basis) were to exercise their Put Rights or (y)
elect (or cause one of its affiliates to elect) to purchase, and make all       
arrangements necessary (including compliance by Roche, or any such affiliate,   
with the Exchange Act and the Securities Act and any other Federal or state     
securities laws) to purchase, at the expiration of the Put Period, directly from
the holders of Special Common Stock at the Put Price the shares of Special      
Common Stock which such stockholders elect to have purchased. The Amended       
Governance Agreement also provides that, in exchange for the payment by Roche of
the amount specified in clause (x) of the immediately preceding sentence, the   
Company will issue to Roche (or its designated affiliate) a number of duly      
authorized and validly issued shares of Common Stock equal to the number of then
outstanding shares of Special Common Stock (on a fully diluted basis).          

   The Amended Governance Agreement also provides that immediately following
the expiration of the Put Period, if the Put Rights have not been exercised with
respect to all of the then outstanding shares of Special Common Stock (on a     
fully diluted basis) and if Roche has complied with such clause (x) of the first
sentence of the immediately preceding paragraph, (1) the Company will refund to 
Roche (or its designated affiliate) an amount (together with any interest       
actually earned thereon) equal to the product of the Put Price times the        

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number of outstanding shares of Special Common Stock (on a fully diluted basis) 
with respect to which the Put Rights have not been exercised and (2) Roche (or  
its designated affiliate) will, in exchange for such payment by the Company,    
contribute to the Company a number of shares of Common Stock equal to the number
of outstanding shares of Special Common Stock (on a fully diluted basis) with   
respect to which the Put Rights have not been exercised. In the event that Roche
pays the amount specified in clause (x) of the first sentence of the immediately
preceding paragraph, none of Roche, Roche Holding or any of their respective    
affiliates will be entitled to any payments or other distributions on or in     
respect of any equity security of the Company unless and until the Company has  
redeemed all of the shares of Special Common Stock with respect to which the Put
Rights have been properly exercised. Under the Amended Governance Agreement, if 
(x) an Insolvency Event occurs and (y) Roche does not timely comply with its    
obligations under the proviso to the first sentence of the immediately preceding
paragraph, the amounts required to be paid by Roche pursuant to such proviso    
will be increased by $1,000,000, and the Agent under the Agency Agreement dated 
as of September 6, 1995 between the Company, the Agent and Roche Holding (the   
"Agency Agreement") will have an undivided interest in the aggregate amount     
payable under such proviso, which undivided interest will (i) be limited to, and
will in no event exceed, $1,000,000 and (ii) be paid by Roche directly to the   
Agent.                                                                          

 The Amended Governance Agreement provides that, if Roche so elects, the
obligations of Roche to purchase shares of Special Common Stock pursuant to any 
of the provisions described in this section may, at the election of Roche, be   
assigned by Roche to Roche Holding or any affiliate of Roche Holding (other than
Genentech). No such assignment will relieve Roche of any of its obligations in  
respect of the Put Rights or otherwise.                                         

   The Amended Governance Agreement also provides that the Company will take
(and will have no corporate power or capacity to refuse to take) such actions as
may be necessary to enforce the obligations of Roche with respect to the Put    
Rights, and the obligations of Roche Holding under the Guaranty, directly       
against Roche and Roche Holding, or in the event of assignment by Roche, against
Roche, Roche Holding and any affiliate of Roche Holding to which any assignment 
is made.                                                                        

THE AGENCY AGREEMENT                                                            

Under the Agency Agreement, Genentech has appointed the Agent as its  
irrevocable agent to seek to enforce, under certain specified circumstances, the
respective obligations of Roche and Roche Holding described under "-- Capital   
Contribution and Assumption of Put Obligations by Roche" and under the Guaranty.
Under the Agency Agreement, upon consummation of the Merger, the Company will   
deposit with the Agent the sum of $1,000,000 (the "Enforcement Amount"), which, 
if necessary, will be disbursed by the Agent for the purposes described in the  
next paragraph. Under the Agency Agreement, the Agent is authorized to receive  
and hold any additional funds contributed at any time by any other person or    
persons to the Enforcement Amount, and any such additional funds will, for all  
intents and purposes of the Agency Agreement, be deemed thereafter to be        
included in the Enforcement Amount.                                             

   Under the Agency Agreement, if the Agent has been notified by the Company
or by any person who is then an officer or director of the Company that (x) an  
Insolvency Event has occurred and (y) Roche and Roche Holding have failed to    
timely perform their respective obligations described under "-- Capital         
Contribution and Assumption of Put Obligations by Roche" and under the Guaranty 
within 10 days after the occurrence of such Insolvency Event, the Agent will    
take all steps necessary (including the commencement and prosecution of legal   
action) to seek to enforce performance of such obligations, in the right of and 
as the agent of the Company, by (i) retaining counsel of reputation and         
standing, (ii) instructing such counsel to use best efforts to seek to cause    
Roche and Roche Holding to perform such obligations, (iii) disbursing all or    
such portion of the Enforcement Amount as may be necessary in connection with   
the foregoing, and (iv) taking any such other action as it may be advised by    
such counsel is necessary and appropriate to seek to enforce such obligations.  
See "The Charter Amendment; Description of the Special Common Stock -- Default  
and Acceleration of Put Rights" and "-- Capital Contribution and Assumption of  
Put Obligations by Roche."                                                      

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 The Agency Agreement also provides that after receipt of written notice
from the Company to the effect that either (x) the redemption of all of the then
outstanding shares of the Special Common Stock pursuant to Call Rights has been 
consummated, (y) Roche and Roche Holding have fully complied with their         
respective obligations described under "-- Capital Contribution and Assumption  
of Put Obligations by Roche" and under the Guaranty or (z) the Put Rights have  
been eliminated pursuant to the vote of the Company's stockholders required to  
be obtained under the Genentech Certificate of Incorporation or the Amended     
Governance Agreement, the Agent shall pay the remaining Enforcement Amount, if  
any, to the Company and to any other person which has contributed to the        
Enforcement Amount, in proportion to their respective contributions. See "The   
Charter Amendment; Description of the Special Common Stock -- Class Vote;" and  
"The Amended Governance Agreement -- Certain Agreements of Roche as to Voting." 
All investment or interest income earned with respect to the Enforcement Amount 
during the term of the Agency Agreement will be added to the Enforcement Amount.
In a separate letter agreement, dated September 6, 1995, Roche and Roche Holding
have, in effect, agreed with Genentech that with respect to any enforcement     
action by the Agent following the notice described in the second preceding      
paragraph, neither Roche nor Roche Holding will assert as a defense that the    
Agent does not have standing or is an improper party for purposes of seeking    
enforcement of their respective obligations with respect to the Put Rights or   
the fact that Genentech or its estate in bankruptcy may have rejected or failed 
to perform an arrangement between the parties.                                  

    The Agency Agreement provides for customary fees and expenses of the Agent
to be paid periodically out of the Enforcement Amount. The Agency Agreement also
provides for certain customary indemnification of the Agent by Roche Holding.   
The Agency Agreement terminates once the entire Enforcement Amount has been     
disbursed.                                                                      

BOARD OF DIRECTORS                                                              

Pursuant to the Amended Governance Agreement, the number of directors 
comprising the Genentech Board immediately after the Effective Time will be     
thirteen and the directors of the Company after the Effective Time will be the  
directors who were serving immediately prior to the Effective Time, until their 
successors have been duly elected or appointed and qualified or until the       
earlier death, resignation or removal in accordance with the Genentech          
Certificate of Incorporation and By-Laws and the Amended Governance Agreement.  
After the Effective Time, the Genentech Board will continue to include two      
nominees of Roche, whom Roche will continue to designate prior to the mailing of
the applicable annual proxy statement of the Company. Such nominees will        
continue to serve in the class or classes of directors in which they served     
prior to the Effective Time. The Amended Governance Agreement provides that,    
notwithstanding any other provision of the Amended Governance Agreement, the    
Genentech Certificate of Incorporation or By-Laws or applicable law, Roche will 
not at any time prior to the day following the last day of the Put Period be    
entitled to designate, or to cause the nomination or election of, more than two 
members of the Genentech Board. Directors nominated by Roche pursuant to the    
Amended Governance Agreement are referred to as "Investor Directors" and all    
other directors are referred to as "Noninvestor Directors."                     

     Pursuant to the Amended Governance Agreement, after the last day of the Put
Period, the Genentech Board will include up to two nominees designated by Roche 
and two officers of Genentech nominated by the nominating or proxy committee of 
the Genentech Board. The remainder of the Genentech Board at such time is to be 
comprised of Independent Directors. Upon its request, Roche will be entitled to 
designate nominees for a number of such Independent Directors equal to Roche    
Holding's Voting Interest times the total number of such Independent Directors, 
rounded up to the next whole number if Roche Holding's Voting Interest is       
greater than 50% and rounded down to the next whole number if Roche Holding's   
Voting Interest is less than or equal to 50%. Notwithstanding the foregoing, (i)
the number of Independent Directors designated by Roche will not exceed 50%     
after any Triggering Disposition and (ii) Roche will have no right to designate 
any nominees for directors pursuant to the Amended Governance Agreement at any  
time after Roche Holding's Voting Interest has fallen below 20%. Under the      
Amended Governance Agreement, Roche will not have the right to nominate or      
designate any additional directors to the Genentech Board unless and until (i)  
the Depositary has received the Put Price in respect of shares of Special Common
Stock with respect to which the Put Rights have been properly exercised and has 
been irrevocably instructed to pay the Put Price to stockholders that have      
exercised their Put Rights; (ii) Roche has made (or caused one of its affiliates
to                                                                              

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make) the election to purchase referred to in the third sentence of the first   
paragraph under "-- Capital Contribution and Assumption of Put Obligations by   
Roche" above and has complied (or caused one or more of its affiliates to       
comply) fully with the provisions described in such sentence; or (iii) the      
obligations of Roche described in such sentence have otherwise been fully       
satisfied through Roche Holding's performance under the Guaranty.               

 The Amended Governance Agreement provides that Genentech will cause the
Genentech Board to be increased or decreased in size, and will cause the        
Genentech Board to fill the vacancies created by any such increase, as          
appropriate in order to achieve the Genentech Board's proportionality required  
by the foregoing. Any directors elected to fill a vacancy will serve until the  
next annual meeting of stockholders, at which the newly created positions shall 
be assigned to classes of directors consistent with the terms of the Genentech  
Certificate of Incorporation and the By-Laws. Whenever necessary to maintain the
proportionality of the Genentech Board required by the Amended Governance       
Agreement, Roche will cause directors designated by Roche to resign from the    
Genentech Board. At such time as Roche Holding's Voting Interest falls below    
20%, Roche will cause all the Investor Directors to resign from the Genentech   
Board.                                                                          

   Under the Amended Governance Agreement, Roche and the nominating or proxy
committee will have the right to designate or nominate any replacement for a    
director designated by Roche or nominated by such committee, respectively, at   
the termination of such director's term or upon such director's death,          
resignation, retirement, disqualification, removal from office or other cause by
which such nominee ceases to be a director. To the extent permitted by the      
Genentech Certificate of Incorporation or the By-Laws, the Genentech Board will 
elect each person so designated or nominated.                                   

    The Amended Governance Agreement provides that no individual designated by
Roche will serve as a director unless such individual has such business or      
technical experience, stature and character as is commensurate with service on  
the board of a publicly held enterprise. No such individual who is an officer,  
director, partner or principal stockholder of any competitor of Genentech and   
its subsidiaries (other than Roche and its affiliates) will serve as a director 
of Genentech.                                                                   

Pursuant to the Amended Governance Agreement, the Genentech Board will
designate a nominating or proxy committee, an executive committee, an audit     
committee and a compensation committee. Each committee of the Genentech Board   
(other than any special committee or committee of Independent Directors         
constituted for the purposes of making any determination that is to be made     
under the terms of the Amended Governance Agreement or the Certificate of       
Incorporation) will at all times include at least one director designated by    
Roche and no action by any such committee shall be valid unless taken at a      
meeting for which adequate notice has been duly given to or waived by the       
members of such committee. Such notice will be required to include a description
of the general nature of the business to be transacted at the meeting, and no   
other business may be transacted at such meeting. Any committee member unable to
participate in person at any meeting will be given the opportunity to           
participate by telephone. The director designated by Roche to serve on any      
committee will be entitled to designate as his alternate another director       
designated by Roche.                                                            

The Amended Governance Agreement provides that the nominating or proxy
committee will include, in addition to the director designated by Roche, one    
Noninvestor Director who is an officer of Genentech and one Independent         
Director, and shall have the exclusive authority to nominate individuals to fill
all Genentech Board positions, except for those to be designated by Roche after 
the last day of the Put Period pursuant to the relevant provisions of the       
Amended Governance Agreement. With respect to any election of directors, any    
nomination of a person not then serving as a director will require the unanimous
approval of the nominating or proxy committee; provided that the two Investor   
Directors designated by Roche and the Independent Directors initially nominated 
by Roche will not require such unanimous approval. Genentech has agreed to use  
all reasonable efforts to solicit proxies for the nominees for director         
nominated by such committee from all holders of voting stock entitled to vote   
thereon.                                                                        

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CERTAIN APPROVAL RIGHTS                                                         

The Amended Governance Agreement provides that the approval of the    
directors designated by Roche pursuant to the Amended Governance Agreement      
(other than those designated pursuant to Roche's right to designate Independent 
Directors) will be required to approve any of the following:                    

         (a) the acquisition by Genentech of any business or assets that would
  constitute a substantial portion of the business or assets of Genentech,
   whether such acquisition be by merger or consolidation or the purchase of
stock or assets or otherwise;                                         

        (b) the sale, lease, license, transfer or other disposal of all or a
  substantial portion of the business or assets of Genentech other than in
    the ordinary course of business, other than any such sale, lease, license,
 transfer or other disposal which is subject to the provisions described
below restricting Genentech and its subsidiaries from entering such   
transactions prior to first negotiating with Roche;                   

       (c) the issuance of any Equity Securities or other capital stock of
    Genentech, except for (i) issuances of shares of Special Common Stock (or,
 after the conversion thereof, into shares of Common Stock, issuances of
shares of Common Stock) or options, warrants or rights to acquire, or 
    securities convertible into or exchangeable for, such Special Common Stock
    (or Common Stock) pursuant to any employee compensation plan that has been
     approved by a majority of the Independent Directors; (ii) issuances thereof
upon the exercise, conversion or exchange of any outstanding Equity   
     Securities or other capital stock; and (iii) other issuances thereof during
any 24-month period not exceeding 5% of the voting stock of Genentech 
outstanding at the beginning of such 24-month period; or              

      (d) the repurchase or redemption of any Equity Securities or other
  capital stock of Genentech, other than redemptions required by the terms
thereof and purchases made at fair market value in connection with any
deferred compensation plan maintained by Genentech.                   

    The Amended Governance Agreement provides that for purposes of clauses (a)
and (b) above, unless the majority of Independent Directors shall have made a   
contrary determination in good faith, a "substantial portion of the business or 
assets of Genentech" will mean a portion of the business or assets of Genentech 
accounting for 10% of the consolidated total assets, contribution to net income 
or revenues of Genentech and its consolidated subsidiaries.                     

AFFILIATION ARRANGEMENTS                                                        

    Pursuant to the Amended Governance Agreement, except as otherwise provided
in the Licensing Agreement, Genentech will not, and will not permit any of its  
subsidiaries to, enter into any material licensing or marketing agreement with  
respect to any products, processes, inventions or developments made by Genentech
or any subsidiary of Genentech unless it shall have first negotiated in good    
faith with Roche for a reasonable period of not less than three or more than six
months with a view towards reaching a mutually beneficial licensing or marketing
agreement with respect to such products, processes, inventions or developments. 

CERTAIN AGREEMENTS OF ROCHE AS TO VOTING                                        

     Pursuant to the Amended Governance Agreement, Roche will vote its shares of
Common Stock and shares of Special Common Stock in any election of directors for
all nominees in proportion to the votes cast by the other holders of Special    
Common Stock (excluding, at Roche's option, any votes cast by any person or     
group that beneficially owns at least 12% of the Equity Securities not          
beneficially owned by Roche Holding); provided that it may cast all of its votes
in favor of any nominee designated by it pursuant to the provisions of the      
Amended Governance Agreement.                                                   

Pursuant to the Amended Governance Agreement, in any vote to amend the
terms of the Special Common Stock, Roche will vote its shares of Special Common 
Stock, if any, in proportion to the votes cast by the holders of Special Common 
Stock (other than Roche and its affiliates).                                    

RESTRICTIONS ON TRANSFERS OF COMMON STOCK BY ROCHE                              

    Roche has agreed in the Amended Governance Agreement that it will not sell
or otherwise transfer any shares of Common Stock or shares of Special Common    
Stock, except (i) pursuant to a registered                                      

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underwritten public offering subsequent to April 30, 2000 (or earlier, if it    
becomes illegal for Roche to own Genentech stock or exercise rights of ownership
with respect to the Genentech stock) in accordance with its registration rights 
under the Amended Governance Agreement (see " -- Registration Rights"), (ii)    
pursuant to Rule 144 promulgated under the Securities Act, subsequent to April  
30, 2000 (or earlier, if it becomes illegal for Roche to own the Genentech Stock
or exercise rights of ownership with respect to the Genentech Stock), provided  
that any such sale will be subject to the volume and manner of sale limitations 
set forth in such rule, whether or not legally required, (iii) to any entity    
directly or indirectly 100% owned by Roche Holding or (iv) after the last day of
the Put Period in a Liquidating Sale (as hereinafter defined) so long as the    
sale is a sale of all Common Stock and Special Common Stock beneficially owned  
by Roche Holding and Roche Holding's Voting Interest is not below 50%.          

In the event Roche determines to sell its entire equity interest in   
Genentech after the last day of the Put Period, the Amended Governance Agreement
is designed to afford the minority holders the ability to participate in such a 
transaction provided that a majority of the Independent Directors and minority  
stockholders approve. Thus, for purposes of the foregoing, a "Liquidating Sale" 
means (i) a sale of all Genentech stock beneficially owned by Roche Holding to  
any person or group that is acquiring all the outstanding voting stock of       
Genentech at a per share consideration having at least the same value, and to be
paid in the same form as (or in cash), and not later than, the per share        
consideration to be paid to Roche and its affiliates in a transaction that has  
been approved by the Genentech Board and the stockholders in accordance with the
requirements that would be applicable to a Business Combination under Article   
Eleventh proposed by Roche or (ii) if such transaction proposed by such person  
or group has been rejected by the Independent Directors or the stockholders     
entitled to vote thereon under Article Eleventh, the sale of all the Genentech  
stock beneficially owned by Roche Holding to such person or group for per share 
consideration having not more than the same value, and payable in the same form,
as was so proposed to be paid to stockholders.                                  

     Notwithstanding the foregoing, (x) no Liquidating Sale may be made prior to
the time that such transaction is either rejected by the Independent Directors  
or the stockholders or consummated and (y) prior to the first anniversary of the
last day of the Put Period, the per share value offered to the public in any    
Liquidating Sale may not be less than the final redemption price of the Special 
Common Stock under the Call Rights (adjusted appropriately for events occurring 
after the conversion thereof as if it were still outstanding). The good faith   
determination of the majority of the Independent Directors of the value of the  
consideration offered in any proposal will be conclusive and binding.           

 The Amended Governance Agreement provides, however, that no Liquidating
Sale will be permitted unless the transferee and each entity controlling such   
transferee shall have agreed in writing to be bound, and to cause their         
affiliates to be bound, by the terms of the Amended Governance Agreement as if  
it were Roche and has entered into a confidentiality agreement with Genentech   
substantially in the form of the confidentiality agreement between Roche Holding
and Genentech dated October 13, 1989 (as modified by Section 6.01 of the 1990   
Merger Agreement); provided that no transferee in a Liquidating Sale shall be   
entitled to Roche's rights under the Amended Governance Agreement with respect  
to the composition of the Genentech Board and the committees of the Genentech   
Board and the covenants of Genentech with respect to severance arrangements and 
marketing agreements.                                                           

     Roche has agreed in the Amended Governance Agreement that in the event of a
Triggering Disposition, it will use its best efforts to sell additional shares  
of Common Stock within three years of the Triggering Disposition such that it   
will beneficially own not more than 20% of the outstanding shares of Common     
Stock. After a Triggering Disposition, Roche will have no further rights (i) to 
request redemption of the Special Common Stock, or (ii) with respect to the     
designation of members of committees of the Genentech Board, the requirement of 
unanimous approval with respect to certain Genentech Board nominees, the right  
to approve certain actions as described above and the right to negotiate first  
with Genentech and its subsidiaries with respect to material licensing or       
marketing agreements; provided, however, that no Triggering Disposition will    
relieve Roche of any of its obligations in connection with the Put Rights. Other
than in connection with its obligations with respect to the Put Rights as       
described in " -- Capital Contribution and Assumption of Put Obligations by     
Roche," after a Triggering Disposition, Roche will not, without the prior       
written consent of the Genentech Board, acting alone or as part of a group,     
acquire or offer or agree to acquire, directly or indirectly,                   

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by purchase or otherwise, any Equity Securities or all or any substantial       
portion of the assets of, or otherwise seek to influence or control, in any     
manner whatsoever, the management or policies of Genentech until the fifteenth  
anniversary of the date it ceases to beneficially own more than 20% of the      
outstanding shares of Common Stock, provided that the foregoing will not apply  
to any of Roche's portfolio managers whose investment decisions are not directed
by Roche.                                                                       

REGISTRATION RIGHTS                                                             

     The Amended Governance Agreement provides that, at any time after April 30,
2000 or such earlier date as it shall have become illegal for Roche Holding to  
continue to own Genentech stock, directly or indirectly, or to exercise fully   
all rights of ownership with respect to Genentech stock, upon the request of    
Roche, Genentech will file a registration statement under the Securities Act as 
to the number of shares of Common Stock or Special Common Stock specified in    
such request; provided that, subject to certain exceptions, Genentech will not  
be required to file more than three registration statements that become         
effective and remain effective for a specified period. Roche's right to request 
such registrations is subject to certain conditions set forth in the Amended    
Governance Agreement, and Roche and Genentech have agreed to certain procedures 
relating to such registration rights, which are set forth in the Amended        
Governance Agreement; these conditions and procedures, however, remain identical
to those of the Existing Governance Agreement. Roche is required to use all     
reasonable efforts to effect as wide a distribution of registered shares as     
possible, and no sale may be knowingly made to any person or entity which is    
part of any group that would, after giving effect to such sale, own more than 5%
of the outstanding Shares or 5% of the Company's Equity Securities.             

  All expenses incident to the performance by Genentech of its obligations
with respect to the registration of Roche's Genentech stock will be borne by    
Genentech except that Roche has agreed to pay any registration or filing fees   
payable under any federal or state securities or Blue Sky laws and certain      
expenses to be directly incurred by Roche, including underwriting fees,         
discounts and commissions and counsel fees. Genentech and Roche each have agreed
to indemnify the other, in certain instances, with respect to liability incurred
in connection with such registrations.                                          

CERTAIN COVENANTS                                                               

    Genentech, pursuant to the Amended Governance Agreement, will not and will
not permit any of its subsidiaries to, (i) enter into any contract, agreement,  
plan or arrangement covering any director, officer or employee of Genentech or  
any of its subsidiaries that provides for the making of any payments, the       
acceleration of vesting of any benefit or right of any other entitlement        
contingent upon (A) the Merger or the exercise by Roche of any of its rights    
under the Amended Governance Agreement to representation on the Genentech Board 
(and its committees) or any acquisition by Roche of securities of Genentech     
(whether by merger, tender offer, private or market purchases or otherwise) not 
prohibited by the Amended Governance Agreement or (B) the termination of        
employment after the occurrence of any such contingency if such payment,        
acceleration or entitlement would not have been provided but for such           
contingency or (ii) amend any existing contract, agreement, plan or arrangement 
to so provide.                                                                  

AMENDMENTS; TERMINATION                                                         

   The provisions of the Amended Governance Agreement, by its terms, may not
be waived or amended without the approval of a majority of the Independent      
Directors. Genentech intends to notify stockholders in the event that any       
material provision of the Amended Governance Agreement is waived or amended.    

     The Amended Governance Agreement, by its terms, will terminate at such time
as Roche and its affiliates beneficially own 100% of the voting stock of        
Genentech, except that Roche's agreement with respect to the indemnification of 
Genentech and certain other persons in connection with a redemption of the      
Special Common Stock pursuant to the Call Rights or the Put Rights and Roche's  
agreement with respect to the treatment of options, warrants and convertible    
securities following any such redemption, will survive such termination.        

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GUARANTY OF ROCHE HOLDING 

GENERAL                                                                         

     Upon consummation of the transactions contemplated by the Merger Agreement,
Roche Holding will deliver the Guaranty to Genentech. THE FOLLOWING DESCRIPTION 
OF THE TERMS AND CONDITIONS OF THE GUARANTY DOES NOT PURPORT TO BE COMPLETE AND 
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE GUARANTY, A FORM OF WHICH IS   
ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS EXHIBIT B TO ANNEX A AND         
INCORPORATED HEREIN BY REFERENCE.                                               

 Pursuant to the Guaranty, Roche Holding unconditionally and irrevocably
guarantees to Genentech the prompt and full discharge by Roche of all of Roche's
covenants, agreements, obligations and liabilities described under "The Amended 
Governance Agreement -- Capital Contribution and Assumption of Put Obligations  
by Roche." The Guaranty applies to all such obligations, including, without     
limitation, the due and punctual payment of all amounts which may become due and
payable to the Company and/or to the holders of Special Common Stock. With      
respect to all obligations to pay money, such Guaranty is a guaranty of payment 
and not merely of collection. If Roche defaults in the due and punctual         
performance of any of its covenants, agreements, obligations and liabilities    
described above, or in the full and timely payment of any amounts owed pursuant 
to such covenants, agreements, obligations and liabilities described above,     
Roche Holding has agreed to forthwith perform or cause to be performed such     
covenants, agreements, obligations and liabilities described above, and         
forthwith make full payment of any amount due with respect thereto at its sole  
cost and expense. For information concerning Roche, Roche Holding and the Roche 
Group, see "Certain Information Concerning Roche and Roche Holding" below.      

COVENANTS                                                                       

    Under the Guaranty, Roche Holding has agreed to be bound by the provisions
of the Amended Governance Agreement and to abide, and to cause its affiliates to
abide, by the obligations and limitations set forth therein as if it were Roche,
and has agreed and acknowledged that any limitation or restriction on Roche set 
forth therein will be deemed to be, and will be construed as, a limitation or   
restriction on Roche Holding and its affiliates taken as a whole.               

THE LICENSING AGREEMENT 

     THE FOLLOWING DESCRIPTION OF THE LICENSING AGREEMENT DOES NOT PURPORT TO BE
COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE TEXT OF THE       
LICENSING AGREEMENT, A COPY OF WHICH WAS FILED WITH THE COMMISSION AS AN EXHIBIT
TO THE REGISTRATION STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE.          

LICENSES, OPTIONS, KNOW-HOW AND TRADEMARKS                                      

    Pursuant to the Licensing Agreement, Genentech would agree to grant to HLR
an exclusive patent, know-how and trademark license to use, sell and, under     
certain conditions, make in Canada: Activase(R) tissue plasminogen activator;   
Protropin(R) and Nutropin(R) human growth hormone; and Actimmune(R) interferon  
gamma 1-b, each as sold in Canada (collectively, the "Canada Products").        
Genentech has also agreed to grant to HLR an exclusive patent, know-how and     
trademark license to use, sell and, under certain conditions, make Pulmozyme(R),
dornase alpha ("DNase"), outside the United States (the "Roche Territory").     
Except as noted below with respect to certain "in-licensed" products, the       
Licensing Agreement provides that Genentech will grant to HLR an option for an  
exclusive patent, know-how and trademark license in the Roche Territory on a    
product-by-product basis to use, sell and, under certain circumstances, make    
other Genentech products for which Genentech has rights as of April 12, 1995 or 
for which Genentech subsequently acquires rights ("Genentech Products"). For    
certain products in-licensed from (x) Scios Nova Inc. ("Scios Nova") (such      
products being referred to as "Scios Product") and (y) IDEC Pharmaceuticals     
Corporation ("IDEC") (such products being referred to as "IDEC Product"),       
Genentech will also grant to Roche an option for an exclusive patent and        
know-how license outside the United States with respect to Scios Product and    
IDEC Product to use, sell and, under certain conditions, make such product. In  
Canada, HLR's rights with respect to Scios Product and IDEC Product are subject 
to the preexisting co-promotion obligations of Genentech with respect           

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to such products. For other human pharmaceutical products for which Genentech   
acquires rights in the HLR Territory by means of a patent and/or know-how       
license from a third party ("In-Licensed Product"), subject to the terms and    
conditions of the relevant license agreements relating to such products and     
HLR's acceptance of the terms and conditions thereunder, Genentech will grant to
HLR an option for an exclusive patent and know-how license in the Roche         
Territory on a product-by-product basis to use, sell and, under certain         
circumstances, make such In-Licensed Products.                                  

Prior to the completion of the first Phase II trial for a particular  
product, Genentech retains authority to discontinue sole development of a       
product and, subject to the provisions of the Amended Governance Agreement, to  
license such product to a third party. See "The Amended Governance Agreement -- 
Affiliation Arrangements" above. Upon the completion of Phase II for a product, 
Genentech must notify HLR of this event and supply to HLR a reasonable summary  
of information regarding the product, including data from any Phase II trials.  
Within 30 days of such notification, the joint Commercialization Committee (as  
defined in the Licensing Agreement) must meet to review the results of the Phase
II trials and other relevant data. Within 30 days of the commencement of such   
meeting, Roche must either exercise its option for the product or irrevocably   
waive it. For those products for which Phase II trials have already been        
completed as of the Effective Date, the Commercialization Committee must meet   
within 45 days of the Effective Date to review summary results of clinical data 
for such products. Within 90 days of the commencement of this meeting, HLR must 
either exercise or waive its option for a license for each such product on a    
product-by-product basis. If HLR waives its option, Genentech is free to develop
and sell the product itself or with another party. If Genentech and HLR mutually
agree, the options granted in the Licensing Agreement can be exercised prior to 
the completion of Phase II.                                                     

  The licenses and options for licenses described above are conditioned on
HLR's using its best efforts in each country in the Roche Territory to take all 
steps necessary to obtain regulatory approval in an expeditious fashion and to  
sell the product in a manner so as to maximize revenues. The options granted in 
the Licensing Agreement expire ten years after the Effective Date. Thus, any    
option exercised by HLR during the ten-year term remains in effect for the full 
term of the license (as described below) and any unexercised option at the end  
of the ten-year period terminates.                                              

     Under the Licensing Agreement with respect to the current Genentech and HLR
collaborations on IIbIIIa antagonists and ras farnesyltransferase inhibitors,   
Genentech has the sole right in the United States, and HLR has the sole right in
the Roche Territory, to use and sell such products. All research efforts on     
these products will continue to be shared in an equal manner; no royalties on   
sales shall be due from either party to the other. See "Certain Relationships   
and Related Transactions." The costs for development of certain products will be
shared as described below under "-- Development and Marketing."                 

COMMERCIALIZATION COMMITTEES                                                    

     To manage collaborations between Genentech and HLR, the Licensing Agreement
provides for the establishment of four committees: A Commercialization Committee
to provide a forum for the exchange of information about Genentech Products; a  
Development Committee to coordinate development efforts between Genentech and   
HLR; a Management Committee to review annually the development and              
commercialization of all products covered by the Licensing Agreement, and a     
Finance Committee to discuss financial activities relating to the Licensing     
Agreement.                                                                      

DEVELOPMENT AND MARKETING                                                       

    Under the Licensing Agreement, Genentech will have sole responsibility and
full autonomy for the development and marketing of its products in the United   
States, and also in the Roche Territory with respect to products for which HLR  
does not exercise its option for a license. HLR will have sole responsibility   
for the development and marketing of products in the Roche Territory for which  
it has been granted an exclusive license or exercised its option for a license. 

  Under the Licensing Agreement, HLR will, in general, reimburse Genentech
for 50% of Genentech's development costs, depending on the payment mechanism    
described below, incurred in connection with a                                  

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product for which HLR has been granted a license or for which HLR has exercised 
its option for a license, and for IIbIIIa antagonists and ras                   
farnesyltransferase. With respect to Canada Products, HLR will reimburse        
Genentech for 10% of Genentech's development costs incurred in connection with  
such products. The mechanism for reimbursement of development costs incurred up 
to the date of HLR's exercise of its option for a product shall be either, at   
Genentech's election and with HLR's consent, of the following: (i) upon HLR's   
exercise of its option by payment by in full of 50% of the previously incurred  
development costs for that Product or (ii) by the payment of 150% of prospective
development costs for that product until 50% of all previously incurred         
development costs for that product have been reimbursed. One-half of all        
development costs incurred after HLR's exercise of its option shall be          
reimbursed by HLR on an ongoing basis.                                          

PRODUCTION AND SUPPLY                                                           

    Pursuant to the Licensing Agreement, Genentech will manufacture and supply
to HLR clinical requirements of Genentech Products at cost and commercial       
requirements at cost plus a margin of 20% on such cost. HLR will manufacture and
supply to Genentech clinical requirements of synthetic molecules other than     
peptides or proteins ("Small Molecule Products") at cost and commercial         
requirements at cost plus a margin of 20% on such cost. In-Licensed Products    
will be manufactured and supplied to Roche, whether by Genentech, the licensor  
or a third party, in a manner consistent with the license agreement for that    
product. HLR will pay 50% of Genentech's costs associated with developing a     
manufacturing process for products licensed by HLR. Genentech will pay that     
proportion of HLR's costs associated with developing a manufacturing process for
a Small Molecule Product licensed by HLR that Genentech's expected revenues for 
sales of that product in the United States bears to expected worldwide sales of 
that product.                                                                   

ROYALTIES AND OTHER PAYMENTS                                                    

   Genentech will receive the following royalties on product sales from HLR:

     (i) On DNase, (x) a royalty of 20% on sales in countries that are
members of the European Economic Community or the European Free Trade 
    Association and in Canada and (y) in all other countries which are part of
the Roche Territory, a royalty of 12.5% for the first $100 million in 
aggregate sales and thereafter a royalty of 15% for aggregate sales in
     excess of $100 million until the later in each country of the expiration of
Genentech patents or 25 years from first commercial introduction;     

   (ii) On Canada Products, a royalty of 20% on sales of each such
     product until the later of the expiration of a relevant Genentech patent in
   Canada or 25 years from the Effective Date (with respect to Activase, HLR
   will pay an additional 10% royalty on sales in each year that exceed 110%
of 1994 Activase sales up to a total payment of $27 million);         

         (iii) On each Genentech Product for which HLR exercises its option, a
royalty of 12.5% for the first $100 million in aggregate sales and    
   thereafter a royalty of 15% for aggregate sales in excess of $100 million
   until the later in each country of the expiration of a relevant Genentech
patent or 25 years from first commercial introduction;                

          (iv) On Scios Product if HLR exercises its option, a royalty of 20% on
   sales for so long as Genentech is paying royalties to Scios Nova on sales
    of Scios Product and thereafter a royalty of 8% for aggregate annual sales
 of $150 million or less and 10% for aggregate annual sales in excess of
$150 million until the later in each country of the expiration of a   
   relevant Genentech patent or 25 years from first commercial introduction;

        (v) On IDEC Product if HLR exercises its option, a royalty of 20% on
     sales for so long as Genentech is paying royalties to IDEC on sales of IDEC
  Product and thereafter a royalty of 8% for aggregate annual sales of $75
     million or less and 10% for aggregate annual sales in excess of $75 million
   until the later in each country of the expiration of a relevant Genentech
patent or 25 years from first commercial introduction;                

    (vi) On In-Licensed Products, a mutually agreeable royalty to be
negotiated for each such product; and                                 

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   (vii) On the expiration of any of the foregoing royalties, on a
    product for which HLR continues to use a Genentech trademark, a royalty of
2% for so long as the trademark is used.                              

 In addition to the foregoing royalties, if HLR exercises its option for
Scios Product, HLR will pay Genentech $25 million and will reimburse Genentech  
for certain one-time milestone payments that Genentech is obligated to pay upon 
the occurrence of such milestones to Scios Nova. If Roche exercises its option  
for IDEC Product, HLR will pay Genentech $10 million and will reimburse         
Genentech for 50% of certain Genentech development costs and for certain        
one-time milestone payments that Genentech is obligated to pay upon the         
occurrence of such milestones to IDEC.                                          

TRANSITION PROVISIONS                                                           

  Pursuant to the Licensing Agreement, the operations of Genentech Canada,
Inc., Genentech Europe Limited and Genentech Ltd. (Japan) will be transferred to
HLR as soon as possible following consummation of the Merger but by no later    
than January 1, 1996. Genentech and HLR will discuss and mutually agree with    
respect to the continuing status of the employees of those organizations. The   
records for those organizations and any appropriate product dossiers and        
registrations will be transferred to HLR. HLR will assume any real property     
leases of those organizations as well as any other liabilities that have arisen 
in the normal course of business, with the exception of a line of credit to     
Genentech Canada, Inc. used to purchase Activase rights and severance costs     
relating to not more than six employees of Genentech Europe Limited.            

TERM AND TERMINATION                                                            

     The Licensing Agreement expires with respect to any individual product when
royalties are no longer payable by HLR to Genentech on sales of such product.   
Other termination provisions include the following: HLR has the right to        
terminate a license for a product upon six months notice if it has completed at 
least one Phase III clinical trial and the results of that trial are unable to  
support the registration of that product, or the results of other trials        
establish that further development would not provide data sufficient to support 
registration, and in such case, all rights to the product revert to Genentech.  
If HLR fails to use its best efforts to commercialize a product in a country and
fails to take adequate remedial measures, Genentech may (i) terminate the       
agreement with respect to that product in that country if a registration has not
been initiated or (ii) convert the exclusive license for that product in that   
country to a nonexclusive one if registration has been initiated. Genentech may 
terminate its development or commercialization at any time for any product which
has been licensed to HLR, and such product shall then be subject to Section 3.07
of the Amended Governance Agreement, provided that if such termination is for   
reasons other than safety concerns, Genentech will have an obligation for up to 
two years to provide HLR's clinical and commercial requirements. Either party   
may terminate the Licensing Agreement for the breach of a material obligation of
the other. Genentech may terminate HLR's option for a license for products if   
HLR's equity ownership in Genentech is less than 50% at any time.               

HOLDERS OF GENENTECH'S DEBENTURES AND WARRANTS

     Holders of the 5% Convertible Subordinated Debentures due 2002 of Genentech
(the "Debentures") who convert their Debentures into Common Stock prior to the  
Effective Time pursuant to the terms of the Indenture, dated as of March 27,    
1987 (the "Indenture"), by and between Genentech and The Bank of New York (the  
"Trustee"), will have their Common Stock converted into and exchanged for       
Special Common Stock on the same basis as other holders of Common Stock. See    
"The Merger Agreement -- Conversion and Exchange of Common Stock and Merger     
Subsidiary Common Stock."                                                       

     Debentures not converted into Common Stock prior to the Effective Time will
remain outstanding following the Effective Time as obligations of Genentech as  
the surviving corporation in the Merger. Pursuant to the Indenture, the holders 
of the Debentures who do not convert their Debentures prior to the Effective    
Time will thereafter have the right to convert such Debentures into the number  
of shares of Special Common Stock they would have received in the Merger had    
they converted their Debentures immediately prior to the Effective Time (subject
to further adjustment for events subsequent to the Merger (including the        
conversion,                                                                     

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if any, of Special Common Stock into Common Stock in 1999) in the manner        
provided in the Indenture). As required by the Indenture, Genentech will deliver
a Supplemental Indenture to the Trustee at the Effective Time which will provide
for such adjustment.                                                            

For information as to the terms of the Debentures, including the terms
relating to conversion, see the Annual Report on Form 10-K of Genentech for the 
year ended December 31, 1994, which is incorporated herein by reference.        

     Holders of warrants issued by Genentech (the "Warrants") to purchase Common
Stock who exercise such Warrants and purchase Common Stock prior to the         
Effective Time pursuant to the terms of the Warrants, will have their Common    
Stock converted into and exchanged for Special Common Stock on the same basis as
other holders of Common Stock. See "The Merger Agreement -- Conversion and      
Exchange of Common Stock and Merger Subsidiary Common Stock."                   

The Warrants will remain outstanding following the Effective Time as  
obligations of Genentech as the surviving corporation in the Merger. Pursuant to
the terms of the Warrants, each Warrant that is not exercised prior to the      
Effective Time will become exercisable, in accordance with its terms, for the   
number of shares of Special Common Stock that the holder of such Warrant would  
have received in the Merger had such holder exercised such Warrant immediately  
prior to the Effective Time (subject to the adjustment for events subsequent to 
the Merger (including the conversion, if any, of Special Common Stock into      
Common Stock in 1999) in the manner provided in the Warrants). As required by   
the Warrants, Genentech will file in the custody of its Secretary or an         
Assistant Secretary at its principal office and with its stock transfer agent an
officer's certificate which will provide for the adjustment described above.    

  Roche will agree in the Amended Governance Agreement to make appropriate
provisions to assure that any options, warrants, rights or securities           
convertible into or exercisable or exchangeable for Special Common Stock        
outstanding on the date of redemption of the Special Common Stock pursuant to   
the Call Rights or the Put Rights (whether or not convertible, vested,          
exercisable or exchangeable on such date) become convertible into or exercisable
or exchangeable for consideration of the same type and amount as the holders    
thereof would have received had they converted, exercised or exchanged such     
options, warrants, rights or securities prior to such date. The Amended         
Governance Agreement provides, however, that such provision will not be deemed  
or construed as a waiver of any other rights that a holder of any such          
securities may have.                                                            

CERTAIN PROJECTIONS OF FUTURE OPERATIONS AND OTHER INFORMATION

     The projected financial information set forth below was not prepared with a
view to publication nor with a view toward complying with published guidelines  
of the Commission or the American Institute of Certified Public Accountants     
regarding projections and forecasts. The projections set forth under "-- April  
Information" are included herein only because they were considered by the       
Special Committee and the Genentech Board during the course of its decision to  
enter into the Proposed Transactions and because they were provided to Roche,   
and the projections set forth under "September Information" are included because
they update the prior information.                                              

APRIL INFORMATION                                                               

     The following projected financial information was completed by Genentech on
April 28, 1995, was delivered to Roche on April 29, 1995 and was presented to   
the Special Committee at the meetings held on April 29 and 30, 1995. Although   
the Company had previously prepared projected financial information, such       
projections were revised downward to reflect the Company's belief that certain  
products in development would be commercially viable at dates later than had    
previously been anticipated.                                                    

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     The information was presented in two forms, the first of which did not take
into account the effects of the Licensing Agreement:                            

1995-2000 BASE FINANCIAL PROJECTIONS -- BEFORE NEW LICENSING AGREEMENT

($ in millions, except per share amounts) 

                                                        [Enlarge/Download Table]

                                                              YEAR ENDED DECEMBER 31,              
                                                 --------------------------------------------------
                                                 1995     1996     1997     1998     1999     2000 
                                                 -----   ------   ------   ------   ------   ------
                                                                                                   
Revenues........................................ $ 930   $1,025   $1,190   $1,380   $1,600   $1,965
Net Income......................................   165      185      210      255      325      470
Earnings Per Share..............................  1.35     1.50     1.64     2.00     2.48     3.55

  Under the Licensing Agreement, the international (European and Canadian)
operations included in the foregoing projected financial information would be   
excluded. In lieu of these operations, Genentech would receive royalties on     
product sales outside the U.S. and a margin on sales of product supplied by     
Genentech to Roche for these markets. In addition Roche would pay 50% of the    
development costs incurred by Genentech in respect of products with respect to  
which Roche exercises its option under the Licensing Agreement. See "The        
Licensing Agreement."                                                           

The second set of projected financial information gives effect to the 
estimated effects on the above Base Financial Projections of the Licensing      
Agreement:                                                                      

1995-2000 FINANCIAL PROJECTIONS -- AFTER NEW LICENSING AGREEMENT

($ in millions, except per share amounts) 

                                                        [Enlarge/Download Table]

                                                              YEAR ENDED DECEMBER 31,              
                                                ---------------------------------------------------
                                                 1995     1996     1997     1998     1999     2000 
                                                ------   ------   ------   ------   ------   ------
                                                                                                   
Revenues....................................... $1,005   $1,065   $1,210   $1,305   $1,460   $1,725
Net Income.....................................    230      260      275      300      335      445
Earnings Per Share.............................   1.87     2.10     2.19     2.33     2.57     3.38

    Both sets of projected financial information set forth above were based on
certain common assumptions: (i) the absence of dividends or share repurchases by
the Company; (ii) no significant acquisitions by the Company; (iii) certain     
assumed rates of taxation; and (iv) probability adjusted projections of expenses
and sales. The projected financial information which takes account of the       
potential impact of the Licensing Agreement further assumes that: (i) Roche will
exercise its option with respect to all of the Company's products in            
development, and the Company will be reimbursed for 50% of the total amount of  
costs incurred with respect to a product up to the date of the exercise of such 
option; (ii) Roche will pay the Company for 50% of such previously incurred     
development costs by reimbursing the Company at 150% of prospectively incurred  
development costs as described under "The Licensing Agreement -- Development and
Marketing;" (iii) Roche will accept the Company's calculation of development    
costs associated with such products; (iv) sales of the Company's currently      
existing products outside the United States will remain at approximately the    
same levels assumed in the Base Financial Projections set forth above; (v) any  
increase in revenues resulting from the Licensing Agreement would flow to       
earnings rather than be used by the Company to accelerate new product           
development; (vi) 1995 special charges, including expenses associated with the  
Merger are excluded; and (vii) Genentech's operations outside the United States 
will be transferred to Roche as of January 1, 1996.                             

SEPTEMBER INFORMATION                                                           

    On September 8, 1995 the following updated projected financial information
was delivered to the Genentech Board and to Roche. Such information takes into  
account developments since the preparation of the projected financial           
information set forth above under "-- April Information" and reflects           
Genentech's management's estimates of the effect of such developments on such   
previously prepared information. Specifically, management of Genentech took into
account the effects of (i) updated estimates as to the timing                   

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of the development and approval of certain products, (ii) updated estimates as  
to the probability of successful development and approval of certain products,  
and (iii) Genentech's management's updated projections of sales and related     
expenses for certain current products and products in development. Other than as
described in this paragraph and as set forth below, the assumptions upon which  
the following information is based are substantially the same as those set forth
in the immediately preceding paragraph.                                         

Three sets of projected financial information were delivered to the   
Genentech Board and to Roche on September 8, 1995.                              

 The first set of projected financial information reflects the estimated
effects of developments since April 1995 on the "1995 - 2000 Base Financial     
Projections -- Before New Licensing Agreement" set forth above under "-- April  
Information." As was the case in connection with the preparation of the         
projected financial information set forth above under "-- April Information,"   
the following projected financial information assumes that one new product will 
be put into development each year:                                              

UPDATED 1995 - 2000 BASE FINANCIAL PROJECTIONS -- BEFORE NEW LICENSING AGREEMENT

($ in millions, except per share amounts) 

                                                        [Enlarge/Download Table]

                                                         YEAR ENDED DECEMBER 31,                  
                                       -----------------------------------------------------------
                                       1995      1996       1997       1998       1999       2000 
                                       ----     ------     ------     ------     ------     ------
                                                                                                  
Revenues.............................. $942     $1,003     $1,098     $1,228     $1,390     $1,679
Net Income............................  171        174        179        206        238        360
Earnings Per Share.................... 1.40       1.41       1.41       1.62       1.82       2.73

  The second set of projected financial information reflects the estimated
effects of developments since April 1995 on the "1995 - 2000 Financial          
Projections -- After New Licensing Agreement" set forth above under "-- April   
Information." As was the case in connection with the preparation of the April   
information, this second set of projected financial information gives effect to 
the estimated impact on the Updated Base Financial Projections of the Licensing 
Agreement and, in addition, takes into account the possibility that HLR may     
elect not to exercise its option with respect to all development projects. See  
"The Licensing Agreement." As in the case of the projected financial information
set forth in the immediately preceding table, the following projected financial 
information assumes that one new product will be put into development each year:

UPDATED 1995 - 2000 FINANCIAL PROJECTIONS -- AFTER NEW LICENSING AGREEMENT

($ in millions, except per share amounts) 

                                                        [Enlarge/Download Table]

                                                         YEAR ENDED DECEMBER 31,                  
                                       -----------------------------------------------------------
                                       1995      1996       1997       1998       1999       2000 
                                       ----     ------     ------     ------     ------     ------
                                                                                                  
Revenues.............................. $958     $1,032     $1,134     $1,205     $1,345     $1,555
Net Income............................  184        248        252        268        291        387
Earnings Per Share.................... 1.52       2.02       2.02       2.08       2.23       2.92

 The third set of projected financial information reflects the estimated
effects on the projections set forth in the immediately preceding table of the  
Company's current intention to accelerate its product development efforts by    
bringing three new products or product indications into development in the next 
year, rather than one product, as is assumed in each of the other sets of       
projected financial information set forth in this section. The third set of     
information also assumes that in addition to product revenue reflected in the   
immediately preceding table, one additional new product or product indication   
will be approved during the period covered                                      

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by the projections. All other assumptions used in preparing the following       
projections are consistent with the assumptions upon which the projected        
financial information set forth in the preceding table is based:                

UPDATED 1995 - 2000 FINANCIAL PROJECTIONS -- AFTER NEW LICENSING AGREEMENT

AND WITH ACCELERATED PRODUCT DEVELOPMENT

($ in millions, except per share amounts) 

                                                        [Enlarge/Download Table]

                                                          YEAR ENDED DECEMBER 31,                   
                                       -------------------------------------------------------------
                                        1995      1996       1997       1998       1999       2000  
                                       ------    -------    -------    -------    -------    -------
                                                                                                    
Revenues.............................. $  958    $ 1,031    $ 1,132    $ 1,203    $ 1,390    $ 1,580
Net Income............................    184        227        236        243        305        389
Earnings Per Share....................   1.52       1.85       1.90       1.89       2.34       2.94

CERTAIN SIGNIFICANT CONSIDERATIONS                                              

All of the projections set forth above are necessarily based upon     
assumptions with respect to Genentech, the pharmaceutical and biotechnology     
industries, general business and economic conditions, and other matters and are 
inherently uncertain and involve numerous factors beyond Genentech's control,   
including, without limitation, Roche's decision whether to exercise its options 
under the Licensing Agreement. To the extent that such projections reflect the  
anticipated sales performance of products currently marketed by Genentech and   
products currently licensed by Genentech to third parties, such projections were
developed based upon information, in the nature of estimates, forecasts and     
projections, provided by members of Genentech's staff. The anticipated sales    
performance of potential new products that are currently in various stages of   
Genentech's research and development process, and new indications for existing  
products, were generated for purposes of the projections from estimates of the  
potential markets for such products based upon analyses of the patient          
populations for the health conditions to be treated by such products and        
estimates of sale prices for such products. The projections assumed that such   
new products will in fact be developed; will be effective; will obtain all      
necessary governmental approvals; and will be introduced into the market; all in
accordance with management's current plans, including the timing assumptions    
thereof, with respect to such products and, in most cases, prior to the         
introduction of competitive products. However, in light of the uncertainties    
inherent in any predictions as to whether and when the development of such      
products can be successfully completed, management probability adjusted such    
projected expenses and sales for new products and new indications on a          
product-by-product basis in arriving at the projections set forth above.        
Management believes that this probability adjustment, although subjective, is   
appropriate in light of the uncertainties inherent in Genentech's business.     

The methods and assumptions used in preparing the projected financial 
information set forth in this section "Certain Projections of Future Operations 
and Other Information" involved significant elements of subjective judgment     
which may or may not prove to be correct. Further, management recognized that   
the product-by-product probability adjustment applied in the projections (to the
extent they relate to or are derived from the potential sales and expenses of   
new products and new indications) may not adequately take into account the      
possibility that some or all of the projected new products and indications may  
not be successfully developed within the five-year period. ACCORDINGLY, SUCH    
PROJECTED FINANCIAL INFORMATION IS NOT NECESSARILY INDICATIVE OF FUTURE         
PERFORMANCE OF GENENTECH, WHICH MAY BE SIGNIFICANTLY LESS FAVORABLE OR MORE     
FAVORABLE THAN AS SET FORTH ABOVE. THE INCLUSION OF SUCH PROJECTED FINANCIAL    
INFORMATION HEREIN SHOULD NOT BE REGARDED AS A REPRESENTATION BY GENENTECH THAT 
THE PROJECTED RESULTS INDICATED WILL BE ACHIEVED OR THAT THE SPECIFIC           
DEVELOPMENT STRATEGY REFLECTED IN EACH OF THE CASES SET FORTH ABOVE WILL BE     
ADOPTED. BECAUSE SUCH PROJECTED FINANCIAL INFORMATION IS INHERENTLY SUBJECT TO  
UNCERTAINTY, GENENTECH ASSUMES NO RESPONSIBILITY FOR ITS ACCURACY.              

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The foregoing projections are not included in this Proxy              
Statement/Prospectus in order to induce any stockholder to vote for approval of 
the Proposal. Neither Genentech nor any of its financial or other advisors or   
any of their respective directors or officers assumes any responsibility for the
accuracy of such projections. Genentech's independent auditors have not         
performed any procedures with respect to such projections and, accordingly,     
assume no responsibility for them. Such projections are not to be regarded as   
facts and should not be relied upon as an accurate representation of future     
results. In addition, because the estimates and assumptions underlying such     
projections are based upon events and circumstances that have not taken place   
and are inherently subject to significant scientific, financial, market,        
economic and competitive uncertainties and contingencies which are difficult or 
impossible to predict accurately and are beyond Genentech's control, there can  
be no assurance that the projections will be realized. Accordingly, it is       
expected that there will be differences between actual and projected results,   
and actual results may be materially higher or lower than those set forth above.

 None of the Special Committee, the Independent Committee, the Genentech
Board nor Roche has been provided further updates of the projected financial    
information set forth above since their respective presentation to the Genentech
Board on April 29 and 30, 1995 and delivery to the Genentech Board and Roche on 
September 8, 1995.                                                              

CERTAIN INFORMATION CONCERNING
ROCHE AND ROCHE HOLDING 

     Roche Holding is the parent company of an international health care concern
operating in more than 100 countries and employing approximately 60,000 people  
worldwide. It was incorporated in 1896 in Basel, Switzerland, under the name of 
F. Hoffmann-La Roche & Co. Limited Company. In June 1989, Roche Holding assumed 
its present name and transferred its operating businesses and related assets and
liabilities to a newly established subsidiary, F. Hoffmann-La Roche Ltd, also   
incorporated in Switzerland and having its principal office in Basel. The       
address of the principal office of Roche Holding is Grenzacherstrasse 124,      
CH-4002, Basel, Switzerland. Roche Holding's business consists principally of   
four divisions: Pharmaceuticals, Vitamins and Fine Chemicals, Diagnostics and   
Fragrances and Flavors.                                                         

   Roche Holding's capital stock is officially listed on the stock exchanges
of Zurich, Basel and Geneva.                                                    

Roche, which was incorporated in the State of Delaware in 1987, is an 
indirect wholly owned subsidiary of Roche Holding and is the holding company for
the principal operating subsidiaries of Roche Holding in the United States.     
Roche, through its various direct and indirect subsidiaries, engages primarily  
in the development and manufacture of pharmaceuticals, vitamins and fine        
chemicals, diagnostics, flavors and fragrances, and in the business of          
analytical laboratory services. In 1994, revenues of Roche were $4.5 billion, an
increase of 15% over the previous year. Roche and Roche Holding are members of  
the Roche Group. Certain financial statements of the Roche Group are set forth  
below.                                                                          

    Roche Finance Ltd, a Swiss corporation ("Roche Finance"), owns 100% of the
stock of Roche, and in turn is a wholly owned subsidiary of Roche Holding. Roche
Finance is a holding company having participations in various subsidiaries of   
Roche Holding. Roche Finance was incorporated in 1971 in Basel, Switzerland,    
under the name Roche Chemie AG and assumed its present name in July 1989. The   
address of the principal office of Roche Finance is Grenzacherstrasse 124,      
CH-4002, Basel, Switzerland.                                                    

 None of Roche, Roche Holding, or Roche Finance has during the last five
years (i) been convicted in a criminal proceeding (excluding traffic violations 
or other similar misdemeanors); or (ii) been a party to a civil proceeding of a 
judicial or administrative body of competent jurisdiction as a result of which  
such person was or is subject to a judgment, decree or final order enjoining    
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.    

Other than as described in "Summary and Special Factors -- The 1990   
Merger", "General Information -- Required Vote", none of Roche, Roche Holding,  
or Roche Finance is the direct or indirect beneficial owner of any security of  
Genentech or, other than as described in this Proxy Statement/Prospectus, has   
any contract, arrangement, understanding or relationship with respect to any    
securities of Genentech.                                                        

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    Other than as described in "The Proposed Transactions -- Background of the
Proposed Transactions," none of Roche, Roche Holding, or Roche Finance has since
January 1, 1993 had any contacts, negotiations, or entered into any transactions
with Genentech concerning a merger, consolidation or acquisition, a tender offer
or other acquisition of securities, an election of directors, or a sale or other
transfer of a material amount of assets, or entered any contracts, arrangements,
understandings or relationships with Genentech or any of its executive officers,
directors, controlling persons or subsidiaries.                                 

    Merger Subsidiary, a wholly owned subsidiary of Roche, was incorporated in
the State of Delaware in May of 1995 and has never carried on any independent   
business activities other than those incident to its formation and the Merger.  
For these reasons, no meaningful financial data are available with respect to   
Merger Subsidiary. Merger Subsidiary owns no physical properties and has no     
subsidiaries. There are no pending legal proceedings to which Merger Subsidiary 
is a party or which relate to the property of Merger Subsidiary.                

FINANCIAL INFORMATION OF THE ROCHE GROUP                                        

     The following consolidated financial statements relating to the Roche Group
have been extracted from the 1994 Annual Report and 1995 Half-Year Report of the
Roche Group which have been submitted to the Commission pursuant to Rule        
12g3-2(b) under the Exchange Act. The consolidated financial statements for the 
two-year period ended December 31, 1994 and at December 31, 1994 and 1993 were  
audited by Price Waterhouse AG, Group Auditors. The consolidated financial      
statements for the half-years ended June 30, 1995 and June 30, 1994 have not    
been audited. The financial data set forth below are qualified in their entirety
by reference to the 1994 Annual Report and 1995 Half-Year Report of the Roche   
Group and the other documents submitted by Roche Holding to the Commission under
Rule 12g3-2b including the financial statements and related notes contained     
therein. These documents may be obtained from Roche Holding at the address      
listed above or inspected and copied at the public reference facilities         
maintained by the Commission located at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549.                                                         

     The Roche Group prepared its consolidated financial statements published in
the 1994 Annual Report and the 1995 Half-Year Report and presented below in     
accordance with the accounting principles formulated by the International       
Accounting Standards Committee ("IASC"). The IASC was established in 1973 by    
professional accountancy bodies from around the world (including the American   
Institute of Certified Public Accountants) with the following objectives: (i) to
formulate and publish in the public interest accounting standards to be observed
in the presentation of financial statements and to promote their worldwide      
acceptance and observance; and (ii) to work generally for the improvement and   
harmonization of regulations, accounting standards and procedures relating to   
the presentation of financial statements.                                       

There are currently 110 member bodies of the IASC in 82 countries,    
including the United States. With representation on the board of the IASC, the  
influence of the United States is noticeable in the extent to which             
International Accounting Standards ("IAS") rely on United States generally      
accepted accounting principles ("US GAAP") in many cases.                       

   Because of the need initially to satisfy the requirements of many diverse
legal and accounting systems around the world, the 31 standards originally      
issued by the IASC contain alternative accounting treatments for similar        
transactions. With a view to facilitating multinational securities offerings,   
the IASC is continuing to work toward improving existing standards so that they 
may be accepted by the International Organization of Securities Commissions as  
mutually acceptable standards of accounting and disclosure. The key to this     
process is harmonization through reduction of the number of alternative         
accounting treatments considered as acceptable under IAS. In January 1989, the  
IASC published an exposure draft ("E 32") on "Comparability of Financial        
Statements" setting forth proposals to eliminate or restrict 26 available       
options. Following comments received on E 32, the proposals -- in some cases in 
modified form -- were built into a "Statement of Intent" (July 1991). The latter
has formed the basis for a series of exposure drafts setting forth the detail of
the proposed revisions to current IAS. In November 1993, the board of the IASC  
approved revisions to 10 current standards which took effect on January 1, 1995.
These revised standards generally do not require material changes in the        
principles of valuation and measurement currently applied by the Roche Group.   

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However, application of the revised standard for business combinations will     
require that the Roche Group recognize goodwill arising after January 1, 1995 as
an intangible asset to be amortized by charging it as an expense over its useful
life. Further revisions are being considered on an ongoing basis. At the end of 
this revision process, the accounting and disclosure requirements will be       
somewhat more restrictive than at present, and adaptations of Roche Group       
accounting policies may well ensue.                                             

The specific accounting principles adopted by the Roche Group from the
alternatives currently allowed under IAS are generally similar to US GAAP.      
However, the following divergences in respect of recognition and measurement    
criteria exist:                                                                 

 - Amortization of intangible assets:  As under US GAAP, the Roche Group
 amortizes purchased intangible assets over their estimated economic
       lives. However, a maximum life of 20 years is allowed, in contrast to the
40 years permitted under US GAAP.                                 

    - Business combinations:  US GAAP requirements for accounting for business
       combinations are similar to those applied by the Roche Group, except with
       respect to the treatment of goodwill, certain limited matters relating to
     the determination of fair value and acquisition costs and the treatment
of acquired in-process research and development. US GAAP requires 
  capitalization of goodwill on acquisitions, with amortization over a
   maximum of 40 years. Further, US GAAP requires the determination of a
fair value for in-process research and development which has been 
   acquired and the charging to expense of the amount so determined. The
     Roche Group charged acquired goodwill directly to retained earnings for
       business combinations through December 31, 1994, as was allowed under IAS
      22, and includes acquired in-process research and development as part of
the goodwill amount.                                              

- Capitalization of borrowing costs:  US GAAP requires, under certain 
 circumstances, the capitalization of the interest costs incurred on
      qualifying assets in preparing them for their intended use. In contrast,
    the Roche Group expenses all such interest cost, as allowed by IAS 23.

- Pensions:  Through December 31, 1994, IAS allowed a wider range of  
     alternative valuation and actuarial methods for accounting for pensions
      than does Financial Accounting Standard ("FAS") 87 in the United States.
     Local companies of the Roche Group accounted for pensions in accordance
     with the legal regulations, fiscal requirements and economic conditions
       of the countries in which employees are employed. Funded pension plans in
the companies in the United States follow FAS 87.                 

- Markable securities:  US GAAP requires that investments in equity   
      securities that have readily determinable fair values and investments in
    debt securities be classified in three categories and accounted for as
follows:                                                          

      -- debt securities that the enterprise has the positive intent and
        ability to hold to maturity be classified as "held to maturity
securities" and reported at amortized cost.           

          -- debt and equity securities that are bought and held principally for
        the purpose of selling them in the near term are classified as
          "trading securities" and reported at fair value, with unrealized
gains and losses included in earnings.                

-- debt and equity securities not classified as either      
             held-to-maturity securities or trading securities are classified as
          "available-for-sale securities" and reported at fair value, with
            unrealized gains and losses excluded from earnings and reported in
a separate component of shareholders' equity.         

       The Roche Group's marketable securities are included at the lower of cost
or market value.                                                  

 The Roche Group's treatment of foreign currency exchange differences is
consistent with both IAS 21 and FAS 52 in the United States: currency           
transaction differences are taken directly to income, while currency translation
differences arising on the translation of the financial statements of           
subsidiaries reporting in currencies other than the Swiss franc ("Sfr.") are    
taken directly to retained earnings.                                            

     The Roche Group's accounting policy for post-retirement benefits other than
pensions was changed in 1992 to comply with FAS 106. A liability has been       
included in the financial statements which is sufficient to                     

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cover the present value of the accumulated benefit obligation based on certain  
assumptions. A charge has been made as a separate item in the statement of      
income which reflects the cumulative after-tax effect.                          

   The consolidated financial statements of the Roche Group are published in
Swiss francs. The following table sets forth, for the periods and dates         
indicated, certain information concerning the exchange rate for Swiss francs    
into U.S. dollars based upon the noon buying rate in New York City for cable    
transfers in foreign currencies as determined from publicly available sources,  
are provided for convenience, and are not necessarily the rates used by the     
Roche Group.                                                                    

(SFR. PER U.S. DOLLAR)

                                                        [Enlarge/Download Table]

           PERIOD             AT DECEMBER 31  AVERAGE RATE(1)     HIGH          LOW    
----------------------------  --------------  ---------------  -----------  -----------
                                                                                       
1992........................  Sfr. 1.4665       Sfr. 1.4060    Sfr. 1.5508  Sfr. 1.2173
1993........................       1.4850            1.4778         1.5470       1.3849
1994........................       1.3100            1.3581          1.491       1.2450

---------------                                                                 

(1) The average of the exchange rates on the last day of each month during the  
year.                                                                   

  The noon buying rate in New York City on June 30, 1995 and on August 24,
1995, were, respectively, 1.1515 Sfr. per U.S. dollar and 1.2210 Sfr. per U.S.  
dollar.                                                                         

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CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER

                                                        [Enlarge/Download Table]

                                                                           1994         1993  
                                                                          ------       ------ 
                                                                            (IN MILLIONS OF   
                                                                             SWISS FRANCS)    
                                                                                              
ASSETS                                                                                        
LONG-TERM ASSETS                                                                              
Property, plant and equipment(2).........................................  8,050        6,789 
Intangible assets(3).....................................................  4,261        1,496 
Other long-term assets(4)................................................  1,238        1,237 
                                                                          -------      -------
     Total long-term assets.............................................. 13,549        9,522 
                                                                          -------      -------
CURRENT ASSETS                                                                                
Inventories(5)...........................................................  3,690        3,127 
Accounts receivable -- trade(6)..........................................  2,987        2,664 
Other receivables and prepaid expenses(7)................................  1,709          917 
Marketable securities(8)................................................. 13,116       12,801 
Cash.....................................................................  1,182        1,895 
                                                                          -------      -------
     Total current assets................................................ 22,684       21,404 
                                                                          -------      -------
     Total assets........................................................ 36,233       30,926 
                                                                          =======      =======
EQUITY AND LIABILITIES                                                                        
EQUITY                                                                                        
Share capital............................................................    160          160 
Retained earnings and reserves........................................... 16,262       17,754 
                                                                          ------       ------ 
Shareholders' equity per accompanying statement(9)....................... 16,422       17,914 
Minority interests(10)...................................................    861          625 
                                                                          ------       ------ 
     Total shareholders' equity and minority interests................... 17,283       18,539 
                                                                          ------       ------ 
LONG-TERM DEBT(11).......................................................  5,210        4,723 
                                                                          ------       ------ 
NON-CURRENT LIABILITIES                                                                       
Deferred income taxes(12)................................................  1,088          888 
Pensions and similar obligations(13).....................................    733          725 
Obligations for warrants(11).............................................  1,055          612 
Other....................................................................  1,948          973 
                                                                          ------       ------ 
     Total non-current liabilities.......................................  4,824        3,198 
                                                                          ------       ------ 
CURRENT LIABILITIES                                                                           
Accounts payable -- trade................................................    751          662 
Other payables and accrued liabilities(14)...............................  4,198        2,984 
Current portion of long-term debt(11)....................................    669          163 
Short-term debt(11)......................................................  3,298          657 
                                                                          ------       ------ 
     Total current liabilities...........................................  8,916        4,466 
                                                                          ------       ------ 
TOTAL EQUITY AND LIABILITIES............................................. 36,233       30,926 
                                                                          ======       ====== 

Reference numbers indicate corresponding Notes to the Consolidated Financial
Statements

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                                                        [Enlarge/Download Table]

                                                                             1994       1993  
                                                                            ------     ------ 
                                                                             (IN MILLIONS OF  
                                                                              SWISS FRANCS)   
                                                                                              
SHARE CAPITAL                                                                                 
Balance at 1 January.......................................................    160        160 
                                                                            -------    -------
Balance at 31 December.....................................................    160        160 
                                                                            -------    -------
RETAINED EARNINGS AND RESERVES                                                                
Balance at 1 January....................................................... 17,754     15,886 
Additional paid-in capital from the exercise of warrants(9)................    558         -- 
Net income.................................................................  2,860      2,478 
Dividends paid.............................................................   (404)      (312)
Goodwill of businesses acquired(1)......................................... (4,327)      (382)
Currency translation differences...........................................   (179)        84 
                                                                            -------    -------
Balance at 31 December..................................................... 16,262     17,754 
                                                                            -------    -------
     TOTAL SHAREHOLDERS' EQUITY AT 31 DECEMBER............................. 16,422     17,914 
                                                                            =======    =======

Reference numbers indicate corresponding Notes to the Consolidated Financial
Statements. 

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CONSOLIDATED STATEMENTS OF INCOME 

                                                        [Enlarge/Download Table]

                                                                             1994       1993  
                                                                            ------     ------ 
                                                                             (IN MILLIONS OF  
                                                                              SWISS FRANCS)   
                                                                                              
SALES...................................................................... 14,748     14,315 
Cost of goods sold......................................................... (4,870)    (5,178)
                                                                            -------    -------
GROSS PROFIT...............................................................  9,878      9,137 
Marketing and distribution................................................. (3,764)    (3,527)
Research and development(15)............................................... (2,332)    (2,269)
Administrative.............................................................   (863)      (821)
Other operating income (expense), net(16)..................................   (263)      (172)
                                                                            -------    -------
OPERATING PROFIT...........................................................  2,656      2,348 
Non-operating income (expense), net(17)....................................    936        786 
                                                                            -------    -------
INCOME BEFORE TAXES........................................................  3,592      3,134 
Taxes(18)..................................................................   (674)      (622)
                                                                            -------    -------
INCOME BEFORE MINORITY INTERESTS...........................................  2,918      2,512 
Income applicable to minority interest(10).................................    (58)       (34)
                                                                            -------    -------
     NET INCOME............................................................  2,860      2,478 
                                                                            =======    =======

Reference numbers indicate corresponding Notes to the Consolidated Financial
Statements. 

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CONSOLIDATED STATEMENTS OF CASH FLOWS 

See note 22 

                                                        [Enlarge/Download Table]

                                                                             1994       1993  
                                                                            ------     ------ 
                                                                             (IN MILLIONS OF  
                                                                              SWISS FRANCS)   
                                                                                              
CASH FLOWS FROM OPERATING ACTIVITIES                                                          
Net income.................................................................  2,860      2,478 
Depreciation(2)............................................................    712        652 
Amortization of intangibles(3).............................................    267        278 
Deferred income taxes(18)..................................................     16         45 
Income applicable to minority interests....................................     58         34 
Increase in current assets.................................................   (706)      (605)
Increase in current liabilities............................................    252        407 
Other......................................................................   (339)      (313)
                                                                            -------    -------
CASH PROVIDED BY OPERATING ACTIVITIES......................................  3,120      2,976 
                                                                            -------    -------
CASH FLOWS FROM FINANCING ACTIVITIES                                                          
Proceeds from new long-term debt(11).......................................  1,360      2,754 
Repayment of long-term debt(11)............................................   (613)    (2,066)
Proceeds from exercise and sale of warrants................................    887        596 
Payment on exercise of bull spread warrants(11)............................   (730)        -- 
Increase (decrease) in short-term debt, net................................  2,274       (143)
Dividends paid.............................................................   (404)      (312)
Other......................................................................     98         61 
                                                                            -------    -------
CASH PROVIDED BY FINANCING ACTIVITIES......................................  2,872        890 
                                                                            -------    -------
CASH FLOWS FROM INVESTING ACTIVITIES                                                          
Purchases of property, plant and equipment(2).............................. (1,355)    (1,407)
Proceeds from disposal of property, plant and equipment and                                   
  from sale of other assets................................................    522        176 
Acquisitions of businesses, net of cash acquired(1)........................ (6,564)      (384)
Sales (purchases) of marketable securities, net and other..................    714     (3,260)
                                                                            -------    -------
CASH USED IN INVESTING ACTIVITIES.......................................... (6,683)    (4,875)
                                                                            -------    -------
Net effect of currency translation on cash.................................    (22)       (13)
                                                                            -------    -------
DECREASE IN CASH...........................................................   (713)    (1,022)
                                                                            -------    -------
Cash at beginning of year..................................................  1,895      2,917 
                                                                            -------    -------
CASH AT END OF YEAR........................................................  1,182      1,895 
                                                                            =======    =======

Reference numbers indicate corresponding Notes to the Consolidated Financial
Statements. 

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SUMMARY OF ACCOUNTING POLICIES

BASIS OF PREPARATION OF FINANCIAL STATEMENTS                                    

The financial statements of the Roche Group are based on the separate 
financial information of the Group companies prepared for the year ending 31    
December using the accounting policies summarized below, which are in accordance
with the principles formulated by the International Accounting Standards        
Committee. Certain amounts in the 1993 financial statements have been           
reclassified to be comparable with the 1994 presentation.                       

BASIS OF CONSOLIDATION                                                          

 The financial statements of the Group include Roche Holding Ltd and the
companies which it controls. Control is the power to govern the financial and   
operating policies of an enterprise so as to obtain benefits from its           
activities. This control is normally evidenced when the Group owns, either      
directly or indirectly, more than 50% of the voting rights of a company's share 
capital. The equity and net income attributable to minority shareholders'       
interests are shown separately in the balance sheet and statement of income,    
respectively. All intercompany transactions and balances with companies included
in the consolidation are eliminated. Companies acquired during the year are     
consolidated from their date of acquisition and subsidiaries disposed of are    
included up to the effective date of disposal.                                  

     Investments in associated companies are accounted for by the equity method.
These are companies over which the Group exercises significant influence, but   
which it does not control. This is normally evidenced when the Group owns 20% or
more of the voting rights of the company. Interests in certain joint ventures   
are reported using the line-by-line proportionate consolidation method. Other   
investments are carried at cost after deducting appropriate provisions for      
permanent impairment and are included in other long-term assets.                

CURRENCY TRANSLATION                                                            

 Assets and liabilities of Group companies reporting in currencies other
than Swiss francs are translated into Swiss francs using year-end rates of      
exchange. Sales, costs, expenses and net income and cash flows are translated at
the average rates of exchange for the year. Translation differences due to the  
changes in exchange rates between the beginning and the end of the year and the 
difference between net income translated at the average and year-end exchange   
rates are taken directly to retained earnings. Exchange gains and losses on     
hedges of non-Swiss franc net investments and on intercompany balances of a     
long-term investment nature are also taken to retained earnings.                

Group companies operating in highly inflationary economies maintain   
financial information for Group reporting purposes in US dollars or Swiss francs
depending on the circumstances. The effect of exchange rate differences between 
the local currency and the US dollar or Swiss franc in respect of monetary      
assets and liabilities is included in income.                                   

Gains and losses on exchange arising in Group companies as a result of
their foreign currency transactions are included in income.                     

PROPERTY, PLANT AND EQUIPMENT                                                   

Property, plant and equipment are stated at cost of purchase or       
construction and depreciated on a straight-line basis. Estimated useful lives of
major classes of depreciable assets range from 25 to 40 years (principally 33   
years) for buildings and from 3 to 15 years (principally 10 years) for machinery
and equipment. Cost includes the Group's own services where appropriate.        
Investment grants or similar assistance for projects are initially recorded as  
deferred income (in other liabilities) and subsequently amortized to income over
the useful lives of the related assets. Interest costs on borrowings to finance 
additions prior to their use are expensed as incurred, along with other interest
expense.                                                                        

     Assets acquired under leasing agreements which provide Group companies with
substantially all benefits and risks of ownership are capitalized at amounts    
equivalent to the estimated present value of the underlying                     

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lease payments. The corresponding rental obligations, net of finance charges,   
are included in debt. Leased assets are depreciated over their estimated useful 
lives.                                                                          

INTANGIBLE ASSETS                                                               

Intangible assets comprise acquired intellectual property (including  
patents, technology and know-how), trademarks, licenses, and other similarly    
identified rights. They are recorded at their acquisition cost and are amortized
using the straight-line basis over their estimated economic lives for a period  
not exceeding 20 years from date of acquisition.                                

   Costs associated with internally developed intangible assets are expensed
as incurred.                                                                    

GOODWILL                                                                        

Goodwill, which relates to the excess of the cost of acquisition of a 
subsidiary or associated company over the fair value of its attributable net    
assets at the date of acquisition, is taken directly to retained earnings.      

INVENTORIES                                                                     

Inventories are stated at the lower of cost or net realizable value.  
Provision is made for slow-moving goods and obsolete materials are written off. 
Cost is determined by the first-in first-out or average method. The cost of     
finished goods and work in progress comprises raw materials, other direct costs 
and related production overheads.                                               

CASH AND MARKETABLE SECURITIES                                                  

    Cash comprises cash on hand and time, call and current balances with banks
and similar institutions.                                                       

  Marketable securities, comprising highly liquid investments purchased by
the Group as part of its funds management policy, are included at the lower of  
cost or market value.                                                           

DEFERRED INCOME TAXES                                                           

     Deferred income taxes are provided using the comprehensive liability method
of accounting for income taxes, under which deferred tax consequences are       
recognized for differences between the tax bases of assets and liabilities and  
their carrying values for financial reporting purposes. The amount of deferred  
income taxes on these differences is determined using the provisions of local   
tax laws, including rates, and is adjusted upon enactment of changes in these   
laws.                                                                           

  Provision has not been made for taxes on possible future distribution of
earnings retained by subsidiary and associated companies as these earnings have 
been, or will be, substantially re-invested by the companies concerned. It is   
not, therefore, meaningful to provide for these taxes nor is it practicable to  
estimate their full amount or the withholding tax element.                      

EMPLOYEE RETIREMENT BENEFITS                                                    

   Retirement plans are provided for employees of all major Group companies.
Plans are generally funded by payments from employees and by the Group to trusts
independent of the Group's finances. Where, due to local conditions, a plan is  
not funded, a liability is recorded in the financial statements. Valuations of  
both funded and unfunded plans are carried out by independent actuaries.        
Contributions to funded plans and changes in liabilities for unfunded plans are 
based on the advice of the actuaries.                                           

  Some Group companies provide certain post-retirement healthcare and life
insurance benefits to their retirees, the entitlement to which is usually based 
on the employee remaining in service up to retirement age and the completion of 
a minimum service period. The expected costs of these benefits are accrued over 
the periods employees render service. A liability is included in the financial  
statements which is sufficient to cover the present value of the accumulated    
benefit obligation based on certain assumptions. These benefits are partially   
funded by means of a trust. Valuations of these obligations are carried out by  
independent actuaries.                                                          

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This policy was adopted in 1992. Prior to that, the payments made for the       
benefits were charged to income as incurred.                                    

DERIVATIVE FINANCIAL INSTRUMENTS                                                

 The Group utilizes various strategies to manage its exposure to foreign
currency and interest rate risks. These risks may be managed through the use of 
certain types of derivative financial instruments. Gains and losses from forward
exchange contracts, options and currency swaps used to hedge potential exchange 
rate exposures are offset against losses and gains on the specific transactions 
being hedged. Interest differentials under swap arrangements, forward rate      
agreements and interest rate caps used to manage interest rate exposures are    
recognized by adjustments to interest expense. When such derivative financial   
instruments are used for trading purposes any gains and losses from changes in  
their market value are taken to income as they arise. Certain covered call      
option contracts entered into by the Group require that the underlying          
securities be lodged with the financial institutions involved in the            
arrangement.                                                                    

SALES AND COST OF GOODS SOLD                                                    

Sales represent goods supplied and services rendered to customers less
volume discounts and sales taxes. Cost of goods sold also includes the costs of 
services rendered.                                                              

RESEARCH AND DEVELOPMENT                                                        

     Research and development costs are charged against income as incurred, with
the exception of buildings and major items of equipment, which are capitalized  
and depreciated.                                                                

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1.  CHANGES IN GROUP ORGANIZATION                                               

 Effective 1 November 1994, Roche acquired all of the outstanding common
stock of Syntex Corporation, an international healthcare company involved in the
research, development, manufacturing and marketing of pharmaceutical products.  
The cost of the acquisition including expenses incidental thereto was 5,560     
million US dollars principally comprised of the cash consideration of 5,158     
million US dollars and shares of Limited Conversion Preferred Stock of Roche    
Capital Corporation (see Note 10). The acquisition was accounted for under the  
purchase method of accounting. Accordingly the cost of the acquisition was      
allocated to identifiable assets and liabilities based on their estimated fair  
values. In determining the fair values consideration was given to intended      
changes in Group activities resulting from the acquisition of Syntex. These     
changes necessitated the creation of provisions for expected costs such as      
employee termination and plant closing costs. Goodwill of 4,183 million Swiss   
francs has been charged directly to retained earnings. The results of operations
of Syntex have been included in those of the Group since the acquisition and    
contributed sales of 332 million Swiss francs.                                  

   In December 1994 Roche entered into an agreement providing for the merger
of Roche Biomedical Laboratories, Inc. (RBL), with and into National Health     
Laboratories Holdings Inc. (NHL). Both companies operate clinical laboratories  
in the United States. All the outstanding shares of RBL will be converted into  
newly issued shares of NHL common stock representing 49.9% of the total number  
of shares of NHL common stock outstanding at the effective date of the merger.  
In addition the merger agreement provides for Roche to purchase 8,325,000       
warrants for 51 million US dollars and a cash contribution to NHL of 135 million
US dollars. The merger is subject to various regulatory clearances and approval 
from the NHL shareholders. If the merger is consummated, Roche will account for 
its investment using the equity method. RBL had sales in 1994 of 730 million US 
dollars (996 million Swiss francs).                                             

 With effect from 5 February 1993 Roche acquired the consumer healthcare
business of Fisons pic in the United Kingdom and Ireland for a cash             
consideration of 90 million pounds sterling. The acquisition was made in order  
to expand Roche's position in the self-medication market in Europe.             

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2.  PROPERTY, PLANT AND EQUIPMENT                                               

                                                        [Enlarge/Download Table]

                                      BUILDINGS                                                          
                                         AND       MACHINERY                                             
                                         LAND         AND       CONSTRUCTION IN                          
                              LAND   IMPROVEMENTS  EQUIPMENT       PROGRESS        1994 TOTAL  1993 TOTAL
                              ----   ------------  ---------    ---------------    ----------  ----------
                                                    (IN MILLIONS OF SWISS FRANCS)                        
                                                                                                         
COST                                                                                                     
At beginning of year......... 406        4,725        7,510            965           13,606      12,477  
Currency translation                                                                                     
  effects.................... (19 )       (187)        (440)           (44)            (690)         69  
Changes in Group                                                                                         
  organization...............  46          635          333            150            1,164          (9) 
Additions....................  10           36          249          1,060            1,355       1,407  
Disposals.................... (18 )       (106)        (305)           (59)            (488)       (338) 
Transfers....................  --          130          463           (593)              --          --  
                              ---       ------       ------          -----           ------      ------  
At end of year............... 425        5,233        7,810          1,479           14,947      13,606  
                              ---       ------       ------          -----           ------      ------  
ACCUMULATED DEPRECIATION                                                                                 
At beginning of year.........           (2,085)      (4,732)                         (6,817)     (6,432) 
Currency translation                                                                                     
  effects....................               94          264                             358         (59) 
Changes in Group                                                                                         
  organization...............                                                            --          11  
Depreciation for the year....             (175)        (537)                           (712)       (652) 
Disposals....................               58          216                             274         315  
                                        ------       ------                          ------      ------  
At end of year...............           (2,108)      (4,789)                         (6,897)     (6,817) 
                                        ------       ------                          ------      ------  
Net book value............... 425        3,125        3,021          1,479            8,050       6,789  
                              ===       ======       ======          =====           ======      ======  

The capitalized cost of machinery and equipment under lease contracts 
amounts to 54 million Swiss francs and the net book value of these assets       
amounts to 37 million Swiss francs.                                             

  Repairs and maintenance expense for 1994 (paid to third parties) was 534
million Swiss francs (1993: 374 million Swiss francs).                          

3.  INTANGIBLE ASSETS                                                           

                                                        [Enlarge/Download Table]

                                                                      1994      1993  
                                                                     ------     ----- 
                                                                     (IN MILLIONS OF  
                                                                      SWISS FRANCS)   
                                                                                      
COST                                                                                  
At beginning of year................................................  2,456     2,560 
Currency translation effects........................................    (78)       15 
Changes in Group organization.......................................  3,000         8 
Additions...........................................................     54        34 
Disposals...........................................................     (3)     (161)
                                                                     -------    ------
At end of year......................................................  5,429     2,456 
                                                                     -------    ------
ACCUMULATED AMORTIZATION                                                              
At beginning of year................................................   (960)     (786)
Currency translation effects........................................     59        (8)
Amortization for the year...........................................   (267)     (278)
Disposals...........................................................     --       112 
                                                                     -------    ------
At end of year...................................................... (1,168)     (960)
                                                                     -------    ------
Net book value......................................................  4,261     1,496 
                                                                     =======    ======

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4.  OTHER LONG-TERM ASSETS                                                      

                                                        [Enlarge/Download Table]

                                                                      1994      1993 
                                                                      -----     -----
                                                                      (IN MILLIONS OF
                                                                       SWISS FRANCS) 
                                                                                     
Investments in associated companies..................................     8        56
Other investments....................................................   319       356
Restricted funds.....................................................   543       608
Loans receivable.....................................................   111        56
Amounts receivable under sales-type leases...........................    17        22
Other................................................................   240       139
                                                                      -----     -----
Total other long-term assets......................................... 1,238     1,237
                                                                      =====     =====

5.  INVENTORIES                                                                 

                                                        [Enlarge/Download Table]

                                                                      1994      1993 
                                                                      -----     -----
                                                                      (IN MILLIONS OF
                                                                       SWISS FRANCS) 
                                                                                     
Raw materials and supplies...........................................   875       831
Work in process......................................................   417       328
Finished goods....................................................... 2,398     1,968
                                                                      -----     -----
Total inventories.................................................... 3,690     3,127
                                                                      =====     =====

6.  ACCOUNTS RECEIVABLE -- TRADE                                                

                                                        [Enlarge/Download Table]

                                                                      1994      1993  
                                                                      -----     ----- 
                                                                      (IN MILLIONS OF 
                                                                       SWISS FRANCS)  
                                                                                      
Accounts receivable.................................................. 3,002     2,681 
Notes receivable.....................................................   124       108 
Current amounts receivable under sales-type leases...................    16        19 
Less: provision for doubtful accounts................................  (155)     (144)
                                                                      -----     ----- 
Total accounts receivable -- trade................................... 2,987     2,664 
                                                                      =====     ===== 

7.  OTHER RECEIVABLES AND PREPAID EXPENSES                                      

                                                        [Enlarge/Download Table]

                                                                      1994      1993 
                                                                      -----     -----
                                                                      (IN MILLIONS OF
                                                                       SWISS FRANCS) 
                                                                                     
Accrued interest income..............................................   107       223
Prepaid expenses.....................................................   404       215
Assets held for sale, net............................................   479        --
Income taxes recoverable.............................................   103        69
Other receivables....................................................   616       410
                                                                      -----     -----
Total other receivables and prepaid expenses......................... 1,709       917
                                                                      =====     =====

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8.  MARKETABLE SECURITIES                                                       

                                                        [Enlarge/Download Table]

                                                                     1994       1993 
                                                                    ------     ------
                                                                     (IN MILLIONS OF 
                                                                      SWISS FRANCS)  
                                                                                     
Bonds and debentures...............................................  2,437      6,228
Equity securities..................................................  9,624      4,856
Money market instruments...........................................  1,055      1,717
                                                                     -----      -----
Total marketable securities........................................ 13,116     12,801
                                                                     =====      =====

The aggregate market value of the portfolio approximates the carrying 
amount at 31 December 1994.                                                     

9.  SHAREHOLDERS' EQUITY                                                        

Share capital:                                                              

  At 31 December 1994 and 1993, the authorized and called-up share capital
was 1,600,000 shares with a nominal value of Sfr. 100 each.                     

    Based on information available to Roche, a shareholders' group with pooled
voting rights, comprising the Hoffmann and Oeri-Hoffmann families and Dr. P.    
Sacher, hold 800,200 shares as in the preceding year. (This figure does not     
include shares without pooled voting rights held outside the group by individual
members of the group.) There were no transactions with these individuals other  
than those in the ordinary course of business.                                  

Retained earnings and reserves:                                             

 As of 31 December 1994 and 1993, 7,025,627 non-voting equity securities
(Genussscheine) had been issued. These have no nominal value and are not part of
the share capital under Swiss company law. Each non-voting equity security      
confers the same rights as any of the shares to participate in the net profit   
and any remaining proceeds from liquidation following repayment of the nominal  
value of the shares and, if any, participation certificates. Also outstanding at
31 December 1993 were 4,127,354 warrants which entitled the holders up to 5     
December 1994 to acquire one non-voting equity security at a price of Sfr. 2,800
in exchange for twenty of the warrants. Of the issued non-voting equity         
securities, 206,368 were reserved for the exercise of these warrants. During    
1994 all of these warrants were exercised and the Group received 558 million    
Swiss francs which has been reflected as additional paid-in capital in the      
statement of changes in shareholders' equity for 1994.                          

10. MINORITY INTERESTS                                                          

                                                                [Download Table]

                                                                      1994  1993
                                                                      ----  ----
                                                                                
Genentech, Inc....................................................... 622   622 
Limited Conversion Preferred Stock................................... 231    -- 
Other................................................................   8     3 
                                                                      ---   --- 
Total minority interests............................................. 861   625 
                                                                      ===   === 

     The minority interest of approximately 35% in Genentech is publicly held by
third parties in the form of 41,274,925 shares of redeemable common stock. These
shares are redeemable by Genentech at the option of Roche in whole (not in part)
at US$58.75 per share in the first calendar quarter of 1995 and increasing to   
US$60.00 per share on 1 April 1995. The redemption right expires on 30 June     
1995. Roche has a contractual right with Genentech by terms of a governance     
agreement to cause this redemption right to be exercised upon deposit in trust  
by Roche of the required funds. In accordance with this agreement, Roche may    
continue to make further purchases of Genentech stock up to an amount not       
exceeding 75% of the whole. After 1 July                                        

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1995, Roche may submit at any time a bid to purchase the remaining shares of    
Genentech. The bid is subject to the approval of the Board of Directors of      
Genentech and, subsequently, of the non-Roche stockholders and for the period 1 
July 1995 until 30 June 1996 must be for not less than US$60.00 per share.      

At 31 December 1994, there were 277,830 (31 December 1993: 1,296,714) 
outstanding warrants to purchase Genentech stock, exercisable at prices ranging 
from US$27.57 to US$28.26. As a result of the Genentech merger, each such       
warrant entitles the holder to receive, upon exercise, one half-share of        
Genentech redeemable common stock and US$18 in cash. As contemplated by the     
Genentech merger agreement, the Group is required to reimburse Genentech for the
cash amount payable upon exercise of such warrants. The warrants expire on 31   
July 1996.                                                                      

The Group currently treats costs incurred in purchasing additional    
Genentech stock as goodwill, which is charged directly to retained earnings.    

  At 31 December 1994 Genentech had options outstanding which entitled the
holders on exercise of the options to purchase 15,980,807 shares of its         
redeemable common stock at prices ranging from US$14.08 to US$50.75.            

In connection with the acquisition of Syntex Corporation in 1994, an  
indirectly wholly owned subsidiary of Roche Holding Ltd issued 175,960 shares of
Limited Conversion Preferred Stock (LCPS) with a total value of 176 million US  
dollars (231 million Swiss francs). The LCPS are subject to mandatory redemption
in 2004 and holders receive dividends at a rate of 3% per annum on the          
liquidation value of each share. Shares of LCPS may be exchanged for non-voting 
equity securities (Genussscheine) of Roche Holding Ltd. If all the LCPS were    
exchanged, it would require 24,630 non-voting equity securities.                

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11.  DEBT                                                                       

                                                        [Enlarge/Download Table]

                                                                       1994      1993  
                                                                       -----     ----- 
                                                                       (IN MILLIONS OF 
                                                                        SWISS FRANCS)  
                                                                                       
LONG-TERM DEBT                                                                         
UNSECURED:                                                                             
Amounts due to banks and other financial institutions................  1,905     1,599 
3 1/2 percent US dollar bond less unamortized discount of 321 million                  
  Swiss francs (sold with detachable bull spread warrants)...........    989     1,069 
2 3/4 percent US dollar bonds less unamortized discount of 211                         
  million Swiss francs (sold with detachable knock-out warrants).....  1,099     1,202 
Zero coupon US dollar exchangeable notes less unamortized discount of                  
  959 million Swiss francs...........................................    901       950 
1 percent Japanese yen bonds less unamortized discount of 353 million                  
  Swiss francs (sold with detachable Samurai warrants)...............    967        -- 
SECURED:                                                                               
Capitalized lease obligations........................................     16        53 
Other borrowings.....................................................      2        13 
                                                                       -----     ----- 
     Total long-term debt............................................  5,879     4,886 
Less: current portion of long-term debt..............................   (669)     (163)
                                                                       -----     ----- 
     Total long-term debt excluding current portion..................  5,210     4,723 
                                                                       -----     ----- 
Repayments of long-term debt are scheduled as follows:                                 
1995.................................................................    669           
1996.................................................................    472           
1997.................................................................    282           
1998.................................................................    982           
1999.................................................................     43           
Thereafter...........................................................  3,431           
                                                                       -----           
          Total long-term debt.......................................  5,879           
                                                                       =====           

    The zero coupon US dollar exchangeable notes are reflected as due in 1998,
which is the first year that the holders of the notes can request the Group to  
purchase the notes.                                                             

In April 1991 the Group issued 3 1/2 percent bonds due in 2001 with an
aggregate principal amount of 1 billion US dollars and detachable bull spread   
warrants related to the shares of Roche Holding Ltd. The proceeds, net of       
expenses, of 975 million US dollars were allocated between the bonds and the    
warrants in proportion to their respective fair market values at the time of    
issue. The discount arising from the low coupon rate and represented by the     
difference between the principal amount and the net proceeds of 639 million US  
dollars allocated to the bonds is being charged to interest expense over the    
life of the bonds.                                                              

   The holders of the bull spread warrants exercised them on 16 May 1994 and
received Sfr 10,000 for each 100 warrants or a total of 730 million Swiss       
francs. This amount had been accrued by the Group over the period the warrants  
were outstanding.                                                               

In April 1993 the Group issued 2 3/4 percent bonds due in 2000 with an
aggregate principal amount of 1 billion US dollars and detachable knock-out     
warrants relating to non-voting equity securities (Genussscheine) of Roche      
Holding Ltd. The proceeds, net of expenses, of 977 million US dollars were      
allocated between the bonds and the warrants in proportion to their respective  
fair market values at the time of issue. The discount arising from the low      
coupon rate and represented by the difference between the principal amount and  
the net proceeds of 793 million US dollars allocated to the bonds is being      
charged to interest expense over the life of the bonds.                         

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In addition to the 4,600,000 warrants issued with the bonds, the Group
simultaneously issued a further identical 5,000,000 warrants. The proceeds      
relating to the value of the warrants sold were 400 million US dollars (596     
million Swiss francs).                                                          

     On the exercise date, 22 May 1996, each 60 warrants will entitle the holder
to receive the amount of Sfr 6,000 or, at the option of the Group, one          
non-voting equity security (Genussschein). If all of the warrants are exercised,
the holders will receive either 960 million Swiss francs or 160,000 non-voting  
equity securities. The maximum cash obligation for the warrants is being accrued
over the period the warrants will be outstanding. At 31 December 1994 the       
liability was 720 million Swiss francs and was included in non-current          
liabilities.                                                                    

  In September 1993 the Group issued zero coupon exchangeable notes due in
2008. The notes were sold at an original issue discount from their principal    
amount at maturity of 1,420 million US dollars. The difference between the      
proceeds, net of expenses, of 685 million US dollars and the principal amount at
maturity is being charged to interest expense over the life of the notes, and   
results in a yield to maturity of 4 3/4% per annum computed on a semi-annual    
bond equivalent basis for the holders of the notes.                             

   On either 23 September 1998 or 23 September 2003 the holders of the notes
can request the Group to purchase the notes. From 23 September 1998 the notes   
can be redeemed for cash at the option of the Group. In each case the purchase  
price will be the issue price plus accrued original issue discount to the date  
of purchase. In the aggregate at 23 September 1998 and 23 September 2003 the    
purchase prices would be 888 million US dollars and 1,123 million US dollars,   
respectively.                                                                   

    The notes are exchangeable at the option of the holder at any time, unless
previously redeemed or otherwise purchased, for American Depositary Shares      
(ADSs), each representing one hundredth of one non-voting equity security       
(Genussschein) issued by Roche Holding Ltd. All exchanges will be made at an    
exchange rate of 10.44298 American Depositary Shares per US $1,000 principal    
amount at maturity of the notes. If the notes were all exchanged for American   
Depositary Shares, it would require 148,290 non-voting equity securities to meet
the exchange obligations.                                                       

In November 1994 the Group issued 1 percent bonds due in 2002 with an 
aggregate principal amount of 100 billion Japanese yen and detachable Samurai   
warrants relating to non-voting equity securities (Genussscheine) of Roche      
Holding Ltd. The proceeds, net of expenses, of 97.73 billion Japanese yen were  
allocated between the bonds and the warrants in proportion to their respective  
fair market values at the time of issue. The discount arising from the low      
coupon rate and represented by the difference between the principal amount and  
the net proceeds of 72.82 billion Japanese yen allocated to the bonds is being  
charged to interest expense over the life of the bonds.                         

     The proceeds relating to the warrants sold were 24.92 billion Japanese yen.
For each 1 million Japanese yen of principal, 69 warrants were issued which are 
exercisable only on 15 June 1998. On that day each 100 warrants will entitle the
holder to receive, at the option of the Group, either one non-voting equity     
security (Genussschein), an amount equivalent to the market price (as defined)  
of one non-voting equity security, or Sfr. 7,100.                               

   If all of the warrants are exercised, the holders will receive either 490
million Swiss francs or 69,000 non-voting equity securities (or cash equivalent 
of their market value). The maximum cash obligation for the warrants is being   
accrued over the period the warrants will be outstanding. At 31 December 1994   
the liability was 335 million Swiss francs and was included in non-current      
liabilities.                                                                    

   The repayment at maturity of zero-percent subordinated bonds with nominal
value of 250 million Swiss francs was fully provided for during 1992. To this   
end the necessary amount of high-quality securities were irrevocably deposited  
with a bank. The bank was instructed to apply the proceeds from the sale of     
these                                                                           

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securities to the repayment of the bondholders at maturity in 1997. The Group   
has recognized this transaction as an extinguishment of debt although the Group 
is not released from the debt obligation.                                       

                                                        [Enlarge/Download Table]

                                                                       1994      1993
                                                                       -----     ----
                                                                        (IN MILLIONS 
                                                                             OF      
                                                                       SWISS FRANCS) 
                                                                                     
SHORT-TERM DEBT                                                                      
Amounts due to banks.................................................. 3,273     638 
Other borrowings......................................................    25      19 
                                                                       -----     --- 
     Total short-term debt............................................ 3,298     657 
                                                                       =====     === 

12.  DEFERRED INCOME TAXES                                                      

Deferred taxes represent the future tax consequences for differences  
between the tax bases of assets and liabilities and their values for financial  
reporting purposes. The tax consequences of these differences occurring during  
the year are charged to income (Note 18).                                       

Deferred taxation arises in respect of the following:                 

                                                        [Enlarge/Download Table]

                                                                       1994      1993
                                                                       -----     ----
                                                                        (IN MILLIONS 
                                                                             OF      
                                                                       SWISS FRANCS) 
                                                                                     
Property, plant and equipment.........................................   307     368 
Intangible assets.....................................................   749     263 
Restructuring provisions..............................................  (336)     -- 
Other differences in basis, net.......................................   368     257 
                                                                       -----     --- 
Total deferred income taxes........................................... 1,088     888 
                                                                       =====     === 

13.  PENSIONS AND SIMILAR OBLIGATIONS                                           

Pension plans:                                                              

     Most employees are covered by pension plans sponsored by Group companies or
state authorities. The nature of such plans varies according to legal           
regulations, fiscal requirements and economic conditions of the countries in    
which the employees are employed. Generally the plans provide defined benefits  
based on employees' years of service and average final remuneration. Valuations 
are made using the most recent available actuarial reports and are based on     
conservative financial assumptions and valuation methods. A summary of the      
status of principal plans is shown below.                                       

                                                        [Enlarge/Download Table]

                                                                      1994      1993 
                                                                      -----     -----
                                                                      (IN MILLIONS OF
                                                                       SWISS FRANCS) 
                                                                                     
FUNDED PENSION PLANS                                                                 
Actuarial present value of benefits due to past and present                          
  employees.......................................................... 4,884     4,301
Plan assets at fair value............................................ 4,996     4,366
                                                                      -----     -----
Plan assets in excess of liability...................................   112        65
                                                                      =====     =====

 Amounts shown for 1994 include the liability and assets relating to the
pension plan at Syntex Corporation. Amounts for 1993 have been modified to      
reflect greater uniformity in calculation methods in the Group for pension data.

                                                                [Download Table]
                                                                                   
UNFUNDED PENSION PLANS                                                             
Actuarial present value of benefits due to past and present employees              
  recorded as a liability in the Group financial statements..........    475    509
                                                                       =====  =====

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Post-retirement benefits other than pensions:                               

    The cost of benefits earned during 1994 was approximately 25 million Swiss
francs as compared to approximately 32 million Swiss francs in 1993. The status 
of these benefits is shown below.                                               

                                                        [Enlarge/Download Table]

                                                                      1994      1993  
                                                                      -----     ----- 
                                                                      (IN MILLIONS OF 
                                                                       SWISS FRANCS)  
                                                                                      
Present value of accumulated benefit obligation......................   463       446 
Plan assets at fair value............................................  (205)     (198)
Amounts not yet recognized...........................................    --       (32)
                                                                      -----     ----- 
Liability in the Group financial statement...........................   258       216 
                                                                      =====     ===== 

The assumptions used to determine this US dollar obligation included a
discount rate of 8.85%, an expected long-term rate of return on assets of 9.5%, 
and a healthcare cost trend rate of 9.5% in 1994.                               

14.  OTHER PAYABLES AND ACCRUED LIABILITIES                                     

                                                        [Enlarge/Download Table]

                                                                      1994      1993 
                                                                      -----     -----
                                                                       (IN MILLIONS  
                                                                         OF SWISS    
                                                                          FRANCS)    
                                                                                     
Income taxes payable.................................................   281       117
Deferred income......................................................   177        15
Sales and other taxes................................................   125        68
Accrued payrolls and related items...................................   331       251
Interest payable.....................................................   154        48
Amounts owed to social institutions..................................    56        64
Restructuring provisions.............................................   890        80
Other accounts payable...............................................   394       368
Obligation for warrants..............................................    --       709
Other accrued liabilities............................................ 1,790     1,264
                                                                      -----     -----
          Total other payables and accrued liabilities............... 4,198     2,984
                                                                      =====     =====

15.  RESEARCH AND DEVELOPMENT                                                   

The following are the components of research and development:         

                                                        [Enlarge/Download Table]

                                                                      1994      1993 
                                                                      -----     -----
                                                                       (IN MILLIONS  
                                                                         OF SWISS    
                                                                          FRANCS)    
                                                                                     
Pharmaceuticals...................................................... 1,988     1,907
Other................................................................   344       362
                                                                      -----     -----
          Total research and development............................. 2,332     2,269
                                                                      =====     =====

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16. OTHER OPERATING INCOME (EXPENSE), NET                                       

                                                        [Enlarge/Download Table]

                                                                     1994       1993  
                                                                    ------     ------ 
                                                                      (IN MILLIONS    
                                                                    OF SWISS FRANCS)  
                                                                                      
Royalty income.....................................................    341        234 
Other operating income.............................................    462        529 
                                                                    -------    -------
                                                                       803        763 
                                                                    -------    -------
Amortization of intangibles........................................   (267)      (278)
Royalty expense....................................................   (166)      (128)
Restructuring expense..............................................   (259)       (37)
Other operating expenses...........................................   (374)      (492)
                                                                    -------    -------
                                                                    (1,066)      (935)
                                                                    -------    -------
Other operating income (expense), net                                 (263)      (172)
                                                                    =======    =======

17.  NON-OPERATING INCOME (EXPENSE), NET                                        

                                                        [Enlarge/Download Table]

                                                                     1994       1993  
                                                                    ------     ------ 
                                                                      (IN MILLIONS    
                                                                    OF SWISS FRANCS)  
                                                                                      
Interest and dividend income.......................................    689        795 
Exchange gains.....................................................    490        528 
Income from sale of marketable securities and other income.........  1,752      1,110 
                                                                    -------    -------
                                                                     2,931      2,433 
                                                                    -------    -------
Interest expense...................................................   (649)      (524)
Exchange losses....................................................   (837)      (606)
Losses from sale of marketable securities and other expense........   (509)      (517)
                                                                    -------    -------
                                                                    (1,995)    (1,647)
                                                                    -------    -------
          Total non-operating income (expense), net................    936        786 
                                                                    =======    =======

18.  TAXES                                                                      

                                                        [Enlarge/Download Table]

                                                                     1994       1993  
                                                                    ------     ------ 
                                                                      (IN MILLIONS    
                                                                    OF SWISS FRANCS)  
                                                                                      
Current taxes......................................................    658        577 
Deferred taxes(12).................................................     16         45 
                                                                    -------    -------
          Total taxes..............................................    674        622 
                                                                    =======    =======

     Current taxes include income taxes paid or payable to tax authorities based
on the current year's income, as determined by the rules and regulations of each
applicable country and business, and withholding, capital and other taxes which 
in part are not based on income. Also included in current taxes are benefits    
from previous years' tax losses recognized in the year. Unrecognized tax losses 
carried forward by Group companies at 31 December 1994 and available for future 
utilization against taxable profits approximate 370 million Swiss francs and    
relate primarily to Genentech, Inc., and Syntex Corporation.                    

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

19.  EMPLOYEES' REMUNERATION                                                    

                                                        [Enlarge/Download Table]

                                                                      1994      1993 
                                                                      -----     -----
                                                                      (IN MILLIONS OF
                                                                       SWISS FRANCS) 
                                                                                     
Wages and salaries................................................... 3,982     3,867
Social security costs................................................   443       413
Pension plans........................................................   220       227
Other employee benefits..............................................   307       262
                                                                      -----     -----
Total employees' remuneration........................................ 4,952     4,769
                                                                      =====     =====

20.  INFORMATION BY INDUSTRY SEGMENT                                            

                                                        [Enlarge/Download Table]

                                                                      1994                   
                                                   ------------------------------------------
                                                                   OPERATING                 
                                                   THIRD-PARTY       ASSETS         CAPITAL  
                                                      SALES        EMPLOYED*      EXPENDITURE
                                                   -----------     ----------     -----------
                                                         (IN MILLIONS OF SWISS FRANCS)       
                                                                                             
Pharmaceuticals...................................     8,339         13,085            878   
Vitamins and fine chemicals.......................     3,204          2,896            256   
Diagnostics.......................................     1,591          1,521            103   
Others............................................        89            204             13   
                                                      ------         ------          -----   
Healthcare........................................    13,223         17,706          1,250   
Fragrances and flavors............................     1,525          1,282            105   
                                                      ------         ------          -----   
Consolidated totals 1994..........................    14,748         18,988          1,355   
                                                      ======         ======          =====   

     In 1994 Operating profit from Healthcare was 2,463 million Swiss francs and
from Fragrances and flavors 193 million Swiss francs, totaling 2,656 million    
Swiss francs.                                                                   

                                                        [Enlarge/Download Table]

                                                                      1993                   
                                                   ------------------------------------------
                                                                   OPERATING                 
                                                   THIRD-PARTY       ASSETS         CAPITAL  
                                                      SALES        EMPLOYED*      EXPENDITURE
                                                   -----------     ----------     -----------
                                                         (IN MILLIONS OF SWISS FRANCS)       
                                                                                             
Pharmaceuticals...................................     7,810          7,474            819   
Vitamins and fine chemicals.......................     3,270          3,381            336   
Diagnostics.......................................     1,712          1,785            138   
Others............................................        87            101              9   
                                                      ------         ------          -----   
Healthcare........................................    12,879         12,741          1,302   
Fragrances and flavors............................     1,436          1,335            105   
                                                      ------         ------          -----   
Consolidated totals 1993..........................    14,315         14,076          1,407   
                                                      ======         ======          =====   

---------------                                                                 

* Property, plant and equipment, intangible assets, inventories and accounts    
receivable-trade.                                                           

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

21.  INFORMATION BY GEOGRAPHICAL AREA                                       

                                                        [Enlarge/Download Table]

                                                                          1994                          
                                                 -------------------------------------------------------
                                                                 OPERATING                              
                                                 THIRD-PARTY      ASSETS         CAPITAL       NUMBER OF
                                                    SALES        EMPLOYED*     EXPENDITURE     EMPLOYEES
                                                 -----------     ---------     -----------     ---------
                                                              (IN MILLIONS OF SWISS FRANCS)             
                                                                                                        
Switzerland.....................................       301          3,366           308          10,512 
European Union..................................     4,041          3,569           285          13,628 
Rest of Europe..................................       714            259            27           1,177 
                                                    ------         ------         -----          ------ 
Europe as a whole...............................     5,056          7,194           620          25,317 
North America...................................     5,839          9,023           565          24,581 
Latin America...................................     1,342          1,087            34           5,452 
Asia............................................     1,986          1,407           125           4,643 
Africa, Australia and Oceania...................       525            277            11           1,388 
                                                    ------         ------         -----          ------ 
Consolidated total 1994.........................    14,748         18,988         1,355          61,381 
                                                    ======         ======         =====          ====== 

                                                        [Enlarge/Download Table]

                                                                          1993                          
                                                 -------------------------------------------------------
                                                                 OPERATING                              
                                                 THIRD-PARTY      ASSETS         CAPITAL       NUMBER OF
                                                    SALES        EMPLOYED*     EXPENDITURE     EMPLOYEES
                                                 -----------     ---------     -----------     ---------
                                                              (IN MILLIONS OF SWISS FRANCS)             
                                                                                                        
Switzerland.....................................       315          3,331           336          10,652 
European Union..................................     4,058          2,920           286          12,622 
Rest of Europe..................................       717            212            21           1,132 
                                                    ------         ------         -----          ------ 
Europe as a whole...............................     5,090          6,463           643          24,406 
North America...................................     5,609          5,431           645          21,978 
Latin America...................................     1,208            627            34           4,133 
Asia............................................     1,923          1,327            75           4,214 
Africa, Australia and Oceania...................       485            228            10           1,351 
                                                    ------         ------         -----          ------ 
Consolidated total 1993.........................    14,315         14,076         1,407          56,082 
                                                    ======         ======         =====          ====== 

---------------                                                                 

* Property, plant and equipment, intangible assets, inventories and accounts    
receivable-trade.                                                           

Sales between geographical areas and operating profit by area are not 
presented because compiling such information would require inordinate effort not
commensurate with the benefits. Sales made in North America in 1994 are 39.6% of
total sales.                                                                    

22.  STATEMENTS OF CASH FLOWS                                                   

     The statements of cash flows reflect cash flows arising from the activities
of Group companies as measured in their own currencies translated into Swiss    
francs at the average rates of exchange for the year. Accordingly the cash flows
in the statements exclude the currency translation differences which arise as a 
result of translating the assets and liabilities of Group companies reporting in
currencies other than Swiss francs into Swiss francs at year-end rates of       
exchange (except for those arising on cash). Also excluded are non-cash         
investing and financing activities.                                             

   The issuance of Limited Conversion Preferred Stock in connection with the
acquisition of Syntex Corporation (see Note 10) has been excluded from the 1994 
statement of cash flows since it is a non-cash item.                            

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

23.  COMMITMENTS AND CONTINGENCIES                                              

COMMITMENTS:                                                          

At 31 December 1994 the future minimum payments under non-cancellable 
operating leases were as follows:                                               

                                                                [Download Table]

                                                 (IN MILLIONS OF
                                                  SWISS FRANCS) 
                                                                
1995..........................................         105      
1996..........................................          65      
1997..........................................          47      
1998..........................................          24      
1999..........................................          19      
Thereafter....................................          71      
                                                       ---      
Total minimum payments........................         331      
                                                       ===      

    Total rental expense for all operating leases was 241 million Swiss francs
for 1994 (1993: 253 million Swiss francs).                                      

CONTINGENCIES:                                                        

   At 31 December 1994 warrants are outstanding which entitle the holders to
receive at certain future dates cash payments or, at the option of the Group,   
229,000 non-voting equity securities. In addition the holders of exchangeable   
notes may exchange the notes for American Depositary Shares (ADSs). If the notes
were all exchanged it would require 148,290 non-voting equity securities to meet
the exchange obligations relating to the ADSs (see Note 11). Also if all the    
holders of the Limited Conversion Preferred Stock exchanged their shares, it    
would require 24,630 non-voting equity securities (see Note 10). It is generally
the policy of the Group to provide for the various alternative arrangements     
which are necessary to ultimately settle these obligations.                     

     The operations and earnings of the Group continue, from time to time and in
varying degrees, to be affected by political, legislative, fiscal and regulatory
developments, including those relating to environmental protection, in the      
countries in which it operates. The industries in which the Group is engaged are
also subject to physical risks of various kinds. The nature and frequency of    
these developments and events, not all of which are covered by insurance, as    
well as their effect on future operations and earnings are not predictable.     

    Group companies are defendants in various legal actions. In the opinion of
management, after taking appropriate legal advice, the results of such actions  
will not have a material effect on the Group's financial position.              

24.  GROUP COMPANIES                                                            

An overview of the operating subsidiaries and associated companies is 
included on pages 108 to 112 of the 1994 Annual Report of the Roche Group. In   
addition to the operating companies, the Group has holding and finance          
companies. All Group companies are included in the scope of consolidation as set
forth in the basis of consolidation in the summary of accounting policies.      

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REPORT OF THE GROUP AUDITORS**

To the General Meeting of Roche Holding Ltd, Basel                              

     We have audited the Consolidated Financial Statements of the Roche Group on
pages 60 to 88 presented by the Board of Directors for the year ended 31        
December 1994 in accordance with the provisions of the Swiss Code of            
Obligations. Our audit was conducted in accordance with auditing standards      
promulgated by the profession in Switzerland and in accordance with the         
International Standards on Auditing issued by the International Federation of   
Accountants. We confirm that we comply with the legal requirements concerning   
professional qualification and independence.                                    

     These Consolidated Financial Statements are the responsibility of the Board
of Directors of Roche Holding Ltd. Our responsibility is to express an opinion  
on these Consolidated Financial Statements based on our audit. We are required  
to plan and perform the audit to obtain reasonable assurance about whether the  
financial statements are free of material misstatement. An audit includes       
examining, on a test basis, evidence supporting the amounts and disclosures in  
the financial statements. An audit also includes assessing the accounting       
principles used and significant estimates made by the Board of Directors, as    
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.                          

In our opinion the Consolidated Financial Statements referred to above
present fairly, in all material respects, the financial position of the Roche   
Group at 31 December 1994, and the changes in its shareholders' equity, the     
results of operations and its cash flows for the year then ended in accordance  
with International Accounting Standards. Based on our audit we conclude that the
Consolidated Financial Statements are in accordance with the provisions of the  
Swiss Code of Obligations and with the principles of consolidation and valuation
described in the summary of accounting policies on pages 66 to 68.              

     We recommend that the Consolidated Financial Statements submitted to you be
approved.                                                                       

PRICE WATERHOUSE AG                                                             

                                                                [Download Table]
                                                                     
Jack W. Flamson                                   Ralph R. Reinertsen
Certified Public Accountant               Certified Public Accountant
                             Auditors in                             
                               charge                                

Basel, 27 April 1995                                                            

---------------                                                                 

     ** The Report of the Group Auditors has been reprinted from the 1994 Annual
   Report of the Roche Group. The references to pages 60 to 88 and the
    pages 66 to 68 are references to the 1994 Annual Report of the Roche
       Group and are pages 89 to 108 and Pages 93 to 95, respectively, in this
Proxy Statement/Prospectus.                                     

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FINANCIAL STATEMENTS OF THE ROCHE GROUP FOR HALF-YEAR 1995

SUMMARIZED CONSOLIDATED STATEMENTS OF INCOME

                                                        [Enlarge/Download Table]


                                                                       FIRST HALF      FIRST HALF       
                                                                          1995            1994          
                                                                       -----------     -----------      
                                                                       (UNAUDITED)     (UNAUDITED)      
                                                                          (IN MILLIONS OF SWISS         
                                                                                 FRANCS)                
                                                                                                        
Consolidated Group sales.............................................      7,495           7,323        
Cost of goods sold...................................................     (2,261)         (2,449)       
Gross profit.........................................................      5,234           4,874        
                                                                          ------          ------        
Operating costs......................................................     (3,419)         (3,313)       
Operating profit.....................................................      1,815           1,561        
                                                                          ------          ------        
Non-operating income (expense), net..................................        598             506        
Taxes................................................................       (469)           (410)       
Inc(UNAUDITED)ome applicable to minority interests..............................        (32)        (34)
                                                                          ------          ------        
          Net income.................................................      1,912           1,623        

                                                ======          ======                                  

SUMMARIZED CONSOLIDATED BALANCE SHEETS

                                                        [Enlarge/Download Table]


                                                                       30 JUNE       31 DECEMBER
                                                                        1995            1994    
                                                                     -----------     -----------
                                                                     (UNAUDITED)     (UNAUDITED)
                                                                        (IN MILLIONS OF SWISS   
                                                                               FRANCS)          
                                                                                                
Long-term assets....................................................    13,322          13,549  
Current assets......................................................    22,584          22,684  
                                                                        ------          ------  
     Total assets...................................................    35,906          36,233  
                                                                        ------          ------  
Shareholders' equity................................................    17,648          16,422  
Minority interests..................................................       724             861  
Long-term debt and non-current liabilities..........................    11,496          10,034  
Current liabilities.................................................     6,038           8,916  
                                                                        ------          ------  
          Total equity and liabilities..............................    35,906          36,233  
                                                                        ======          ======  

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CONDUCT OF GENENTECH'S BUSINESS AFTER 
COMPLETION OF THE PROPOSED TRANSACTIONS;
ROCHE'S PLANS WITH RESPECT TO GENENTECH 

As a result of the Licensing Agreement, Genentech expects that it will
terminate all or a substantial portion of its operations outside the United     
States for at least ten years. As noted under "Certain Projected Financial      
Information -- September Information" above, Genentech intends to accelerate its
product development efforts by bringing three new products or product           
indications into development in the next year, rather than one product, as had  
previously been the Company's intention. No other changes to Genentech's        
business and operations are anticipated to occur as a result of the Proposed    
Transactions, and Genentech is unaware of any new plans of Roche with respect to
Genentech or its investment in Genentech.                                       

PRINCIPAL STOCKHOLDERS OF GENENTECH 

    The following table sets forth, as of September   , 1995, unless otherwise
noted, certain information regarding all stockholders known by Genentech to be  
the beneficial owners of more than 5% of any class of Genentech's voting        
securities:                                                                     

                                                                [Download Table]

 NAME AND ADDRESS                      NUMBER OF                       PERCENT      
OF BENEFICIAL OWNER                     SHARES         CLASS           OF CLASS     
-------------------                    ---------   -------------  ------------------
                                                                                    
Roche Holdings, Inc................... 76,621,009  Common Stock   approximately 65% 
  15 East North Street                                                              
  Dover, DE 19901                                                                   

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SECURITY OWNERSHIP OF MANAGEMENT

     The following table sets forth the beneficial ownership of shares of Common
Stock and of the equity securities of Roche Holding as of July 14, 1995, unless 
otherwise noted, of (i) each director of Genentech, (ii) the Chief Executive    
Officer and each of Genentech's four other most highly compensated executive    
officers at December 31, 1994 (the "Named Executive Officers"), and (iii) all   
directors and executive officers of Genentech as a group:                       

AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP 

                                                        [Enlarge/Download Table]

                                                    GENENTECH            EQUITY SECURITIES OF  
                                                  COMMON STOCK             ROCHE HOLDING LTD   
                                            -------------------------   -----------------------
                                                             PERCENT                  PERCENT  
    NAME OF BENEFICIAL OWNER                 SHARES          OF CLASS     SHARES      OF CLASS 
    ------------------------                --------         --------   ----------   ----------
                                                                                               
Herbert W. Boyer..........................   794,570(1)        1.55%          0            0   
Jurgen Drews(2)...........................    30,200(3)           *(4)        0            0   
Franz B. Humer(2).........................         0              *           0            0   
Louis J. Lavigne, Jr......................   105,873(5)           *           0            0   
Arthur D. Levinson........................   241,995(6)           *           0            0   
Linda Fayne Levinson......................    15,200(7)           *           0            0   
John P. McLaughlin........................   153,753(8)           *           0            0   
J. Richard Munro..........................    40,000(9)           *           0            0   
Donald L. Murfin..........................    38,250(10)          *           0            0   
John T. Potts, Jr.........................    45,667(11)          *           0            0   
G. Kirk Raab..............................   276,671(12)          *           0            0   
C. Thomas Smith, Jr.......................    40,000(9)           *           0            0   
Robert A. Swanson......................... 1,915,120(13)       3.72%          0            0   
David S. Tappan, Jr.......................    42,000(14)          *           0            0   
William D. Young..........................   189,463(15)          *           0            0   
All Directors and Executive Officers as a                                                      
  Group (37 persons)......................  4,884,543(16)      9.12%          0            0   

---------------                                                                 

(1) Includes stock options outstanding on July 14, 1995 to purchase 30,000    
shares of Common Stock which are currently exercisable.               

(2) Pursuant to the 1990 Merger, Roche acquired 67,133,409 shares of Common   
    Stock, and in addition as of July 14, 1995 owns 9,487,600 shares of Common
Stock, which it has purchased (as Redeemable Common Stock) on the open
market since 1990. Roche currently owns approximately 65% of the      
  outstanding Common Stock. Pursuant to the Existing Governance Agreement,
Roche has appointed Drs. Drews and Humer as its representatives on the
Genentech Board.                                                      

(3) Includes stock options outstanding on July 14, 1995 to purchase 30,000    
shares of Common Stock which are currently exercisable.               

(4) Asterisk (*) indicates that the amount beneficially owned is less than one
percent (1%) of the outstanding shares of Common Stock.               

(5) Includes stock options outstanding on July 14, 1995 to purchase 89,948    
shares of Common Stock which are currently exercisable.               

(6) Includes stock options outstanding on July 14, 1995 to purchase 236,356   
shares of Common Stock which are currently exercisable.               

(7) Includes stock options outstanding on July 14, 1995 to purchase 15,000    
shares of Common Stock which are currently exercisable.               

(8) Includes stock options outstanding on July 14, 1995 to purchase 153,753   
shares of Common Stock which are currently exercisable.               

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(9) Includes stock options outstanding on July 14, 1995 to purchase 38,000    
shares of Common Stock which are currently exercisable.               

(10) Includes stock options outstanding on July 14, 1995 to purchase 38,250     
shares of Common Stock which are currently exercisable.               

(11) Includes stock options outstanding on July 14, 1995 to purchase 41,334     
shares of Common Stock which are currently exercisable.               

(12) Includes stock options outstanding on July 14, 1995 to purchase 274,169    
  shares of Common Stock which are currently exercisable. On July 7, 1995,
   Mr. Raab resigned as President, Chief Executive Officer and a director of
   the Company. See "The Proposed Transactions -- Background of the Proposed
Transactions."                                                        

(13) Includes stock options outstanding on July 14, 1995 to purchase 236,190    
shares of Common Stock which are currently exercisable. Also includes 
     1,678,928 shares of Common Stock held as trustee of six trusts. Mr. Swanson
   disclaims beneficial ownership of the 553,473 shares held by five of such
trusts. Excludes ownership of 146,980 shares held by a charitable     
foundation of which Mr. Swanson is one of the directors.              

(14) Includes stock options outstanding on July 14, 1995 to purchase 42,000     
shares of Common Stock which are currently exercisable.               

(15) Includes stock options outstanding on July 14, 1995 to purchase 121,980    
shares of Common Stock which are currently exercisable.               

(16) Includes all shares of Common Stock reflected in footnotes 1, 3 and 5      
 through 15 above and also includes outstanding stock options held by 22
 other executive officers on July 14, 1995 to purchase 866,901 shares of
Common Stock which are currently exercisable and warrants issued in   
     connection with the formation of Genentech Clinical Partners IV exercisable
for 72 shares of Common Stock.                                        

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CERTAIN INFORMATION CONCERNING DIRECTORS AND

EXECUTIVE OFFICERS OF THE COMPANY 

EXECUTIVE OFFICERS                                                              

     The following table sets forth the name, age, and position of the executive
officers of the Company:                                                        

                                                        [Enlarge/Download Table]

NAME                                    AGE                   POSITION HELD                 
-------------------------------------  -----  ----------------------------------------------
                                                                                            
Arthur D. Levinson, Ph.D.............   45    President and Chief Executive Officer         
Gregory P. Baird*....................   44    Vice President -- Corporate Communications    
David W. Beier.......................   47    Vice President -- Government Affairs          
Richard B. Brewer....................   44    Senior Vice President                         
Robert L. Garnick, Ph.D..............   45    Vice President -- Quality                     
Marty Glick..........................   46    Vice President and Treasurer                  
Bradford S. Goodwin..................   41    Vice President and Controller                 
Dennis Henner, Ph.D..................   44    Vice President -- Research Technology         
Paul F. Hohenschuh...................   52    Vice President -- Manufacturing               
Edmon R. Jennings....................   48    Vice President -- Sales and Marketing         
Stephen G. Juelsgaard................   46    Vice President, General Counsel & Assistant   
                                                Secretary                                   
Kurt Kopp**..........................   46    Vice President -- General Manager, Europe     
Louis J. Lavigne, Jr.................   47    Senior Vice President and Chief Financial     
                                              Officer                                       
Bryan Lawlis, Ph.D...................   43    Vice President -- Process Science             
M. David MacFarlane..................   54    Vice President -- Regulatory Affairs          
John P. McLaughlin...................   43    Senior Vice President and Secretary           
Polly Moore, Ph.D....................   48    Vice President -- Information Resources       
James Panek..........................   42    Vice President -- Engineering & Facilities    
Eric J. Patzer, Ph.D.................   46    Vice President -- Development                 
Kim Popovits.........................   36    Vice President -- Sales                       
Stephen Raines, Ph.D.................   57    Vice President -- Intellectual Property &     
                                              Assistant Secretary                           
Barry M. Sherman, M.D................   54    Senior Vice President and Chief Medical       
                                              Officer                                       
Nicholas Simon, III..................   41    Vice President -- Business Development        
David Stump, M.D. ...................   45    Vice President -- Clinical                    
William D. Young.....................   51    Senior Vice President                         

---------------                                                                 

* Prior to joining Genentech in 1992, Mr. Baird was employed by G.D.
Searle & Co. for five years as Vice President of Corporate Communications.      

** Mr. Kopp joined the Company in January 1993 as Vice President and  
General Manager, Europe. Prior to joining Genentech in 1993, Mr. Kopp was       
employed by F. Hoffmann-La Roche, Ltd from 1980 until December 1992, most       
recently as Regional Director for Latin America. Mr. Kopp is a citizen of       
Switzerland.                                                                    

   During the last five years, no person named above has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors).     

  During the last five years, no person named above was a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction as a  
result of which such person was or is subject to a judgment, decree or final    
order enjoining future violations of, or prohibiting or mandating activities    
subject to, federal or state securities laws or finding any violation with      
respect to such laws.                                                           

    Except as indicated above, (i) each person named above has been an officer
and/or employee of Genentech or one or more of its subsidiaries during each of  
the preceding five years; (ii) each person named above is a citizen of the      
United States of America; and (iii) the business address of each person listed  
above is 460 Point San Bruno Boulevard, South San Francisco, California.        

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DIRECTORS                                                                       

The following table sets forth the name and age (as of the date of the
Special Meeting) of the directors of the Company, the class to which each has   
been elected, their principal occupations at present, the positions and offices 
held by each with the Company in addition to the position as a director, and the
period during which each has served as a director of the Company.               

                                                        [Enlarge/Download Table]

                                                                                     SERVED AS 
                                                PRINCIPAL OCCUPATION --               DIRECTOR 
               NAME            AGE                   POSITION HELD                     SINCE   
                               ----  ----------------------------------------------  ----------
                                                                                               
1998 CLASS                                                                                     
     Jurgen Drews.............   62  President, International Research and              1990   
                                     Development of the Roche Group                            
     Franz B. Humer...........   49  Director and Head of the Pharmaceuticals           1995   
                                     Division, Roche Holding                                   
     Donald L. Murfin.........   52  General Partner of Chemical and Materials          1980   
                                     Enterprise Associates, L.P.                               
     John T. Potts, Jr. ......   63  Physician-in-Chief at Massachusetts General        1982   
                                     Hospital                                                  
     Arthur D. Levinson.......   45  President and Chief Executive Officer of           1995   
                                     Genentech                                                 
1997 CLASS                                                                                     
     Herbert W. Boyer.........   59  Director of Genentech                              1976   
     Linda Fayne Levinson.....   53  President of Fayne Levinson Associates, Inc.       1992   
1996 CLASS                                                                                     
     J. Richard Munro.........   64  Chairman of the Executive Committee of the         1988   
                                     Board of Time Warner Inc.                                 
     C. Thomas Smith, Jr. ....   57  President and Chief Executive Officer of VHA,      1986   
                                     Inc.                                                      
     Robert A. Swanson........   47  Chairman of the Board of Genentech, Inc.           1976   
     David S. Tappan, Jr. ....   73  Director of Genentech                              1981   

1998 Class                                                                  

     Dr. Drews has been President, International Research and Development, and a
member of the Executive Committee, of the Roche Group, an international health  
care concern, since 1991. Dr. Drews served as Chairman of the Research Board and
a member of the Executive Committee of HLR from 1986 to 1991, and served as the 
Director of Pharmaceutical Research at HLR from 1985 to 1986. These Roche       
entities are affiliated with the Company. Dr. Drews served as Head of           
Pharmaceutical Research and Development for Sandoz Ltd from 1982 to 1985, and as
Head of the Sandoz Research Institute from 1979 to 1982. Dr. Drews is a citizen 
of Germany; his business address is c/o Hoffmann-LaRoche Inc., 340 Kingsland    
Street, Nutley, New Jersey.                                                     

Dr. Humer was elected to the Genentech Board in June 1995 to fill the 
vacancy created by the retirement of Roche's designee Dr. Armin M. Kessler. Dr. 
Humer joined Roche Holding in the spring of 1995 as the head of its             
Pharmaceuticals Division. He is also a member of Roche Holding's board of       
directors and corporate executive committee. Prior to joining Roche Holding, Dr.
Humer was an Executive Director and Chief Operating Officer of Glaxo Holdings, a
United Kingdom public limited company. Dr. Humer also serves as a director of   
Cadbury Schweppes p.l.c. Dr. Humer is a citizen of Switzerland; his business    
address is c/o Roche Holding Ltd, Grenzacherstrasse 124, CH-4002 Basel,         
Switzerland.                                                                    

Mr. Murfin is General Partner of Chemicals and Materials Enterprise   
Associates, L.P., a venture capital firm focusing on businesses based on        
specialty chemicals and materials. Mr. Murfin was Managing Partner of Trident   
Venture Partners from 1988 to 1989. Mr. Murfin served from 1979 to 1988 as      
President of Lubrizol Enterprises, Inc., a venture development subsidiary of The
Lubrizol Corporation, a manufacturer of chemical additives for lubricants and   
fuels and specialty chemicals for industrial applications, of which he was Vice 

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President from 1985 to 1988. Mr. Murfin served as Chairman of the Board of Genex
Corporation from 1990 to 1991. Mr. Murfin is a director of Corvita Corporation, 
a Trustee of the Edison BioTechnology Center and serves on the boards of        
directors of a number of private technology based businesses. Mr. Murfin is a   
citizen of the United States; his business address is Chemicals & Materials     
Enterprise Assoc., One Cleveland Center, Suite 2700, Cleveland, Ohio.           

     Dr. Potts has been Physician-in-Chief at Massachusetts General Hospital and
Jackson Professor of Clinical Medicine at Harvard Medical School since 1981. Dr.
Potts also serves as a consultant to the Company. Dr. Potts' accomplishments    
have been recognized with a series of honors over the years, including the      
prestigious Fred Conrad Koch Award of the Endocrine Society, the Prize Andre    
Lichwitz, and the American Society of Bone and Mineral Research's highest honor,
the William F. Neumann Award. He holds many active and honorary memberships in  
scientific and professional organizations, including the Institute of Medicine, 
the American Academy of Arts and Sciences, and the Association of Professors of 
Medicine. Dr. Potts is a citizen of the United States; his business address is  
Massachusetts General Hospital, Medical Services, Bigelow 740, Boston,          
Massachusetts.                                                                  

Dr. Levinson was elected President and Chief Executive Officer and a  
director of the Company on July 7, 1995. Since joining the Company in 1980, Dr. 
Levinson has been a senior Scientist, Staff Scientist and the Director of the   
Company's Cell Genetics Department. Dr. Levinson was appointed Vice President of
Research Technology in April 1989, Vice President of Research in May 1990 and   
Senior Vice President in December 1992. Dr. Levinson has been a member of       
Genentech's Operations Committee since 1990. Dr. Levinson is currently on the   
editorial boards of "Molecular Biology" and "Medicine," as well as "Molecular   
and Cellular Biology" and is active in the American Society of Microbiology, the
New York Academy of Sciences, the American Association for the Advancement of   
Science, and the American Society for Biochemistry and Molecular Biology. From  
1977 to 1980, Dr. Levinson was a Postdoctoral Fellow in the Department of       
Microbiology at the University of California, San Francisco. In 1977, Dr.       
Levinson received his Ph.D. in Biochemistry from Princeton University. Dr.      
Levinson is a citizen of the United States; his business address is Genentech,  
Inc., 460 Point San Bruno Blvd., South San Francisco, California.               

1997 Class                                                                  

 Dr. Boyer, a founder of the Company, has been a director of the Company
since 1976 and is a consultant to the Company. He served as Vice President of   
the Company from 1976 to 1991. Dr. Boyer, a Professor of Biochemistry at the    
University of California at San Francisco from 1976 to 1991, demonstrated the   
usefulness of recombinant DNA technology to produce medicines economically,     
which laid the groundwork for the Company's development. In 1993, Dr. Boyer     
received the 1993 Helmut Horten Research Award. He also received the National   
Medal of Science from President Bush in 1990, the National Medal of Technology  
in 1989 and the Albert Lasker Basic Medical Research Award in 1980. He is an    
elected member of the National Academy of Sciences and a Fellow in the American 
Academy of Arts and Sciences. Dr. Boyer is a citizen of the United States; his  
business address is Genentech, Inc., 460 Point San Bruno Blvd., South San       
Francisco, California.                                                          

Ms. Levinson has served as the President of Fayne Levinson Associates,
Inc., a general management consulting firm to consumer and financial service    
organizations, since 1982. Ms. Levinson also serves as a member of the Board of 
Egghead, Inc. Ms. Levinson was an executive at Creative Artists Agency, Inc.    
from 1993 through February 1994 and was a partner of Wings Partners, a Los      
Angeles-based merchant bank whose holdings include Northwest Airlines, from 1989
until 1993. Ms. Levinson was a Senior Vice President at American Express Travel 
Related Services Co., Inc., from 1984 until 1987. In 1982, Ms. Levinson served  
as Executive Vice President, Marketing, Hotel Group at John B. Coleman & Co. Ms.
Levinson was at McKinsey & Co., a worldwide general management consulting firm, 
from 1972 through 1981, where she was made the first woman partner in 1979. Ms. 
Levinson is a citizen of the United States; her business address is 710 22nd    
Street, Santa Monica, California. Ms. Levinson is not related to Dr. Levinson.  

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1996 Class                                                                  

    Mr. Munro is Chairman of the Executive Committee of the Board of Directors
of Time Warner Inc., a media and entertainment company. Mr. Munro was Chairman  
of Time, Inc., a predecessor of Time Warner Inc., from 1986 to 1989 and its     
Chief Executive Officer from 1980 to 1989. Mr. Munro is a director of Time      
Warner Inc., Mobil Corporation, Kellogg Company, and K-Mart Corporation. Mr.    
Munro is a member of the National Coalition of AIDS Research (Washington, D.C.) 
and the Counsel on Foreign Relations, Chairman of the Points of Light           
Foundation, a director of the United Negro College Fund, and a trustee of       
Hamilton College, St. Lawrence University, Teacher's College, Columbia          
University and the Salisbury School. Mr. Munro is a citizen of the United       
States; his business address is Time Warner, Inc., 300 First Stamford Plaza,    
Stamford, Connecticut.                                                          

   Mr. Smith has been President and Chief Executive Officer of VHA, Inc., an
alliance of 1,150 healthcare organizations in 47 states, since 1991. Mr. Smith  
served as President of Yale-New Haven Hospital, a nonprofit teaching hospital   
affiliated with Yale University Medical School, from 1977 to 1991. Mr. Smith was
the 1991 Chairman of the Board of Trustees of the American Hospital Association,
and serves on the Board of VHA and the National Committee on Quality of Health  
Care. Previously he was on the Board of the Association of American Medical     
Colleges. Mr. Smith was the 1991 Rene Sand lecturer at the Congress of the      
International Hospital Federation, the third American to be so honored. Mr.     
Smith is a citizen of the United States; his business address is VHA, Inc., 220 
E. Las Colinas Blvd., Irving, Texas.                                            

    Mr. Swanson, a founder of the Company and its Chief Executive Officer from
1976 to 1990, has been Chairman of the Genentech Board since 1990. Prior to     
forming the Company, Mr. Swanson was a partner with Kleiner & Perkins venture   
capital partnership in San Francisco, and from 1970 to 1974, he was an          
investment officer with Citicorp Venture Capital Ltd. Mr. Swanson serves on the 
Board of Fellows of the Faculty of Medicine at Harvard University, and is a     
member of the Biology Visiting Committee of, and has served as a Trustee for,   
the Massachusetts Institute of Technology. Mr. Swanson is a member of the Royal 
Swedish Academy of Engineering Sciences and a member of the Board of Molten     
Metal Technology, Inc. He also serves as a trustee of the San Francisco Ballet, 
the San Francisco Museum of Modern Art, and the Nueva School. Mr. Swanson is a  
citizen of the United States; his business address is Genentech, Inc., 460 Point
San Bruno Blvd., South San Francisco, California.                               

    Mr. Tappan served as Chairman of the Board of Fluor Corporation ("Fluor"),
an international engineering, construction and technical services company, from 
1984 through 1990, at which time he retired. Mr. Tappan was Chief Executive     
Officer of Fluor from 1984 to 1990. Mr. Tappan is a director of Beckman         
Instruments, Inc., Advanced Tissue Sciences, Inc., and Allianz Insurance        
Company. Mr. Tappan is a member of the Board of Trustees of the University of   
Southern California and The Scripps Research Institute Board of Trustees. Mr.   
Tappan is a citizen of the United States; his business address is Genentech,    
Inc., 460 Point San Bruno Blvd., South San Francisco, California.               

To the knowledge of the Company, none of the Company's directors has, 
during the last five years, been convicted in a criminal proceeding (excluding  
traffic violations or similar misdemeanors), or has been party to a civil       
proceeding of a judicial or administrative body of competent jurisdiction as a  
result of which such person was or is subject to a judgment, decree or final    
order enjoining further violations of, or prohibiting or mandating activities   
subject to, federal or state securities laws or finding any violation with      
respect to such laws.                                                           

TRANSACTIONS IN SECURITIES OF GENENTECH DURING THE LAST 60 DAYS                 

This section sets forth the transactions in the Company's Common Stock
effected in the 60-day period preceding July 31, 1995 by certain affiliates and 
former affiliates of the Company. No transactions by any such affiliates have   
been effected since July 31, 1995. All dollar amounts are per share of Common   
Stock. On July 14, 1995, G. Kirk Raab sold 2,129 shares of Common Stock for     
$47.375 per share. On July 24, 1995 Mr. Raab exercised options to purchase      
70,003 shares of Common Stock for $15.625 per share and sold such shares of     
Common Stock on the same day for $47.00 per share. On July 24, 1995 Mr. Raab    
also exercised options to purchase 76,597 shares of Common Stock for $25.50 per 
share and sold such shares of Common                                            

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Stock on the same day for $47.00 per share. On July 25, 1995 Mr. Raab exercised 
options to purchase 2,300 shares of Common Stock for $25.50 per share and sold  
such shares of Common Stock on the same day for $47.00 per share. On July 25,   
1995 Mr. Raab also exercised options to purchase 11,100 shares of Common Stock  
for $25.50 per share and sold such shares of Common Stock on the same day for   
$46.75 per share.                                                               

On July 3, 1995, each of the following officers of the Company, or his or her   
spouse where indicated, purchased under the Company's Employee Stock Plan (the  
"ESP") the number of shares of Common Stock noted in parentheses after his or   
her name for $30.49 per share of Common Stock: David Beier (123); Paul          
Hohenschuh's wife, Marjorie Winkler (133); Bryan Lawlis (8); Louis Lavigne (26);
Polly Moore (32) and Dr. Moore's husband, Stuart Builder (203); Eric Patzer (71)
and Mr. Patzer's wife, Janet Briggs (154); and Nicholas Simon (61).             

CERTAIN INFORMATION CONCERNING
THE DIRECTORS AND EXECUTIVE OFFICERS
OF ROCHE AND ROCHE HOLDING

DIRECTORS AND EXECUTIVE OFFICERS OF ROCHE                                       

The following table sets forth the name, business address and present 
principal occupation or employment, and material occupations, positions, offices
or employments for the past five years of each director and executive officer of
Roche. Except as otherwise noted, the business address of each such person is   
c/o Roche Holding, Grenzacherstrasse 124, CH-4002 Basel, Switzerland and each   
such person is a Swiss citizen, except that Mr. Schiller is a citizen of the    
United States. Directors are identified by an asterisk next to their names.     

                                                        [Enlarge/Download Table]

                                                 PRESENT PRINCIPAL OCCUPATION             
              NAME AND                           OR EMPLOYMENT AND FIVE-YEAR              
          BUSINESS ADDRESS                            EMPLOYMENT HISTORY                  
   -------------------------------  ------------------------------------------------------
                                                                                          
*  Mr. Fritz Gerber                 Chairman of the Board and Chief Executive Officer of  
   (President)                      Roche Holding. Mr. Gerber is also a director of       
                                    Nestle, S.A., Swiss Credit Bank and IBM.              

*  Dr. Henri B. Meier               Chief Financial Officer of Roche Holding. Prior to    
   (Vice President                  1994, Dr. Meier was a General Manager of Roche        
   and Treasurer)                   Holding.                                              

   Peter N. Schiller                Attorney-at-Law.                                      
   Hoffstots Lane                                                                         
   Sands Point, New York 11050                                                            
   (Secretary)                                                                            

   To the best knowledge of Roche, no person named above has during the last
five years (i) been convicted in a criminal proceeding (excluding traffic       
violations or similar misdemeanors); or (ii) been a party to a civil proceeding 
of a judicial or administrative body of competent jurisdiction as a result of   
which such person was or is subject to a judgment, decree or final order        
enjoining future violations of, or prohibiting or mandating activities subject  
to, federal or state securities laws or finding any violation with respect to   
such laws.                                                                      

To the best knowledge of Roche, no person named above is the direct or
indirect beneficial owner of any security of Genentech, or has any contract,    
arrangement, understanding or relationship with respect to any securities of    
Genentech.                                                                      

  To the best knowledge of Roche, other than as described in "The Proposed
Transactions -- Background of the Proposed Transactions," no person named above 
has since January 1, 1993 had any contacts, negotiations, or entered into any   
transactions with Genentech, Inc. concerning a merger, consolidation or         
acquisition, a tender offer or other acquisition of securities, an election of  
directors, or a sale or other transfer of a material amount of assets, or       
entered any contracts, arrangements, understandings or relationships with       
Genentech or any of its executive officers, directors, controlling persons or   
subsidiaries.                                                                   

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DIRECTORS AND EXECUTIVE OFFICERS OF ROCHE HOLDING                               

The following table sets forth the name, business address and present 
principal occupation or employment, and material occupations, positions, offices
or employments for the past five years of each director and executive officer of
Roche Holding. Except as otherwise noted, the business address of each such     
person is c/o Roche Holding, Grenzacherstrasse 124, CH-4002 Basel, Switzerland, 
and such person is a Swiss citizen except that Dr. Drews is a German citizen and
Mr. Belingard is a French citizen. In addition, except as otherwise noted, each 
executive officer of Roche Holding has been employed by Roche Holding in the    
positions listed below during the last five years. Directors are identified by  
an asterisk next to their names.                                                

                                                        [Enlarge/Download Table]

                                                 PRESENT PRINCIPAL OCCUPATION             
              NAME AND                           OR EMPLOYMENT AND FIVE-YEAR              
          BUSINESS ADDRESS                            EMPLOYMENT HISTORY                  
   -------------------------------  ------------------------------------------------------
                                                                                          
*  Mr. Fritz Gerber                 Chairman of the Board and Chief Executive Officer. Mr.
                                    Gerber is also a director of Nestle, S.A., Swiss      
                                    Credit Bank and IBM.                                  

                                                        [Enlarge/Download Table]
                                                                                         
*  Dr. Lukas Hoffmann              Vice Chairman of the Board. Dr. Hoffmann is also the  
   Le petit Essert                 Vice Chairman of World Wildlife Fund International (a 
   1147 Montricher,                nonprofit organization) and is the founder and head of
   Switzerland                     Station Biologique, a private research center in      
                                   France.                                               

*  Dr. Andres F. Leuenberger       Vice Chairman and Delegate of the Board. Prior to     
                                   1990, Dr. Leuenberger was a member of the Board of    
                                   Directors and Managing Director of Roche Holding. Dr. 
                                   Leuenberger is also Chairman of the Swiss Federation  
                                   of Commerce and Industry and a director of the        
                                   Swiss-American Chamber of Commerce.                   

*  Dr. h.c. Paul Sacher            Conductor and founder of the Paul Sacher Foundation (a
   Haus auf Burg                   nonprofit organization).                              
   Muensterplatz 4                                                                       
   Basel 4051, Switzerland                                                               

*  Dr. Franz B. Humer              Member of the Executive Committee. Head of Roche      
                                   Holding's Pharmaceuticals Division. Dr. Humer is also 
                                   a Director of Genentech. Prior to 1995, Dr. Humer was 
                                   an Executive Director of Glaxo Holdings, a United     
                                   Kingdom public limited company.                       

*  Dr. Henri B. Meier              Member of the Executive Committee. Chief Financial    
                                   Officer. Prior to 1994, Dr. Meier was a General       
                                   Manager of Roche Holding Ltd.                         

*  Dr. Jakob Oeri                  Surgeon and retired Head Physician, Kantonsspital     
   St. Alban -- Vorstadt 71        Basel (hospital).                                     
   4052 Basel, Switzerland                                                               

*  Prof. jur. Kurt Jenny           Attorney. Prior to 1993, Prof. Jenny held various     
   Aeschengraben 18                positions in the Basel state government, including    
   4051 Basel, Switzerland         President and Head of the Department of Finance.      

*  Prof. Dr. Werner Stauffacher    Head, Department of Research,                         
   Department of Research          University of Basel.                                  
   University of Basel                                                                   
   Hebelstrasse 32                                                                       
   4056 Basel, Switzerland                                                               

*  Prof. Charles Weissmann         Professor, University of Zurich.                      
   Institut fur Molekularbiologie                                                        
   I                                                                                     
   der Universitaet Zurich                                                               
   Hoenggerberg                                                                          
   8903 Zurich, Switzerland                                                              

   Dr. Markus Altwegg              Member of the Executive Committee. Head of Pharma     
                                   Stammhaus Basel, Group Informatics.                   

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                                                        [Enlarge/Download Table]

                                              PRESENT PRINCIPAL OCCUPATION             
           NAME AND                           OR EMPLOYMENT AND FIVE-YEAR              
       BUSINESS ADDRESS                            EMPLOYMENT HISTORY                  
-------------------------------  ------------------------------------------------------
                                                                                       
Mr. Jean-Luc Belingard           Member of the Executive Committee. Head of Diagnostics
                                 Division.                                             
Dr. Roland Bronnimann            Member of the Executive Committee. Head of Vitamins   
                                 and Fine Chemicals Division.                          
Prof. Jurgen Drews               Member of the Executive Committee. Head of Research   
                                 and Development. Prof. Drews is also a director of    
                                 Genentech.                                            

   To the best knowledge of Roche, no person named above has during the last
five years (i) been convicted in a criminal proceeding (excluding traffic       
violations or other misdemeanors); or (ii) been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction as a result of which
such person was or is subject to a judgment, decree or final order enjoining    
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.    

To the best knowledge of Roche, other than as described in "Security  
Ownership of Management", no person named above is the direct or indirect       
beneficial owner of any security of Genentech, or has any contract, arrangement,
understanding or relationship with respect to any securities of Genentech.      

  To the best knowledge of Roche, other than as described in "The Proposed
Transactions -- Background of the Proposed Transactions," no person named above 
has since January 1, 1993 had any contacts, negotiations, or entered into any   
transactions with Genentech concerning a merger, consolidation or acquisition, a
tender offer or other acquisition of securities, an election of directors, or a 
sale or other transfer of a material amount of assets, or entered any contracts,
arrangements, understandings or relationships with Genentech or any of its      
executive officers, directors, controlling persons or subsidiaries.             

TRANSACTIONS IN SECURITIES OF GENENTECH DURING THE LAST 60 DAYS                 

 None of Roche, Roche Holding, Roche Finance, or any of the directors of
Roche or Roche Holding have effected any transactions with respect to securities
of Genentech in the 60-day period preceding the date of this Proxy              
Statement/Prospectus.                                                           

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TRANSACTIONS IN SECURITIES OF GENENTECH DURING THE LAST TWO YEARS               

     Since January 1, 1993, Roche has purchased an aggregate of 7,780,500 shares
of Redeemable Common Stock of Genentech. The range of prices paid and the       
average purchase price for such purchases of Redeemable Common Stock on a       
quarterly basis is included in the following chart.                             

                                                                [Download Table]

--------------------------------------------------------------------------------- 
                                     AMOUNT OF                             AVERAGE
                                      SHARES                              PURCHASE
QUARTER ENDED                        PURCHASED        HIGH        LOW       PRICE 
--------------------------------------------------------------------------------- 
                                                                                  
 1993                                                                             
     March 31                        2,036,700      $35.00     $32.25      $33.45 
--------------------------------------------------------------------------------- 
     June 30                           709,500      $35.00    $34.625      $34.65 
--------------------------------------------------------------------------------- 
     September 30                            0           0          0           0 
--------------------------------------------------------------------------------- 
     December 31                             0           0          0           0 
--------------------------------------------------------------------------------- 
 1994                                                                             
--------------------------------------------------------------------------------- 
     March 31                                0           0          0           0 
--------------------------------------------------------------------------------- 
     June 30                         3,271,400      $50.00    $44.375      $47.63 
--------------------------------------------------------------------------------- 
     September 30                            0           0          0           0 
--------------------------------------------------------------------------------- 
     December 31                     1,106,300      $48.00     $42.25      $46.76 
--------------------------------------------------------------------------------- 
 1995                                                                             
--------------------------------------------------------------------------------- 
     March 31                          512,000     $47.875    $44.625      $45.92 
--------------------------------------------------------------------------------- 
     June 30                           144,600      $47.00     $46.50      $46.68 
--------------------------------------------------------------------------------- 
     Through September 6                     0           0          0           0 
--------------------------------------------------------------------------------- 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In January 1980, Genentech and Hoffmann-La Roche Inc. ("Hoffmann-La Roche")
entered into an agreement regarding the development and commercialization of    
human leukocyte ("alpha") and fibroblast ("beta") interferons. Hoffmann-La Roche
is a New Jersey corporation and a subsidiary of Roche, and, as such, is         
affiliated with Genentech. Pursuant to this agreement, as amended from time to  
time, Genentech granted Hoffmann-La Roche a sole and exclusive, worldwide       
license to use and sell (and, under certain circumstances, manufacture) alpha   
and beta interferons using organisms and know-how developed by Genentech, and   
under patent rights belonging to Genentech, for a period of 20 years. Pursuant  
to this agreement, Genentech is entitled to royalties on sales of interferons by
Hoffmann-La Roche for 10 years after commercial introduction, unless the period 
of exclusivity is extended for an additional five-year royalty-bearing period.  
These royalties totaled $7.9 million in 1994.                                   

    In May 1991, Genentech entered into an agreement with Hoffmann-La Roche in
settlement of all disputes, including all issues in litigation between the      
parties, relating to the patent on human growth hormone and methods for its     
preparation. Under the settlement agreement, Genentech received a non-exclusive 
license under the patent and will make payments and/or grant credits, against   
future royalties under the interferon license described above, to Hoffmann-La   
Roche totalling $4 million over a ten-year period. In addition, Hoffmann-La     
Roche received a paid-up non-exclusive license under certain Genentech patents  
for specific product applications.                                              

   In January 1992, Genentech entered into an agreement with HLR relating to
the development and supply of a recombinant tumor necrosis factor ("TNF")       
receptor-fusion protein being evaluated for in septic shock, rheumatoid         
arthritis and multiple sclerosis. Pursuant to this agreement, Genentech is      
responsible for developing and scaling up a recombinant production process for  
TNF receptor-fusion protein and for supplying preclinical and clinical          
requirements of such material and, eventually, commercial requirements. HLR     

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reimburses Genentech for certain costs of developing and scaling its            
manufacturing capability and will purchase manufactured TNF receptor-fusion     
protein from Genentech; for calendar year 1994, such costs totalled             
approximately $7.1 million. In addition, Genentech has the option to participate
in certain commercial opportunities with HLR.                                   

In March 1992, Genentech announced a collaborative agreement with HLR 
intended to combine the resources of the two companies to focus on              
commercialization of Genentech's drug Pulmozyme(R). HLR is a Swiss corporation  
and a subsidiary of Roche Holding, and as such is affiliated with Genentech.    
Pulmozyme(R) is also being evaluated in both the United States and Europe as a  
potential treatment for chronic obstructive pulmonary diseases. Specifically,   
the agreement between Genentech, Genentech Europe Limited, a wholly-owned       
subsidiary of Genentech, and HLR calls for the collaborative clinical           
development, registration and marketing of Pulmozyme by Genentech and HLR in 17 
European countries (the "Collaborative Countries"). Genentech Europe Limited and
its affiliates are responsible for the manufacture and supply of Pulmozyme      
throughout the Collaborative Countries and for the marketing of the product in  
certain of the Collaborative Countries. HLR provides technical support to       
Genentech and will make milestone payments of up to $30 million to Genentech if 
certain conditions are met. HLR and Genentech Europe Limited share the          
developmental costs and the marketing and selling effort for Pulmozyme(R) and   
profits from product sales. As of December 31, 1994, Genentech has earned and   
received $19 million in milestone payments from HLR (including $10.0 million    
earned in the fiscal year 1994) and Genentech Europe Limited had received $10.5 
million in payments in accordance with the profit sharing arrangement between   
the companies (including $8.7 million accrued in fiscal year 1994). On January  
1, 1995, Genentech Europe Limited's rights and obligation under this Agreement  
were assigned to Genentech Biopharmaceuticals Limited. Genentech Europe Limited 
has also granted HLR exclusive licenses to sell Pulmozyme(R) in the countries   
outside of the Collaborative Countries, the United States and Canada under a    
common Genentech trademark in exchange for royalties and, in the case of Japan, 
for the payment of $5 million, which includes payments to be made if certain    
development targets are met. Also, during fiscal year 1994, Genentech Europe    
Limited sold $6.7 million worth of Pulmozyme(R) to HLR. Such agreement will be  
terminated if the Proposal is approved, and its subject matter will become part 
of the Licensing Agreement. See "The Licensing Agreement."                      

    Genentech and Roche also entered into a Small Molecule Screening Agreement
for the screening of Roche's chemical library using certain mutually agreed     
Genentech assays to find lead molecules for development into small molecule     
therapeutics. Roche has the responsibility for supplying the chemical library to
be screened. Genentech has the responsibility for supplying the assays and for  
undertaking the initial screening. If the screening results in the              
identification of a molecule of interest to one of the parties, that party shall
advise the other party of its interest. The second party can then elect to      
proceed with the interested party and jointly develop the molecule or it can    
choose to let the interested party develop the molecule on its own. If a        
molecule is jointly developed, the parties are to share equally the cost of     
joint development and to agree to a plan proportioning research and development 
responsibilities between them based on their capability. If a product is jointly
developed, both Genentech and Roche have the right to make, use and sell that   
product and will negotiate an allocation of the major marketing territories     
between them as well as appropriate royalties payable by each to the other for  
sales of that product in that party's marketing territory. As a general         
principle, the markets for each product are to be allocated on an equal basis,  
but Genentech is to have at least 50% of the marketing rights in North America  
and Roche is to have at least 50% of the marketing rights in Europe, subject to 
certain exceptions. After allocation of marketing rights, each party is to pay  
the other a royalty on sales in that party's marketing territory with the       
royalty to be determined by negotiation. As a general principle, the percentage 
royalty payable on sales by either party to the other should have equivalent    
royalty rates. If a product is unilaterally developed, the party unilaterally   
developing that product has the sole right to make, use and sell that product   
throughout the world and will pay the other party a royalty of 5% of sales.     

    In 1994 Genentech entered into four research and development collaboration
agreements with HLR (and Hoffmann-La Roche, Inc.), each an affiliate of         
Genentech (collectively, "HLR/Roche") which involve consideration in excess of  
$60,000. The four collaborations are in the areas of IIb/IIIa antagonists, IL-8 
antagonists, LFA/ICAM antagonists, and ras farnesyltransferase inhibitors. The  
collaboration pursuant to the                                                   

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IL-8 agreement is in the process of being terminated. In general, under the IIb 
IIIa antagonists collaboration agreement Genentech will have marketing rights in
the United States and Canada (the "Genentech Countries") to products developed  
through the collaboration, and HLR will have marketing rights to products in the
rest of the world ("ROW Countries"). In general, Genentech and HLR will share   
equally all development costs of products for the Genentech Countries and       
Europe; however, HLR will bear all such costs associated with other countries.  
In general, Genentech will pay royalties to HLR on product sales in each of the 
Genentech Countries, and HLR will pay an equivalent royalty rate to Genentech on
product sales in each of the ROW Countries. If under certain circumstances one  
of the parties declines to participate and share in future research and         
development of a product, royalties to be received by such party shall be       
reduced. For the year ended December 31, 1994 no amounts have been paid under   
this agreement. This agreement will be revised if the Proposal is approved and  
certain of its terms will be modified in accordance with the Licensing          
Agreement. See "The Licensing Agreement."                                       

In general, under each of the LFA/ICAM antagonists and ras            
farnesyltransferase inhibitors agreements, Genentech and HLR/Roche will share   
equally (i) the rights to market and sell any products in the United States,    
Canada, Mexico and Europe (the "Collaborative Countries") and (ii) any profits  
from product sales in the Collaborative Countries. HLR/Roche will have the      
rights to market and sell any products in the rest of the world, including, in  
certain circumstances, Japan (the "ROW Countries"). In general, Genentech and   
HLR/Roche will share equally all development costs of products for the          
Collaborative Countries; however, HLR/Roche will bear all such costs associated 
with ROW Countries. In general, if Genentech meets certain requirements as to   
its development and sales efforts in Japan, each party will (i) share equally   
all development costs for products in Japan, (ii) have the right to use, market 
and sell such products in Japan, and (iii) pay a royalty to the other party on  
product sales in Japan. Otherwise, Japan shall be considered part of HLR/Roche's
ROW Countries and HLR/Roche shall pay Genentech a royalty on products sales in  
Japan. Under certain circumstances, each party has the option to decline to     
participate and share in future research and development of products (the       
"Optout Option"). If Genentech has not exercised its Optout Option, HLR/Roche   
will pay a royalty to Genentech on sales of products in each of the ROW         
Countries, and if Genentech has exercised its Optout Option, HLR/Roche will pay 
a reduced royalty to Genentech on worldwide sales of products. If HLR/Roche has 
exercised its Optout Option, Genentech will pay a royalty to HLR/Roche on sales 
of products in each of the Collaborative Countries. For the year ended December 
31, 1994, no amounts have been paid under these agreements. The ras             
farnesyltransferase inhibitors agreement will be revised if the Proposal is     
approved and certain of its terms will be modified in accordance with the       
Licensing Agreement. See "The Licensing Agreement."                             

In addition to the foregoing agreements, Genentech is developing a    
mammalian cell line for HLR to produce a molecule that HLR is developing. HLR   
will provide Genentech future services of an equivalent value in exchange for   
Genentech's development efforts.                                                

OTHER MATTERS 

   The Genentech Board does not intend to bring any other matters before the
Special Meeting.                                                                

AUDITORS' REPRESENTATIVES 

 Representatives of Ernst & Young LLP, Genentech's independent auditors,
will be present at the Special Meeting and will have the opportunity to make a  
statement if they desire to do so. Such representatives are also expected to be 
available to respond to appropriate questions.                                  

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LEGAL MATTERS 

The legality of the shares of Special Common Stock to be issued in    
connection with the Merger will be passed upon by Wachtell, Lipton, Rosen &     
Katz, New York, New York, special counsel for Genentech. The discussion of the  
federal income tax consequences of the Merger to Genentech's stockholders       
contained herein is based upon an opinion of Wachtell, Lipton, Rosen & Katz, New
York, New York, special counsel for Genentech.                                  

EXPERTS 

The consolidated financial statements of Genentech incorporated by    
reference in Genentech's 1994 Annual Report on Form 10-K for the year ended     
December 31, 1994, have been audited by Ernst & Young LLP, independent auditors,
and incorporated by reference in this Proxy Statement/Prospectus which are      
referred to and made a part of this Registration Statement, as set forth in     
their report thereon incorporated by reference therein and herein. Such         
financial statements are incorporated herein by reference in reliance upon such 
report given upon the authority of such firm as experts in accounting and       
auditing.                                                                       

     The consolidated financial statements of the Roche Group as of December 31,
1994 and 1993 and for each of the two years in the period ended December 31,    
1994 included in this Proxy Statement/Prospectus have been so included in       
reliance on the report of Price Waterhouse AG, Group Auditors, given on the     
authority of said firm as experts in auditing and accounting.                   

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                                                                         ANNEX A

                                       [CONFORMED COPY, INCLUDING ALL AMENDMENTS

                                                 MADE THROUGH SEPTEMBER 6, 1995]

AGREEMENT AND PLAN OF MERGER

AMONG 

ROCHE HOLDINGS, INC., 

HLR (U.S.) II, INC. 

AND 

GENENTECH, INC. 

DATED MAY 23, 1995, 

AS AMENDED AND RESTATED 

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TABLE OF CONTENTS 

                                                        [Enlarge/Download Table]
                                                                                          
                                         ARTICLE I                                        
Definitions..........................................................................  A-1
                                         ARTICLE II                                       
The Merger; Effective Time; Closing..................................................  A-2
  2.1.    The Merger.................................................................  A-2
  2.2.    Effective Time.............................................................  A-2
  2.3.    Closing....................................................................  A-3
                                        ARTICLE III                                       
Terms of Merger......................................................................  A-3
  3.1.    Certificate of Incorporation...............................................  A-3
  3.2.    The By-Laws................................................................  A-3
  3.3.    Directors..................................................................  A-3
  3.4.    Officers...................................................................  A-3
                                        ARTICLE IV                                        
Merger Consideration; Conversion or Cancellation of Shares in the Merger.............  A-3
  4.1.    Share Consideration; Conversion or Cancellation of Shares in the Merger....  A-3
  4.2.    Exchange of Shares in the Merger...........................................  A-4
  4.3.    Transfer of Shares after the Effective Time................................  A-5
                                        ARTICLE V                                         
Additional Covenants and Agreements..................................................  A-5
  5.1.    Stockholder Meeting; Proxy Material; Registration Statement; Stock Exchange  A-5
          Listing....................................................................     
  5.2.    Reasonable Efforts.........................................................  A-5
  5.3.    Continued Applicability of Governance Agreement............................  A-5
  5.4.    Compliance with Securities Laws............................................  A-6
  5.5.    Option Plans...............................................................  A-6
  5.6.    Additional Agreements......................................................  A-6
  5.7.    Voting.....................................................................  A-6
  5.8.    Certain Proceedings........................................................  A-6
                                       ARTICLE VI                                         
Conditions...........................................................................  A-6
  6.1.    Conditions to Each Party's Obligations.....................................  A-6
  6.2.    Condition to Obligations of Roche and Merger Sub...........................  A-7
  6.3.    Conditions to Obligations of the Company...................................  A-7
                                      ARTICLE VII                                         
Termination..........................................................................  A-7
  7.1.    Termination................................................................  A-7
  7.2.    Effect of Termination and Abandonment......................................  A-7

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                                                        [Enlarge/Download Table]
                                                                                         
                                        ARTICLE VIII                                     
Miscellaneous and General............................................................ A-8
  8.1.    Expenses................................................................... A-8
  8.2.    Notices, Etc............................................................... A-8
  8.3.    Amendments, Waivers, Etc................................................... A-8
  8.4.    No Assignment.............................................................. A-8
  8.5.    Entire Agreement........................................................... A-9
  8.6.    No Third Party Beneficiaries............................................... A-9
  8.7.    Jurisdiction............................................................... A-9
  8.8.    Governing Law.............................................................. A-9
  8.9.    Name, Captions, Etc........................................................ A-9
  8.10.   Counterparts............................................................... A-9

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AGREEMENT AND PLAN OF MERGER* 

AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated May 23, 1995, among Roche
Holdings, Inc., a Delaware corporation ("Roche"), HLR (U.S.) II, Inc., a newly  
formed Delaware corporation which is a direct wholly-owned subsidiary of Roche  
("Merger Sub"), and Genentech, Inc., a Delaware corporation (the "Company").    

RECITALS

    WHEREAS, the Boards of Directors of Roche, Merger Sub and the Company each
have determined that it is in the best interests of their respective            
stockholders for Merger Sub to merge with and into the Company, upon the terms  
and subject to the conditions of this Agreement;                                

     NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, Roche, Merger Sub and the Company    
hereby agree as follows:                                                        

ARTICLE I 

DEFINITIONS 

  As used in this Agreement, the following terms shall have the respective
meanings set forth below:                                                       

"Affiliate":  As defined in Rule 12b-2 under the Exchange Act.        

    "Authorization":  Any consent, approval or authorization of, expiration or
termination of any waiting period requirement by, or filing, registration,      
qualification, declaration or designation with, any Governmental Body.          

 "Certificate of Merger":  The certificate of merger with respect to the
merger of Merger Sub with and into the Company, containing the provisions       
required by, and executed in accordance with, Section 251 of the DGCL.          

"Certificates":  As defined in Section 4.2(b).                        

"Closing Date":  The date on which the Effective Time occurs.         

     "Code":  The Internal Revenue Code of 1986, as amended, and all regulations
promulgated thereunder, as in effect from time to time.                         

    "Common Shares":  The shares of Common Stock, par value $.02 per share, of
the Company.                                                                    

"DGCL":  The General Corporation Law of the State of Delaware.        

"Effective Time":  As defined in Section 2.2.                         

     "Exchange Act":  The Securities Exchange Act of 1934, as amended, including
the rules and regulations promulgated thereunder.                               

"Exchange Agent":  As defined in Section 4.2(a).                      

"Exchange Fund":  As defined in Section 4.2(a).                       

    "Governance Agreement":  The Governance Agreement dated as of September 7,
1990 between Roche and the Company.                                             

    "Governmental Body":  Any Federal, state, municipal, political subdivision
or other governmental department, commission, board, bureau, agency or          
instrumentality, domestic or foreign.                                           

---------------                                                                 

* This Agreement and Plan of Merger and the exhibits hereto reflect   
 amendments executed by the parties on July 7 and September 6, 1995.

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    "Marketing Agreement":  The Agreement between F. Hoffmann -- La Roche Ltd.
and the Company, to be dated as of the Closing Date, in substantially the form  
attached hereto as Exhibit D.                                                   

"Merger":  As defined in Section 2.1.                                 

    "New Governance Agreement":  The Amended and Restated Governance Agreement
between Roche and the Surviving Corporation, to be dated as of the Closing Date,
in substantially the form attached hereto as Exhibit A.                         

     "New Guaranty":  The Guaranty of Roche Holding Ltd, a Swiss corporation, to
be dated as of the Closing Date, in substantially the form attached hereto as   
Exhibit B.                                                                      

"NYSE":  The New York Stock Exchange, Inc.                            

"Option":  As defined in Section 4.1(d).                              

"Option Plans":  As defined in Section 4.1(d).                        

"Person":  Any individual or corporation, company, partnership, trust,
incorporated or unincorporated association, joint venture or other entity of any
kind.                                                                           

 "Redeemable Common Shares":  The shares of Redeemable Common Stock, par
value $.02 per share, of the Company.                                           

    "Roche Shares":  The Common Shares held by Roche or any Affiliate thereof.

"S-4 Registration Statement":  As defined in Section 5.1(b).          

"SEC":  The Securities and Exchange Commission.                       

  "Securities Act":  The Securities Act of 1933, as amended, including the
rules and regulations promulgated thereunder.                                   

"Share Consideration":  The Special Common Shares which the holders of
Common Shares (other than Roche or any Affiliate of Roche) will be entitled to  
receive in the Merger pursuant to Section 4.1(a) hereof.                        

     "Shares":  Collectively, the Common Shares and the Redeemable Common Shares
(other than Common Shares or Redeemable Common Shares owned by Roche or any     
Affiliate of Roche).                                                            

 "Special Common Shares":  The shares of Special Common Stock, par value
$.02 per share, of the Surviving Corporation.                                   

"Stockholder Meeting":  As defined in Section 5.1.                    

"Surviving Corporation":  The surviving corporation in the Merger.    

"Termination Date":  As defined in Section 5.3.                       

ARTICLE II

THE MERGER; EFFECTIVE TIME; CLOSING 

     2.1. The Merger.  Subject to the terms and conditions of this Agreement, at
the Effective Time (as hereinafter defined), Merger Sub, which at such time     
shall have no assets or business operations and shall exist solely for the      
purpose of effecting the Merger, shall be merged (the "Merger") with and into   
the Company in accordance with the provisions of Section 251 of the DGCL and    
with the effect provided in Sections 259 and 261 of the DGCL. The separate      
corporate existence of Merger Sub shall thereupon cease and the Company shall be
the Surviving Corporation and shall continue to be governed by the laws of the  
State of Delaware.                                                              

    2.2. Effective Time.  The Merger shall become effective on the date and at
the time (the "Effective Time") that the Certificate of Merger shall have been  
accepted for filing by the Secretary of State of the State                      

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of Delaware (or such later date and time as may be specified in the Certificate 
of Merger), which shall be the Closing Date or as soon as practicable           
thereafter.                                                                     

  2.3. Closing.  The consummation of the transactions contemplated by this
Agreement shall take place (i) at the offices of Wachtell, Lipton, Rosen & Katz,
New York, New York, at 10:00 a.m. on the second business day following the date 
on which the last of the conditions set forth in Article VI hereof is fulfilled 
or (subject to applicable law) waived or (ii) at such other place and/or time   
and/or on such other date as Roche and the Company may agree or as may be       
necessary to permit the fulfillment or waiver of the conditions set forth in    
Article VI.                                                                     

ARTICLE III 

TERMS OF MERGER 

     3.1. Certificate of Incorporation.  The Certificate of Incorporation of the
Company as in effect immediately prior to the Effective Time shall be the       
Certificate of Incorporation of the Surviving Corporation, until duly amended in
accordance with the terms thereof, of the New Governance Agreement and of the   
DGCL, except that at the Effective Time Article THIRD of such Certificate of    
Incorporation shall be amended by operation of the Merger, of this Agreement and
of the DCGL in substantially the form attached hereto as Exhibit C.             

  3.2. The By-Laws.  The By-Laws of the Company in effect at the Effective
Time shall be the By-Laws of the Surviving Corporation, until duly amended in   
accordance with the terms thereof, of the Certificate of Incorporation of the   
Surviving Corporation, of the New Governance Agreement and of the DGCL.         

    3.3. Directors.  The directors of the Company at the Effective Time shall,
from and after the Effective Time, be the directors of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or     
until their earlier death, resignation or removal in accordance with the        
Surviving Corporation's Certificate of Incorporation and By-Laws and the New    
Governance Agreement.                                                           

  3.4. Officers.  The officers of the Company at the Effective Time shall,
from and after the Effective Time, be the officers of the Surviving Corporation 
until their successors have been duly elected or appointed and qualified or     
until their earlier death, resignation or removal in accordance with the        
Surviving Corporation's Certificate of Incorporation and By-Laws and the New    
Governance Agreement.                                                           

ARTICLE IV

MERGER CONSIDERATION; CONVERSION OR 
CANCELLATION OF SHARES IN THE MERGER

4.1. Share Consideration; Conversion or Cancellation of Shares in the 
Merger.  Subject to the provisions of this Article IV, at the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof, 
the shares of the constituent corporations and options issued by any such       
corporation in respect of any such shares shall be treated as follows:          

         (a) Each Common Share issued and outstanding immediately prior to the
   Effective Time (other than the Roche Shares, which Common Shares shall be
 cancelled, and thereupon the holders thereof shall cease to have rights
 with respect thereto, and other than shares held in the treasury of the
Company) shall be converted into one Special Common Share.            

          (b) All Common Shares converted into Special Common Shares pursuant to
Section 4.1(a) shall cease to be outstanding, shall be cancelled and  
retired and shall cease to exist, and each holder of a certificate    
   theretofore representing any such Common Shares shall thereafter cease to
 have any rights with respect to such Common Shares, except the right to
  receive for each Common Share, upon the surrender of such certificate in
accordance with Section 4.2, the Share Consideration.                 

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        (c) The common stock, par value $.02 per share, of Merger Sub issued
    and outstanding immediately prior to the Effective Time shall be converted
  into a number of Common Shares equal to, in the aggregate, the number of
Roche Shares.                                                         

       (d) Each outstanding option to purchase Redeemable Common Shares or
   Common Shares, as the case may be (each, an "Option"), issued pursuant to
the Company's stock option plans (collectively, the "Option Plans")   
 (whether or not vested or exercisable) shall, without any action by the
holder thereof, constitute an option to acquire, on the same terms and
  conditions as were applicable under such Option immediately prior to the
     Effective Time, that number of Special Common Shares equal to the number of
   Redeemable Common Shares or Common Shares, as the case may be, subject to
     such Option immediately prior to the Effective Time, at the price or prices
    per share in effect pursuant to the terms of such Option immediately prior
to the Effective Time.                                                

 4.2. Exchange of Shares in the Merger.  The manner of exchanging Shares
converted in the Merger pursuant to Section 4.1(a) hereof shall be as follows:  

     (a) At the Effective Time, the Company shall make available to an
exchange agent selected by the Company (the "Exchange Agent"), for the
   benefit of those Persons who immediately prior to the Effective Time were
 the holders of Shares, a sufficient number of certificates representing
Special Common Shares required to effect the delivery of the aggregate
   Share Consideration required to be issued pursuant to Section 4.1(a) (the
   certificates representing Special Common Shares comprising such aggregate
    Share Consideration being hereinafter referred to as the "Exchange Fund").

        (b) Promptly after the Effective Time, the Exchange Agent shall mail
     to each holder of record of a certificate or certificates which immediately
prior to the Effective Time represented outstanding Shares (the       
  "Certificates") (i) a form of letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the    
   Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent) and (ii) instructions for use in effecting the    
surrender of the Certificates for exchange therefor. Upon surrender of
Certificates to the Exchange Agent, together with such letter of      
   transmittal duly executed and any other required documents, the holder of
   such Certificates shall be entitled to receive for the Shares represented
by such Certificates the Share Consideration and the Certificates so  
     surrendered shall forthwith be canceled. Until so surrendered, Certificates
 shall represent solely the right to receive the Share Consideration. No
     dividends or other distributions that are declared after the Effective Time
     on Special Common Shares and payable to the holders of record thereof after
     the Effective Time will be paid to Persons entitled by reason of the Merger
to receive Special Common Shares until such Persons surrender their   
 Certificates. Upon such surrender, there shall be paid to the Person in
whose name the Special Common Shares are issued any dividends or other
 distributions having a record date after the Effective Time and payable
   with respect to such Special Common Shares between the Effective Time and
     the time of such surrender. After such surrender there shall be paid to the
    Person in whose name the Special Common Shares are issued any dividends or
     other distributions on such Special Common Shares which shall have a record
 date after the Effective Time and prior to such surrender and a payment
     date after such surrender; such payment shall be made on such payment date.
   In no event shall the Persons entitled to receive such dividends or other
  distributions be entitled to receive interest on such dividends or other
    distributions. If any certificate representing Special Common Shares is to
     be issued in a name other than that in which the Certificate surrendered in
   exchange therefor is registered, it shall be a condition of such exchange
that the Certificate so surrendered shall be properly endorsed and    
   otherwise in proper form for transfer and that the Person requesting such
exchange shall pay to the Exchange Agent any transfer or other taxes  
    required by reason of the issuance of certificates for such Special Common
Shares in a name other than that of the registered holder of the      
Certificate surrendered, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable. The  
Exchange Agent shall not be entitled to vote or exercise any rights of
     ownership with respect to the Special Common Shares held by it from time to
time hereunder, except that it shall receive and hold all dividends or
     other distributions paid or distributed with respect to such Special Common
Shares for the account of the Persons entitled thereto.               

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       (c) Any portion of the Exchange Fund which remains unclaimed by the
 former holders of Shares for one year after the Effective Time shall be
delivered to the Surviving Corporation, upon demand of the Surviving  
     Corporation, and any former holders of Shares shall thereafter look only to
the Surviving Corporation for payment of their claim for the Share    
  Consideration for the Shares. If, after the Effective Time, certificates
   representing Shares outstanding prior to the Effective Time are presented
     to the Surviving Corporation, they shall be cancelled and exchanged for the
consideration provided for, and in accordance with the procedures set 
forth, in this Article IV.                                            

   4.3. Transfer of Shares after the Effective Time.  No transfers of Shares
shall be made on the stock transfer books of the Company after the close of     
business on the day prior to the date of the Effective Time.                    

ARTICLE V 

ADDITIONAL COVENANTS AND AGREEMENTS 

 5.1. Stockholder Meeting; Proxy Material; Registration Statement; Stock
Exchange Listing.  (a) The Company shall cause a meeting of its stockholders    
(the "Stockholder Meeting") to be duly called and held as soon as reasonably    
practicable for the purpose of voting on the approval and adoption of this      
Agreement and the Merger (including the amendments to the Certificate of        
Incorporation of the Company to be effected by the Merger). The directors of the
Company shall, subject to their fiduciary duties, recommend approval and        
adoption of this Agreement and the Merger (including such amendments) by the    
Company's stockholders. In connection with such meeting, the Company (i) will   
promptly prepare and file with the SEC, will use all reasonable efforts to have 
cleared by the SEC and will thereafter mail to its stockholders as promptly as  
practicable a proxy statement/prospectus, registration statement and all other  
documents which may be required to be filed or mailed in connection with such   
meeting and the consummation of the transactions contemplated hereby, (ii) will,
subject to the fiduciary duties of its board of directors, use all reasonable   
efforts to obtain the necessary approvals by its stockholders of this Agreement 
and the transactions contemplated hereby and (iii) will otherwise comply with   
all legal requirements applicable to such meeting.                              

     (b) The Company shall promptly prepare and file with the SEC under the 1933
Act a registration statement on Form S-4 with respect to the Special Common     
Stock (the "S-4 Registration Statement") and shall use all reasonable efforts to
cause the S-4 Registration Statement to be declared effective as promptly as    
practicable. The Company shall take any action required to be taken under       
foreign or state securities or Blue Sky laws in connection with the issuance of 
Special Common Stock in the Merger.                                             

(c) The Company shall use all reasonable efforts to cause the Special 
Common Stock to be issued in connection with the Merger, and upon exercise of   
Options which are exercised after the Effective Time to be listed on the NYSE,  
subject to official notice of issuance and evidence of satisfactory             
distribution.                                                                   

 5.2. Reasonable Efforts.  The Company and Roche shall and shall use all
reasonable efforts to cause their respective subsidiaries to: (i) promptly make 
all filings and seek to obtain all Authorizations required under all applicable 
laws with respect to the Merger and the other transactions contemplated hereby  
and will cooperate with each other with respect thereto; (ii) use all reasonable
efforts to promptly take, or cause to be taken, all other actions and do, or    
cause to be done, all other things necessary, proper or appropriate to satisfy  
the conditions set forth in Article VI and to consummate and make effective the 
transactions contemplated by this Agreement on the terms and conditions set     
forth herein as soon as practicable (including seeking to remove promptly any   
injunction or other legal barrier that may prevent such consummation); and (iii)
not take any action which might reasonably be expected to impair the ability of 
the parties to consummate the Merger at the earliest possible time (regardless  
of whether such action would otherwise be permitted or not prohibited           
hereunder); provided that the foregoing shall not require Roche to furnish,     
other than for itself and its United States Affiliates, financial statements    
prepared in accordance with United States generally accepted accounting         
principles or any reconciliation of financial statements with United States     
generally accepted accounting principles.                                       

 5.3. Continued Applicability of the Governance Agreement.  On and after
July 1, 1995, each of Roche and the Company shall continue to abide by the terms
of the Governance Agreement, except that the                                    

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references (a) in Section 2.01 to "June 30, 1996" shall be deemed to be replaced
by the date that is the first anniversary of the date, if any, upon which this  
Agreement is terminated pursuant to Section 7.01 hereof (the "Termination       
Date"); (b) in Sections 3.01 and 3.02(a) to "July 1, 1995" shall be deemed to be
replaced by the date that is the Termination Date; (c) in Section 4.01 to "June 
30, 1995" shall be deemed to be replaced by the Termination Date; and (d) in    
Section 4.01 to "June 30, 1996" shall be deemed to be replaced by the first     
anniversary of the Termination Date.                                            

  5.4. Compliance with Securities Laws.  The parties hereto agree to take,
and to cause their respective affiliates to take, all actions necessary to      
comply with the Securities Act and the Exchange Act and the rules and           
regulations promulgated under such statutes in connection with the Merger and   
the transactions contemplated by this Agreement; provided that the foregoing    
shall not require Roche to furnish, other than for itself and its United States 
Affiliates, financial statements prepared in accordance with United States      
generally accepted accounting principles or any reconciliation of financial     
statements with United States generally accepted accounting principles.         

5.5. Option Plans.  The Surviving Corporation shall take all action   
necessary to ensure that, as provided in Section 4.1(d) hereof, Options         
outstanding immediately prior to the Effective Time shall represent, at and     
after the Effective Time, Options to acquire Special Common Shares on the same  
terms as in effect immediately prior to the effective time pursuant to such     
Options (and the related Option Plans) with respect to Shares. The Surviving    
Corporation shall take all corporate action necessary to reserve for issuance a 
sufficient number of Special Common Shares for delivery upon exercise of the    
Options. The Surviving Corporation shall file a registration statement on Form  
S-8 (or any successor form) or another appropriate form, effective as of the    
Effective Time, with respect to Special Common Shares subject to such Options   
and shall use all reasonable efforts to maintain the effectiveness of such      
registration statement or registration statements (and maintain the current     
status of the prospectus or prospectuses contained therein) for so long as such 
Options remain outstanding.                                                     

     5.6. Additional Agreements.  The Company and Roche agree to execute each of
the New Governance Agreement and the Marketing Agreement in the forms attached  
hereto as Exhibits A and D, respectively, immediately prior to the Effective    
Time.                                                                           

    5.7. Voting.  Roche agrees to vote all Common Shares owned by it or any of
its affiliates in favor of the Merger.                                          

   5.8. Certain Proceedings.  In the event that any action, suit, proceeding
or investigation relating hereto or to the transactions contemplated by this    
Agreement is commenced, whether before or after the Closing Date, the parties   
hereto agree to cooperate and use their respective reasonable efforts to        
vigorously defend against and respond thereto.                                  

ARTICLE VI

CONDITIONS

     6.1. Conditions to Each Party's Obligations.  The respective obligations of
each party to consummate the transactions contemplated by this Agreement are    
subject to the fulfillment at or prior to the Effective Time of each of the     
following conditions, any or all of which may be waived in whole or in part by  
the party being benefitted thereby, to the extent permitted by applicable law:  

   (a) Stockholder Approval.  This Agreement and the amendments to
 Article THIRD of Company's Certificate of Incorporation shall have been
     duly approved or ratified by the requisite vote of holders of Common Shares
and Redeemable Common Shares in accordance with applicable law, the   
Certificate of Incorporation (including Article ELEVENTH thereof) and 
By-Laws of the Company and the Governance Agreement.                  

    (b) Additional Agreements.  The New Governance Agreement and the
 Marketing Agreement shall have been executed in substantially the forms
 attached hereto as Exhibits A and D, respectively, and shall be in full
force and effect.                                                     

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        (c) Amendment of Certificate of Incorporation.  Article THIRD of the
  Certificate of Incorporation shall have been amended by operation of the
Merger in substantially the form attached hereto as Exhibit C.        

        (d) No Injunction.  No provision of any applicable law or regulation
and no judgment, injunction, order or decree shall prohibit the       
consummation of the Merger.                                           

          (e) Registration Statement.  The S-4 Registration Statement shall have
   been declared effective and shall be effective at the Effective Time, and
   no stop order suspending effectiveness shall have been issued, no action,
   suit, proceeding or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing, and all necessary
     approvals under state securities laws or the Securities Act or Exchange Act
     relating to the issuance or trading of the Special Common Shares shall have
been received.                                                        

     (f) Listing of Special Common Shares on NYSE.  The Special Common
    Shares required to be issued hereunder (including upon exercise of Options
   as referred to in Section 4.1(d)) shall have been approved for listing on
the NYSE, subject only to official notice of issuance.                

       (g) Third Party Consents.  All required authorizations, consents or
approvals of any third party, the failure to obtain which would have a
material adverse effect on the Company and its subsidiaries taken as a
whole, shall have been obtained.                                      

6.2. Condition to Obligations of Roche and Merger Sub.  The respective
obligations of Roche and Merger Sub to consummate the transactions contemplated 
by this Agreement are subject to the fulfillment at or prior to the Effective   
Time of the condition, which may be waived in whole or part by Roche and Merger 
Sub, as the case may be, to the extent permitted by applicable law, that the    
Company shall have performed or complied in all material respects with all      
agreements and conditions contained herein required to be performed or complied 
with by it prior to or at the time of the Closing.                              

6.3. Conditions to Obligations of the Company.  The obligations of the
Company to consummate the transactions contemplated by this Agreement are       
subject to the fulfillment at or prior to the Effective Time of the following   
conditions, which may be waived in whole or in part by the Company to the extent
permitted by applicable law:                                                    

   (a) Performance.  Roche shall have performed or complied in all
material respects with all agreements and conditions contained herein 
    required to be performed or complied with by it prior to or at the time of
the Closing.                                                          

   (b) New Guaranty.  The New Guaranty shall have been executed in
  substantially the form attached as Exhibit B hereto and shall be in full
force and effect.                                                     

ARTICLE VII 

TERMINATION 

   7.1. Termination.  This Agreement may be terminated and the Merger may be
abandoned at any time:                                                          

    (a) Prior to the Effective Time, before or after the approval by
     holders of Common Shares or Redeemable Common Shares, by the mutual written
consent of Roche and the Company;                                     

        (b) By either the Company or Roche, upon written notice to the other
    parties hereto, if the stockholder approval contemplated by Section 6.1(a)
hereof is not obtained by the Company at the Stockholder Meeting; or  

    (c) By either the Company or Roche if the Effective Time has not
occurred on or prior to October 31, 1995.                             

     7.2. Effect of Termination and Abandonment.  In the event of termination of
this Agreement and abandonment of the Merger pursuant to this Article VII, no   
party hereto (or any of its directors or officers)                              

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shall have any liability or further obligation to any other party to this       
Agreement, except that nothing herein will relieve any party from liability for 
any breach of this Agreement.                                                   

ARTICLE VIII

MISCELLANEOUS AND GENERAL 

    8.1. Expenses.  Each party shall bear its own expenses, including the fees
and expenses of any attorneys, accountants, investment bankers, brokers, finders
or other intermediaries or other Persons engaged by it, incurred in connection  
with this Agreement and the transactions contemplated hereby.                   

    8.2. Notices, Etc.  All notices, requests, demands or other communications
required by or otherwise with respect to this Agreement shall be in writing and 
shall be deemed to have been duly given to any party when delivered personally  
(by courier service or otherwise), when delivered by telecopy and confirmed by  
return telecopy, or seven days after being mailed by first-class mail, postage  
prepaid and return receipt requested in each case to the applicable addresses   
set forth below:                                                                

If to the Company:                                                    

Genentech, Inc.                                             
490 Point San Bruno Boulevard                               
South San Francisco, California 94080                       
Attn.: John P. McLaughlin                                   
Telecopy: 415-952-9881                                      

Richard D. Katcher, Esq.                                    
Wachtell, Lipton, Rosen & Katz                              
51 West 52nd Street                                         
New York, New York 10019                                    
Telecopy: 212-403-2000                                      

If to Roche:                                                          

Roche Holdings, Inc.                                        
c/o Roche Holding Ltd                                       
Grenzacherstrasse 124                                       
CH-4002 Basel                                               
Switzerland                                                 
Telecopy: 011-41-61-688-1396                                
Attn.: Dr. Felix Amrein                                     

with a copy to:                                                       

Peter R. Douglas, Esq.                                      
Davis Polk & Wardwell                                       
450 Lexington Avenue                                        
New York, New York 10017                                    
Telecopy: 212-450-4800                                      

or to such other address as such party shall have designated by notice so given 
to each other party.                                                            

     8.3. Amendments, Waivers, Etc.  This Agreement may not be amended, changed,
supplemented, waived or otherwise modified except by an instrument in writing   
signed by the party against whom enforcement is sought.                         

   8.4. No Assignment.  This Agreement shall be binding upon and shall inure
to the benefit of and be enforceable by the parties and their respective        
successors and assigns; provided that, except as otherwise expressly set forth  
in this Agreement, neither the rights nor the obligations of any party may be   
assigned or delegated without the prior written consent of the other party.     

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     8.5. Entire Agreement.  Except as otherwise provided herein, this Agreement
and the exhibits hereto embody the entire agreement and understanding between   
the parties relating to the subject matter hereof and supersedes all prior      
agreements and understandings relating to such subject matter. There are no     
representations, warranties or covenants by the parties hereto relating to such 
subject matter other than those expressly set forth in this Agreement and the   
exhibits hereto and any writings expressly required hereby or thereby.          

  8.6. No Third Party Beneficiaries.  This Agreement is not intended to be
for the benefit of and shall not be enforceable by any Person or entity who or  
which is not a party hereto.                                                    

    8.7. Jurisdiction.  Each party hereby irrevocably submits to the exclusive
jurisdiction of the United States District Court for the Southern District of   
New York or any court of the State of New York located in the City of New York  
in any action, suit or proceeding brought by either party hereto and arising in 
connection with this Agreement, and agrees that any such action, suit or        
proceeding shall be brought only in such court (and waives any objection based  
on forum non conveniens or any other objection to venue therein); provided,     
however, that such consent to jurisdiction is solely for the purpose referred to
in this Section 8.7 and shall not be deemed to be a general submission to the   
jurisdiction of said Courts or in the State of New York other than for such     
purpose. Roche and the Company hereby waive any right to a trial by jury in     
connection with any such action, suit or proceeding.                            

 8.8. Governing Law.  This Agreement and all disputes hereunder shall be
governed by and construed and enforced in accordance with the internal laws of  
the State of Delaware, without regard to principles of conflict of laws.        

     8.9. Name, Captions, Etc.  The name assigned this Agreement and the section
captions used herein are for convenience of reference only and shall not affect 
the interpretation or construction hereof. Unless otherwise specified, (a) the  
terms "hereof", "herein" and similar terms refer to this Agreement as a whole   
and (b) references herein to Articles or Sections refer to articles or sections 
of this Agreement.                                                              

8.10. Counterparts.  This Agreement may be executed in any number of  
counterparts, each of which shall be deemed to be an original, but all of which 
together shall constitute one instrument. Each counterpart may consist of a     
number of copies each signed by less than all, but together signed by all, the  
parties hereto.                                                                 

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   IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties set forth below.                                                        

                   GENENTECH, INC.

                              By: /s/ ARTHUR D. LEVINSON

                                            ------------------------------------

                                 Name:  Arthur D. Levinson

                                 Title:  President and CEO

                        ROCHE HOLDINGS, INC.

                          By: /s/ HENRI B. MEIER

                                            ------------------------------------
                             Name:  Henri B. Meier
                              Title:  Vice President

                       HLR (U.S.) II, INC.

                        By: /s/ FELIX AMREIN

                                            ------------------------------------
                           Name:  Felix Amrein
                              Title:  Vice President

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                                                                       EXHIBIT A

AMENDED AND RESTATED GOVERNANCE AGREEMENT 

AGREEMENT DATED AS OF           , 1995 between Roche Holdings, Inc., a
Delaware corporation ("Roche"), and Genentech, Inc., a Delaware corporation (the
"Company").                                                                     

   WHEREAS, Roche, a subsidiary of Roche ("Merger Sub") and the Company have
entered into an Agreement and Plan of Merger dated as of           , 1995 (the  
"Merger Agreement") pursuant to which, among other things, (i) Merger Sub is    
being merged (the "Merger") with and into the Company on the date hereof, (ii)  
all capital stock of the Company not owned by Roche or any Affiliate (as        
hereinafter defined) of Roche shall be converted into shares of Callable Putable
Common Stock, par value $.02 per share (the "Special Common Stock"), of the     
Surviving Corporation (as defined in the Merger Agreement), and (iii) all of the
common stock of Merger Sub owned by Roche shall be converted into Common Stock  
(as defined below), all upon the terms and subject to the conditions set forth  
in the Merger Agreement; and                                                    

  WHEREAS, Roche and the Company have previously entered into a Governance
Agreement, dated as of September 7, 1990 (the "Governance Agreement"); and      

  WHEREAS, Roche and the Company have agreed that the Governance Agreement
shall be amended and restated in its entirety contemporaneously with the        
effectiveness of the Merger; and                                                

   WHEREAS, Roche and the Company have agreed to set forth in this Agreement
the terms and conditions upon which the Company shall redeem the Special Common 
Stock; and                                                                      

   WHEREAS, Roche and the Company have agreed to establish in this Agreement
certain terms and conditions concerning the corporate governance of the Company;
and                                                                             

WHEREAS, Roche and the Company also have agreed to establish in this  
Agreement certain terms and conditions concerning the acquisition and           
disposition of securities of the Company by Roche and its Affiliates;           

   NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and agreements contained herein, Roche and the Company hereby agree, and hereby 
amend and restate the Governance Agreement in its entirety, as follows:         

ARTICLE I 

REDEMPTION AND REPURCHASE OF
SPECIAL COMMON STOCK

SECTION 1.01. Redemption and Repurchase of Special Common Stock.  (a) 
Subject to Sections 1.01(c) and 4.02, the Company shall, promptly upon receipt  
of a written request from Roche for the redemption of the Special Common Stock, 
designate a depositary (the "Depositary") for such redemption in accordance with
paragraph (A) of Article THIRD, Section (c)(iv) of the Company's certificate of 
incorporation (the "Certificate of Incorporation") and notify Roche of such     
designation. Upon confirmation from the Depositary that it has received         
sufficient funds from Roche to pay the aggregate Redemption Price (as defined in
the Certificate of Incorporation) in respect of all outstanding shares of       
Special Common Stock, the Company shall give, or cause to be given, the Call    
Notification (as defined in the Certificate of Incorporation) in accordance with
such paragraph (B) of Article THIRD, Section (c)(ii). The Company shall set as  
the date of redemption (the "Redemption Date") the date set forth in Roche's    
written request for redemption; provided that such date shall be consistent with
the notice requirements of such paragraph (B). The Redemption Date shall in no  
event be later than the earlier of June 30, 1999 or such earlier date on which  
Roche's right to request redemption pursuant to this Section 1.01 shall         
terminate. The calculation of the Redemption Price per share of Special Common  
Stock, which shall be made in accordance with paragraphs (A) and (C) of Article 
THIRD, Section (c)(ii) of the Certificate of Incorporation, shall be verified   
with Roche prior to the mailing of such notice. In the event that additional    
amounts become payable, pursuant to the second sentence of Article THIRD,       
Section (c)(ii)(C) of the Certificate of Incorporation in connection with a     
redemption of the Special Common Stock pursuant to this Section 1.01(a), Roche  
shall promptly make available to the Depositary the aggregate additional amount 
required to be paid pursuant to such second sentence of Article THIRD, Section  
(c)(ii)(C).                                                                     

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    (b) At least ten, but not more than thirty, days prior to the commencement
of the Put Period (as defined in the Certificate of Incorporation), or, in the  
event of an acceleration of the Put in accordance with the terms of Section     
(c)(v) of Article THIRD of the Certificate of Incorporation, as soon as         
practicable following the date of the occurrence of the Insolvency Event (as    
defined in the Certificate of Incorporation) giving rise to such acceleration   
(but in no event later than the tenth day following such date), the Company     
shall (i) designate the Depositary for making payments to, and receiving shares 
from, holders of Special Common Stock in connection with exercises of the Put   
(as defined in the Certificate of Incorporation) in accordance with paragraph   
(A) of Article THIRD, Section (c)(iv) of the Certificate of Incorporation and   
notify Roche of such designation and (ii) give, or cause to be given, the Put   
Notification (as defined in the Certificate of Incorporation) in accordance with
paragraph (B) of Article THIRD, Section (c)(iii) of the Certificate of          
Incorporation or Section (c)(v) thereof, as the case may be. The Company shall  
set as the Put Period the period required to be set pursuant such Section       
(c)(iii) or Section (c)(v), as the case may be.                                 

 (c) The Company's obligations under Sections 1.01(a) and 1.01(b) hereof
shall be suspended during any period when, in the good faith judgment of the    
majority of the Company's directors, the redemption of the Special Common Stock 
would be prohibited under the Delaware General Corporation Law (the "DGCL").    

(d) Subject to the provisions of Section 1.01(c), the Company hereby  
irrevocably appoints Roche its attorney-in-fact for purposes of redeeming the   
Special Common Stock in accordance with the terms of Sections 1.01(a) and       
1.01(b) hereof and the Certificate of Incorporation.                            

SECTION 1.02. Deposit of Shares in Lieu of Cash.  If so instructed in 
connection with any redemption of the Special Common Stock pursuant to Sections 
1.01(a) hereof and Article THIRD, Section (c)(ii) of the Certificate of         
Incorporation, the Company shall deposit or cause to be deposited with the      
Depositary any certificates representing shares of Special Common Stock         
delivered to it by or on behalf of Roche promptly after the receipt thereof.    

   SECTION 1.03. Indemnification.  Roche shall indemnify the Company and its
officers and directors against all losses, claims, damages, liabilities and     
expenses (including attorneys' fees) arising out of the redemption (pursuant to 
the Call or the Put (each as defined in the Certificate of Incorporation)) of   
the Special Common Stock in accordance with the provisions of this Agreement    
(including, without limitation, in the event of the Company's consummation of   
the redemption of Special Common Stock in contravention of Section 160 of the   
DGCL or any other law for the protection of creditors), other than any such     
losses, claims, damages, liabilities and expenses that result primarily from    
actions taken or omitted in bad faith by the indemnified person or from the     
indemnified person's gross negligence or willful misconduct.                    

  SECTION 1.04. Options, Etc.  Roche and the Company will make appropriate
provisions to assure that any options, warrants, rights or securities issued by 
the Company and convertible into or exercisable or exchangeable for shares of   
Special Common Stock outstanding on the Redemption Date or the final day of the 
Put Period (whether or not convertible, vested, exercisable or exchangeable on  
such date) become convertible into or exercisable or exchangeable for           
consideration of the same type and amount as the holders thereof would have     
received had they converted, exercised or exchanged such options, warrants,     
rights or securities prior to the Redemption Date or the final day of the Put   
Period. Nothing herein shall be deemed or construed as a waiver of any other    
rights that a holder of any such securities may have.                           

ARTICLE II

FURTHER ACQUISITIONS OF 
COMPANY SECURITIES BY ROCHE 

SECTION 2.01. Mergers, Etc.  (a) Unless a majority of the Independent 
Directors (as hereinafter defined) shall have determined that there has been a  
sustained, substantial impairment of the business, prospects or financial       
viability of the Company and its subsidiaries, taken as a whole, since the      
effective time of the Merger (the "Effective Time"), Roche shall not, prior to  
June 30, 1999, propose any Business Combination (as such term is used in Article
ELEVENTH of the Certificate of Incorporation) with Roche or any affiliate (an   
"Affiliate") of Roche, as such term is defined in Rule 12b-2 promulgated under  
the Securities                                                                  

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Exchange Act of 1934, as amended (such Act, including the rules and regulations 
promulgated thereunder, the "1934 Act"). Unless such a determination shall be   
made, Roche shall not propose any such Business Combination during the period   
commencing on July 1, 1999 and terminating on June 30, 2000, at a price per     
share for the unaffiliated holders of the common stock into which shares of     
Special Common Stock shall have been converted on June 30, 1999 less than the   
price per share at which shares of Special Common Stock could have been redeemed
on such date, adjusted for any event occurring since such date as if the Special
Common Stock had continued to be outstanding.                                   

   (b) For purposes of the approval of the board of directors of the Company
(the "Board") required under Article ELEVENTH of the Certificate of             
Incorporation for any transaction permitted by Section 2.01(a), the Independent 
Directors shall consider whether the Business Combination is fair to the        
minority stockholders of the Company without taking into account any possible   
discount due to the fact that there exists a controlling stockholder of the     
Company.                                                                        

 (c) The term "Independent Director" means a director of the Company who
would be entitled for purposes of Article ELEVENTH of the Certificate of        
Incorporation to vote on a Business Combination with Roche.                     

     SECTION 2.02. Additional Limitation.  Subject to (a) Sections 1.01 and 2.01
and (b) the obligation of the Company to honor the rights of holders of Special 
Common Stock to sell Special Common Stock to the Company in accordance with the 
Call and the Put, Roche shall not, directly or indirectly, purchase or otherwise
acquire, or propose or offer to purchase or acquire, any Equity Security (as    
defined below) of the Company, whether by tender offer, market purchase,        
privately negotiated purchase, merger or otherwise, except that Roche may       
acquire Equity Securities such that Parent's Voting Interest (as defined below) 
in the Company would not immediately after such acquisition exceed 79.9%. Except
as expressly required pursuant to the terms of the Special Common Stock and this
Agreement, in no event will Roche, directly or indirectly, make any tender offer
for Equity Securities of the Company without the consent of the majority of the 
Independent Directors. For purposes of this Agreement, (i) "Equity Security"    
means any (A) voting stock of the Company (other than shares of voting stock not
having the right to vote generally in any election of directors of the Company),
(B) securities of the Company convertible into or exchangeable for such stock,  
and (C) options, rights and warrants issued by the Company to acquire such      
stock; and (ii) "Parent's Voting Interest" means the percentage of votes for    
elections of directors of the Company generally controlled directly or          
indirectly by Roche Holding Ltd, a Swiss corporation ("Parent"), assuming the   
conversion, exchange or exercise into or for voting stock of all Equity         
Securities other than voting stock and not taking into account any voting       
agreements or arrangements granting to a third party control over the voting of 
voting stock (including those contained herein) beneficially owned by Parent.   

    SECTION 2.03. Capital Contribution and Assumption of Put Obligations.  (a)
Roche agrees to, or to cause one or more of its Affiliates to, contribute to the
Company, immediately prior to the time that any amounts become due and payable  
to the holders of Special Common Stock pursuant to Article THIRD, Section       
(c)(iii) of the Company's Certificate of Incorporation, (i) funds in an amount  
equal to the product of the number of shares of Special Common Stock with       
respect to which the Put has been properly exercised multiplied by the Put Price
(as defined in Article THIRD of the Company's Certificate of Incorporation) plus
(ii) such additional funds, if any, sufficient to permit the Company to redeem  
the shares of Special Common Stock with respect to which the Put has been       
properly exercised without violating Section 160 of the DGCL, any bankruptcy or 
insolvency law or other law or regulation for the protection of creditors. In   
exchange for such payment, the Company will issue to Roche (or to its designated
Affiliate) a number of duly authorized and validly issued shares of Common Stock
equal to the number of shares of Special Common Stock acquired thereby by the   
Company. Notwithstanding the foregoing, Roche's obligation to make any such     
payment to the Company under this Section 2.03 shall be void and of no further  
force and effect if, in lieu thereof, Roche shall (or shall cause one of its    
Affiliates to) elect to purchase, and make all arrangements necessary (including
compliance by Roche, or any such Affiliate or Affiliates, with the 1934 Act, the
1933 Act (as hereinafter defined) and any other applicable Federal or state     
securities laws) to purchase, at the expiration of the Put Period, directly from
the holders of Special Common Stock at the Put Price the shares of Special      
Common Stock which such holders elect to have purchased.                        

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 (b) Notwithstanding any other term or provision hereof or of the Merger
Agreement, the Marketing Agreement (as defined below), the Guaranty dated as of 
the date hereof by Parent of Roche's obligations under this Section 2.03,       
Article Third of the Company's Certificate of Incorporation or any other        
agreement, Roche agrees that it shall either (i) make (or cause one or more of  
its Affiliates to make) the aggregate payments required to be made under the    
first sentence of Section 2.03(a) hereof or (ii) if such payments are not made  
for any reason, make (or cause one of its Affiliates to make) the election to   
purchase referred to in the third sentence of Section 2.03(a) hereof and comply 
(or cause one of its Affiliates to comply) fully with such sentence; provided,  
however, that if an Insolvency Event (as defined in Article Third of the        
Company's Certificate of Incorporation) occurs, Roche shall, within 10 days     
after the occurrence of such Insolvency Event, either (x) contribute (or cause  
one or more of its Affiliates to contribute) to the Company an amount equal to  
the aggregate amount that would be required to be contributed to the Company    
under the first sentence of Section 2.03(a) hereof assuming (for purposes of    
clause (i) of such sentence) that the holders of all of the then outstanding    
shares of Special Common Stock (on a fully diluted basis) were to exercise the  
Put or (y) elect (or cause one of its Affiliates to elect) to purchase, and make
all arrangements necessary (including compliance by Roche, or any such          
Affiliate, with the 1934 Act, the 1933 Act and any other Federal or state       
securities laws) to purchase, at the expiration of the Put Period, directly from
the holders of Special Common Stock at the Put Price the shares of Special      
Common Stock which such stockholders elect to have purchased. In exchange for   
the payment by Roche of the amount specified in clause (x) of the immediately   
preceding sentence (which amount shall be invested by the Company in a money    
market fund which holds primarily U.S. government obligations until such time as
any amounts are paid to creditors or stockholders), the Company will issue to   
Roche (or its designated Affiliate) a number of duly authorized and validly     
issued shares of Common Stock equal to the number of then outstanding shares of 
Special Common Stock (on a fully diluted basis). Immediately following the      
expiration of the Put Period, if the Put has not been exercised with respect to 
all of the then outstanding shares of Special Common Stock (on a fully diluted  
basis) and if Roche shall have complied with clause (x) of the first sentence of
this Section 2.03(b), (1) the Company shall refund to Roche (or its designated  
Affiliate) an amount (together with any interest actually earned thereon) equal 
to the product of the Put Price times the number of outstanding shares of       
Special Common Stock (on a fully diluted basis) with respect to which the Put   
has not been exercised and (2) Roche (or by its designated Affiliate) shall, in 
exchange for such payment by the Company, contribute to the Company a number of 
shares of Common Stock equal to the number of outstanding shares of Special     
Common Stock (on a fully diluted basis) with respect to which the Put has not   
been exercised. In the event that Roche pays the amount specified in clause (x) 
of the first sentence of this Section 2.03(b), none of Roche, Parent or any of  
their respective Affiliates shall be entitled to any payments or other          
distributions on or in respect of any Equity Security unless and until the      
Company has redeemed all of the shares of Special Common Stock with respect to  
which the Put has been properly exercised. If (x) an Insolvency Event occurs and
(y) Roche does not timely comply with its obligations under the proviso to the  
first sentence of this Section 2.03(b), the amounts required to be paid by Roche
pursuant to such proviso shall be increased by $1,000,000, and the agent (the   
"Agent") under the Agency Agreement dated as of September 6, 1995 between the   
Company, the Agent and Parent shall have an undivided interest in the aggregate 
amount payable under such proviso, which undivided interest shall (i) be limited
to, and shall in no event exceed, $1,000,000 and (ii) be paid by Roche directly 
to the Agent.                                                                   

     (c) It is understood and agreed that, if Roche so elects, the obligation of
Roche to purchase shares of Special Common Stock pursuant to any of the         
provisions in this Section 2.03 may, at the election of Roche, be assigned by   
Roche to Parent or any Affiliate of Parent (other than the Company). No         
assignment pursuant to this Section 2.03(c) shall relieve Roche of any of its   
obligations under this Section 2.03 or otherwise.                               

   (d) The Company shall take (and shall have no corporate power or capacity
to refuse to take) such actions as may be necessary to enforce the obligations  
of Roche under this Section 2.03 and the obligations of Parent under the        
Guaranty dated as of the date hereof by Parent of Roche's obligations under this
Section 2.03 (the "Guaranty") directly against Roche and Parent, or in the event
of assignment by Roche, against Roche, Parent and any Affiliate of Parent to    
which any assignment is made.                                                   

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ARTICLE III 

BOARD OF DIRECTORS

  SECTION 3.01. Initial Composition of Board of Directors at the Effective
Time.  The number of directors comprising the Board immediately after the       
Effective Time shall be 13. The directors of the Company following the Effective
Time shall be the directors of the Company immediately prior to the Effective   
Time, until their successors have been duly elected or appointed and qualified  
or until the earlier death, resignation or removal in accordance with the       
Company's Certificate of Incorporation and By-Laws and this Agreement. After the
Effective Time, the Board shall continue to include up to two nominees of Roche,
whom Roche shall continue to designate prior to the mailing of the applicable   
annual proxy statement of the Company. Such nominees shall continue to serve in 
the class or classes of directors in which they served prior to the Effective   
Time in a manner consistent with the terms of the Certificate of Incorporation  
and bylaws of the Company. Directors nominated by Roche pursuant to this Section
3.01 or Section 3.02 are referred to herein as "Investor Directors" and all     
other directors are referred to herein as "Noninvestor Directors".              
Notwithstanding any other provision of this Agreement, the Certificate of       
Incorporation or by-laws of the Company or applicable law, Roche shall not at   
any time prior to the day following the last day of the Put Period be entitled  
to designate, or cause the nomination or election of, more than two members of  
the Board.                                                                      

 SECTION 3.02. Proportional Representation.  (a) The Company agrees that
after the last day of the Put Period the Board shall include two nominees       
designated by Roche and two officers of the Company nominated by the nominating 
or proxy committee of the Board. The remainder of the Board shall be comprised  
of Independent Directors. Upon its request, Roche shall be entitled to designate
nominees for a number of such Independent Directors equal to Parent's Voting    
Interest times the total number of such Independent Directors, rounded up to the
next whole number if Parent's Voting Interest is greater than 50% and rounded   
down to the next whole number if Parent's Voting Interest is less than or equal 
to 50%. Notwithstanding the foregoing, (i) the number of Independent Directors  
designated by Roche shall not exceed 50% after any Triggering Disposition (as   
defined in Section 4.02) and (ii) Roche shall have no right to designate any    
nominees for directors hereunder at any time after Parent's Voting Interest has 
fallen below 20%. Roche shall not have the right to nominate or designate any   
additional directors to the Board pursuant to this Section 3.02(a) unless and   
until (i) the Depositary shall have received the Put Price in respect of shares 
of Special Common Stock with respect to which the Put has been properly         
exercised and shall have been irrevocably instructed to pay the Put Price to    
stockholders that have exercised the Put; (ii) Roche shall have made (or caused 
one of its Affiliates to make) the election to purchase referred to in the third
sentence of Section 2.03(a) hereof and shall have complied (or caused one or    
more of its Affiliates to comply) fully with such sentence; or (iii) the        
obligations of Roche under the third sentence of Section 2.03(a) hereof shall   
have otherwise been fully satisfied through Parent's performance under the      
Guaranty.                                                                       

   (b) The Company agrees to cause the Board to be increased or decreased in
size, and to cause the Board to fill the vacancies created by any such increase,
as appropriate in order to achieve the proportionality required by Section      
3.02(a). Any directors elected to fill a vacancy shall serve until the next     
annual meeting of stockholders, at which the newly created positions shall be   
assigned to classes of directors consistent with the terms of the Certificate of
Incorporation and the Company's bylaws. Whenever necessary to maintain the      
proportionality required by Section 3.02(a), Roche will cause directors         
designated by Roche to resign from the Board. At such time as Parent's Voting   
Interest falls below 20%, Roche will cause all the Investor Directors to resign 
from the Board.                                                                 

 (c) Roche and the nominating or proxy committee shall have the right to
designate or nominate any replacement for a director designated by Roche or     
nominated by such committee, respectively, at the termination of such director's
term or upon death, resignation, retirement, disqualification, removal from     
office or other cause. To the extent permitted by the Certificate of            
Incorporation or bylaws of the Company, the Board shall elect each person so    
designated or nominated.                                                        

     (d) No individual designated by Roche shall serve as a director unless such
individual has such business or technical experience, stature and character as  
is commensurate with service on the board of a publicly held enterprise. No such
individual who is an officer, director, partner or principal stockholder of any 
competitor of                                                                   

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the Company and its subsidiaries (other than Roche and its Affiliates) shall    
serve as a director of the Company.                                             

    SECTION 3.03. Committees.  The Board shall designate a nominating or proxy
committee, an executive committee, an audit committee and a compensation        
committee. Each committee of the Board (other than any special committee or     
committee of Independent Directors constituted for the purposes of making any   
determination that is to be made under the terms of this Agreement or the       
Certificate of Incorporation) shall at all times include at least one director  
designated by Roche and no action by any such committee shall be valid unless   
taken at a meeting for which adequate notice has been duly given to or waived by
the members of such committee. Such notice shall include a description of the   
general nature of the business to be transacted at the meeting and no other     
business may be transacted at such meeting. Any committee member unable to      
participate in person at any meeting shall be given the opportunity to          
participate by telephone. The director designated by Roche to serve on any      
committee may designate as his alternate another director designated by Roche.  

   SECTION 3.04. Nomination of Other Directors.  (a) The nominating or proxy
committee shall include, in addition to the director designated by Roche, one   
Noninvestor Director who is an officer of the Company and one Independent       
Director, and shall have the exclusive authority to nominate individuals to fill
all Board positions except for those designated by Roche pursuant to the first  
sentence of Section 3.02(a). With respect to any election of directors, any     
nomination of a person not then serving as a director shall require the         
unanimous approval of the nominating or proxy committee; provided that the      
directors designated by Roche pursuant to Section 3.01, the directors designated
by Roche pursuant to the first sentence of Section 3.02(a), and the directors   
initially nominated by Roche pursuant to the third sentence of Section 3.02(a)  
shall not require such unanimous approval.                                      

     (b) The Company agrees to use all reasonable efforts to solicit proxies for
the nominees for director nominated by such committee from all holders of voting
stock entitled to vote thereon.                                                 

     SECTION 3.05. Roche Approval Required for Certain Actions.  The approval of
the directors designated by Roche pursuant to Section 3.01 or the first sentence
of 3.02(a) shall be required to approve any of the following:                   

     (a) the acquisition by the Company of any business or assets that
 would constitute a substantial portion of the business or assets of the
Company, whether such acquisition be by merger or consolidation or the
purchase of stock or assets or otherwise;                             

        (b) the sale, lease, license, transfer or other disposal of all or a
    substantial portion of the business or assets of the Company other than in
    the ordinary course of business, other than any such sale, lease, license,
  transfer or other disposal which is subject to the provisions of Section
3.07;                                                                 

       (c) the issuance of any Equity Securities or other capital stock of
 the Company, except for (i) issuances of shares of Special Common Stock
(or, after the conversion thereof into shares of the Company's Common 
Stock, par value $.02 per share (the "Common Stock"), Common Stock) or
   options, warrants or rights to acquire, or securities convertible into or
   exchangeable for, such Special Common Stock (or Common Stock) pursuant to
    any employee compensation plan that has been approved by a majority of the
     Independent Directors, (ii) issuances thereof upon the exercise, conversion
  or exchange of any outstanding Equity Securities or other capital stock;
    and (iii) other issuances thereof during any 24 month period not exceeding
    5% of the voting stock of the Company outstanding at the beginning of such
24 month period; or                                                   

      (d) the repurchase or redemption of any Equity Securities or other
    capital stock of the Company, other than redemptions required by the terms
thereof and purchases made at fair market value in connection with any
deferred compensation plan maintained by the Company.                 

For purposes of clauses (a) and (b), unless the majority of Independent         
Directors shall have made a contrary determination in good faith, a "substantial
portion of the business or assets of the Company" shall mean a                  

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portion of the business or assets of the Company accounting for 10% of the      
consolidated total assets, contribution to net income or revenues of the Company
and its consolidated subsidiaries.                                              

  SECTION 3.06. Voting of Shares.  (a) In any election of directors, Roche
will vote its shares of Common Stock and of Special Common Stock for all        
nominees in proportion to the votes cast by the other holders of Special Common 
Stock (excluding, at Roche's option, any votes cast by any person (as such term 
is defined in Section 16(a) of the 1934 Act) or group (as defined in Section    
13(d) of the 1934 Act) that beneficially owns (as defined in Rule 13d-3         
promulgated under the 1934 Act) at least 12% of the Equity Securities not       
beneficially owned by Parent); provided that it may cast all of its votes in    
favor of any nominee designated by it pursuant to the provisions of this        
Agreement.                                                                      

    (b) In any vote to amend the terms of the Special Common Stock, Roche will
vote its shares of Special Common Stock, if any, in proportion to the votes cast
by the holders of Special Common Stock (other than Roche and its Affiliates).   

  SECTION 3.07. Affiliation Arrangements.  Except as otherwise provided in
the Marketing Agreement between F. Hoffmann -- La Roche Ltd and the Company     
dated as of the date hereof (the "Marketing Agreement"), the Company will not,  
and will not permit any of its subsidiaries to, enter into any material         
licensing or marketing agreement with respect to any products, processes,       
inventions or developments made by the Company or any subsidiary of the Company 
unless it shall have first negotiated in good faith with Roche for a reasonable 
period of not less than three or more than six months with a view towards       
reaching a mutually beneficial licensing or marketing agreement with respect to 
such products, processes, inventions or developments.                           

ARTICLE IV

RESTRICTIONS ON TRANSFER
OF COMMON STOCK 

   SECTION 4.01. Restrictions on Transfer of Common Stock.  (a) Roche agrees
that it will not sell or otherwise transfer any shares of Common Stock or       
Special Common Stock except (i) pursuant to a registered underwritten public    
offering in accordance with Article V, (ii) pursuant to Rule 144 promulgated    
under the Securities Act of 1933, as amended (such Act, including the rules and 
regulations promulgated thereunder, the "1933 Act"), provided that Roche at or  
prior to the time of such sale or transfer could have requested a registration  
pursuant to Section 5.01 and that any such sale shall be subject to the volume  
and manner of sale limitations set forth in such rule, whether or not legally   
required, (iii) to any entity that is directly or indirectly 100% owned by      
Parent or (iv) after the last day of the Put Period and so long as Parent's     
Voting Interest is not below 50%, in a Liquidating Sale, as defined below;      
provided that (x) no Liquidating Sale shall be made prior to the time that such 
transaction is either rejected by the Independent Directors or the stockholders,
or consummated and (y) prior to the first anniversary of the last day of the Put
Period the per share value offered to the public in any Liquidating Sale shall  
not be less than the final Redemption Price of the Special Common Stock         
(adjusted appropriately for events occurring after the conversion thereof as if 
it were still outstanding). The good faith determination of the majority of the 
Independent Directors of the value of the consideration offered in any proposal 
shall be conclusive and binding.                                                

    (b) "Liquidating Sale" shall mean (i) a sale of all shares of Common Stock
and Special Common Stock beneficially owned by Parent to any person or group    
that is acquiring all outstanding voting stock of the Company at a per share    
consideration having at least the same value, and to be paid in the same form as
(or in cash), and not later than, the per share consideration to be paid to     
Roche and its Affiliates in a transaction that has been approved by the Board   
and the stockholders in accordance with the requirements that would be          
applicable to a Business Combination under Article ELEVENTH of the Certificate  
of Incorporation proposed by Roche or (ii) if such transaction proposed by such 
person or group has been rejected by the Independent Directors or the           
stockholders entitled to vote thereon under Article ELEVENTH of the Certificate 
of Incorporation, the sale of all the shares of Common Stock and Special Common 
Stock beneficially owned by                                                     

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Parent to such person or group for per share consideration having not more than 
the same value, and payable in the same form, as was so proposed to be paid to  
stockholders.                                                                   

(c) If requested by Roche, the Company shall use its best efforts to  
consider any proposal involving a Liquidating Sale expeditiously and, if        
recommended by the Board or any independent or special committee thereof to the 
stockholders, to cause a stockholder meeting to be convened as promptly as      
practicable for the purpose of voting on such proposal.                         

   (d) Notwithstanding the foregoing, no Liquidating Sale shall be permitted
unless the transferee and each entity controlling such transferee shall have    
agreed in writing to be bound, and to cause their Affiliates to be bound, by the
terms of this Agreement (including, without limitation, Section 3.06 hereof) as 
if it were Roche and has entered into a confidentiality agreement with the      
Company substantially in the form of the Confidentiality Agreement between      
Parent and the Company dated October 13, 1989 (as modified by Section 6.01 of   
the Agreement and Plan of Merger dated as of February 2, 1990 among the Company,
Roche and HLR (U.S.), Inc.); provided that no transferee in a Liquidating Sale  
shall be entitled to the rights of Roche set forth in Articles III (other than  
Section 3.06) and VII hereof.                                                   

    SECTION 4.02. Commitment to Complete Disposition.  In the event that Roche
sells shares of Common Stock in an underwritten public offering or pursuant to  
Rule 144 prior to April 30, 2004 (a "Triggering Disposition"), it shall use its 
best efforts to sell additional shares of Common Stock within three years of the
Triggering Disposition such that it will beneficially own not more than 20% of  
the outstanding shares of Common Stock. After a Triggering Disposition, Roche   
shall have no further rights (i) to request redemption of the Special Common    
Stock or (ii) pursuant to Sections 3.03, 3.04, 3.05 and 3.07 or Article VII;    
provided, however, that no Triggering Disposition shall relieve Roche of any of 
its obligations pursuant to the Put. Other than in connection with its          
obligations with respect to the Put pursuant to Section 2.03 hereof, after a    
Triggering Disposition, Roche shall not, without the prior written consent of   
the Board, acting alone or as part of a group, acquire or offer or agree to     
acquire, directly or indirectly, by purchase or otherwise, any Equity Securities
or all or any substantial portion of the assets of, or otherwise seek to        
influence or control, in any manner whatsoever, the management or policies of   
the Company until the fifteenth anniversary of the date it ceases to            
beneficially own more than 20% of the outstanding shares of Common Stock,       
provided that the foregoing shall not apply to any of Roche's portfolio managers
whose investment decisions are not directed by Roche.                           

ARTICLE V 

REGISTRATION RIGHTS 

     SECTION 5.01. Registration.  (a) The Company agrees that, at any time after
April 30, 2000 or such earlier date as it shall have become illegal for Parent  
to continue to own the shares of Common Stock or Special Common Stock directly  
or indirectly or to exercise fully all rights of ownership with respect to the  
shares of Common Stock or Special Common Stock, upon the request of Roche it    
will file a registration statement (a "Registration Statement") under the 1933  
Act as to the number of shares of Common Stock and/or Special Common Stock      
specified in such request (the "Registered Shares"); provided that, subject to  
Section 5.04, the Company shall not be required to file more than three         
Registration Statements that become effective and remain effective for the      
period referred to in Section 5.01(b).                                          

    (b) The Company agrees to use its best efforts to have any registration of
the Registered Shares declared effective as promptly as practicable after the   
filing thereof and (ii) to keep such registration statement effective for a     
period (up to three months) sufficient to complete the distribution of the      
Registered Shares. The Company further agrees to supplement or make amendments  
to the Registration Statement, if required by (x) the registration form utilized
by the Company for such registration or by the instructions applicable to such  
registration form, (y) the 1933 Act or the rules and regulations thereunder or  
(z) Roche (or any underwriter for Roche) with respect to information concerning 
Roche or such underwriter or the plan of distribution to be utilized with       
respect to the Registered Shares. The Company agrees to furnish to Roche        

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copies of any such supplement or amendment prior to its being used or filed with
the Securities and Exchange Commission (the "SEC").                             

SECTION 5.02. Registration Procedures.  Subject to the provisions of  
Section 5.01 hereof, in connection with the registration of shares of Common    
Stock hereunder, the Company will as expeditiously as possible:                 

          (a) furnish to Roche, prior to the filing of a Registration Statement,
copies of such Registration Statement as is proposed to be filed, and 
thereafter such number of copies of such Registration Statement, each 
amendment and supplement thereto (in each case including all exhibits 
     thereto), the prospectus included in such Registration Statement (including
     each preliminary prospectus) and such other documents in such quantities as
   Roche may reasonably request from time to time in order to facilitate the
disposition of the Registered Shares;                                 

        (b) use all reasonable efforts to register or qualify the Registered
     Shares under such other securities or blue sky laws of such jurisdiction as
   Roche reasonably requests and do any and all other acts and things as may
be reasonably necessary or advisable to enable Roche to consummate the
    disposition in such jurisdictions of the shares of Common Stock or Special
     Common Stock owned by Roche; provided that the Company will not be required
    to (i) qualify generally to do business in any jurisdiction where it would
not otherwise be required to qualify but for this subsection (b), (ii)
 subject itself to taxation in any such jurisdiction or (iii) consent to
general service of process in any such jurisdiction;                  

       (c) use all reasonable efforts to cause the Registered Shares to be
registered with or approved by such other governmental agencies or    
     authorities as may be necessary by virtue of the business and operations of
     the Company to enable Roche to consummate the disposition of such shares of
Common Stock or Special Common Stock;                                 

       (d) notify Roche, at any time when a prospectus relating thereto is
    required to be delivered under the 1933 Act, of the happening of any event
     as a result of which the prospectus included in such Registration Statement
  or amendment contains an untrue statement of a material fact or omits to
    state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Company will prepare a 
     supplement or amendment to such prospectus so that, as thereafter delivered
to the purchasers of the Registered Shares, such prospectus will not  
contain an untrue statement of a material fact or omit to state any   
material fact required to be stated therein or necessary to make the  
statements therein not misleading;                                    

  (e) enter into customary agreements (including an underwriting
    agreement in customary form) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of the    
Registered Shares;                                                    

(f) make available for inspection by Roche, any underwriter 
 participating in any disposition pursuant to such registration, and any
attorney, accountant or other agent retained by any Roche or any such 
underwriter (collectively, the "Inspectors"), all financial and other 
records, pertinent corporate documents and properties of the Company  
  (collectively, the "Records") as shall be reasonably necessary to enable
them to exercise their due diligence responsibility, and cause the    
    officers, directors and employees of the Company to supply all information
reasonably requested by any such Inspector in connection with such    
    registration; provided that (i) records and information obtained hereunder
shall be used by such persons only to exercise their due diligence    
responsibility and (ii) records or information which the Company      
     determines, in good faith, to be confidential shall not be disclosed by the
Inspectors unless (x) the disclosure of such Records or information is
necessary to avoid or correct a misstatement or omission in the       
     Registration Statement or (y) the release of such Records or information is
    ordered pursuant to a subpoena or other order from a court or governmental
  authority of competent jurisdiction. Roche shall use reasonable efforts,
     prior to any such disclosure, to inform the Company that such disclosure is
necessary to avoid or correct a misstatement or omission in the       
  Registration Statement. Roche further agrees that it will, upon learning
that disclosure of such Records or information is sought in a court or
   governmental authority, give notice to the Company and allow the Company,
at the expense of                                                     

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   the Company, to undertake appropriate action to prevent disclosure of the
Records or information deemed confidential;                           

      (g) use all reasonable efforts to obtain a comfort letter from the
independent public accountants for the Company in customary form and  
     covering such matters of the type customarily covered by comfort letters as
Roche reasonably requests;                                            

          (h) otherwise use all reasonable efforts to comply with all applicable
rules and regulations of the                                          
SEC, and make generally available to its security holders, as soon as 
   reasonably practicable, an earnings statement covering a period of twelve
months, beginning within three months after the effective date of the 
registration, which earnings statement shall satisfy the provisions of
Section 11(a) of the 1933 Act and Rule 158 thereunder; and            

       (i) use all reasonable efforts to cause all Registered Shares to be
  listed on each securities exchange on which similar securities issued by
the Company are listed.                                               

   SECTION 5.03. Conditions to Offerings.  The obligations of the Company to
take the actions contemplated by Sections 5.01 and 5.02 with respect to an      
offering of shares of Common Stock shall be subject to the following conditions:

       (i) The Registered Shares shall (unless reduced pursuant to Section
 5.04(b)) constitute at least 10% of the outstanding common stock of the
    Company and shall be distributed in an underwritten firm commitment public
 offering. Roche shall have the right to select the investment banker or
    bankers and lead manager or managers to administer the offering and its or
     their counsel; provided that such lead manager or managers and such counsel
must be reasonably satisfactory to the Company.                       

     (ii) There shall not have been an offering registered pursuant to
 Section 5.01 within the immediately preceding twelve months and if such
earlier offering was completed or is continuing.                      

        (iii) Roche shall conform to all applicable requirements of the 1933
  Act and the 1934 Act with respect to the offering and sale of securities
and advise each underwriter, broker or dealer through which any of the
Registered Shares are offered that the Registered Shares are part of a
     distribution that is subject to the prospectus delivery requirements of the
1933 Act.                                                             

   (iv) Roche shall use all reasonable efforts to effect as wide a
     distribution of such Registered Shares as reasonably practicable, and in no
   event shall any sale of Registered Shares be made knowingly to any person
     (including such person's Affiliates and any person or entities which are to
  the knowledge of Roche part of any group (as defined in Section 13(d) of
 the 1934 Act) which includes such purchaser (or any of its Affiliates))
   who, after giving effect to such sale, would beneficially own (as defined
in Rule 13d-3 promulgated under the 1934 Act) Equity Securities       
   representing more than 5% of the Company's outstanding Common Stock or 5%
of the Company's Equity Securities.                                   

  The Company may require Roche to furnish to the Company such information
regarding Roche or the distribution of the Registered Shares as the Company may 
from time to time reasonably request in writing, in each case only as required  
by the 1933 Act or the rules and regulations thereunder or under state          
securities or Blue Sky laws.                                                    

Roche agrees that, upon receipt of any notice from the Company of the 
happening of any event of the kind described in Section 5.02(d) hereof, such    
holder will forthwith discontinue disposition of Registered Shares pursuant to  
the registration covering such shares of Common Stock until Roche's receipt of  
the copies of the supplemented or amended prospectus contemplated by Section    
5.02(d) hereof.                                                                 

SECTION 5.04. Additional Conditions.  (a) The Company's obligations   
pursuant to Section 5.01 shall be suspended if (i) the fulfillment of such      
obligations would require the Company to make a disclosure that would, in the   
reasonable good faith judgment of the Company's board of directors, be          
detrimental to the Company and premature, (ii) the Company has filed a          
registration statement with respect to securities to be distributed in an       
underwritten public offering and it is advised by its lead or managing          
underwriter that an offering by Roche of the Registered Shares would materially 
adversely affect the distribution of such equity                                

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securities or (iii) the fulfillment of such obligations would require the       
Company to prepare audited financial statements not required to be prepared for 
the Company to comply with its obligations under the 1934 Act as of any date not
coincident with the last day of any fiscal year of the Company. Such obligations
shall be reinstated (x) in the case of clause (i) above, upon the making of such
disclosure by the Company (or, if earlier, when such disclosure would either no 
longer be necessary for the fulfillment of such obligations or no longer be     
detrimental), (y) in the case of clause (ii) above, upon the conclusion of any  
period during which the Company would not, pursuant to the terms of its         
underwriting arrangements, be permitted to sell the Registered Securities for   
its own account and (z) in the case of clause (iii) above, as soon as it would  
no longer be necessary to prepare such financial statements to comply with the  
1933 Act. The period during which Roche is required to sell its shares of Common
Stock pursuant to Section 5.05 shall be tolled for the duration of any          
suspension pursuant to this paragraph.                                          

(b) The number of shares of Common Stock to be registered pursuant to 
Section 5.01 shall be reduced to the extent that the Company is advised in      
writing by an investment banker of national standing that the sale of all shares
of Common Stock requested to be registered by Roche would materially and        
adversely affect the market price of the Company's equity securities. No        
registration reduced pursuant to this Section 5.04(b) shall be counted for      
purposes of the proviso to Section 5.01(a).                                     

SECTION 5.05. Registration Expenses.  All expenses incident to the    
performance of or compliance with this Article by the Company, including,       
without limitation, all fees and expenses of compliance with securities or blue 
sky laws (including reasonable fees and disbursements of counsel in connection  
with blue sky qualifications of the Registered Shares), rating agency fees,     
printing expenses, messenger and delivery expenses, internal expenses           
(including, without limitation, all salaries and expenses of its officers and   
employees performing legal or accounting duties), the fees and expenses incurred
in connection with the listing of the securities to be registered on each       
securities exchange on which similar securities issued by the Company are then  
listed, fees and disbursements of counsel for the Company and its independent   
certified public accountants (including the expenses of any comfort letters     
required by or incident to such performance), securities acts liability         
insurance (if the Company elects to obtain such insurance), the reasonable fees 
and expenses of any special experts retained by the Company in connection with  
such registration and the fees and expenses of other persons retained by the    
Company (all such expenses being herein called "Registration Expenses"), will be
borne by the Company. The Company will not have any responsibility for any      
registration or filing fees payable under any federal or state securities or    
Blue Sky laws or for any of the expenses of the holders of Registrable          
Securities incurred in connection with any registration hereunder including,    
without limitation, underwriting fees, discounts and commissions and transfer   
taxes, if any, attributable to the sale of Registrable Securities, counsel fees 
of such holders and travel costs.                                               

  SECTION 5.06. Indemnification; Contribution.  (a) Indemnification by the
Company.  The Company agrees to indemnify, to the fullest extent permitted by   
law, Roche, its directors and officers and each person who controls Roche       
(within the meaning of either the 1933 Act or the 1934 Act) against any and all 
losses, claims, damages, liabilities and expenses (including attorneys' fees)   
caused by any untrue or alleged untrue statement of material fact contained in  
any Registration Statement, prospectus or preliminary prospectus (each as       
amended and or supplemented, if the Company shall have furnished any amendments 
or supplements thereto), or any omission or alleged omission to state therein a 
material fact required to be stated therein or necessary to make the statements 
therein (in the case of a prospectus, in the light of the circumstances under   
which they were made) not misleading, provided that the Company shall not be    
required to indemnify any holder or its officers, directors or controlling      
persons for any losses, claims, damages, liabilities or expenses resulting from 
any such untrue statement or omission if such untrue statement or omission is   
made in reliance on and conformity with any information with respect to such    
holder furnished to the Company by such holder expressly for use therein. In    
connection with an underwritten offering, the Company will indemnify each       
underwriter thereof, the officers and directors of such underwriter, and each   
person who controls such underwriter (within the meaning of either the 1933 Act 
or 1934 Act) to the same extent as provided above with respect to the           
indemnification of Roche; provided that such underwriter agrees to indemnify the
Company to the same extent as provided below with respect to the indemnification
of the Company by Roche.                                                        

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     (b) Indemnification by Roche.  In connection with any registration in which
Roche is participating, Roche will furnish to the Company in writing such       
information and affidavits with respect to Roche as the Company reasonably      
requests for use in connection with any such registration, prospectus, or       
preliminary prospectus and agrees to indemnify the Company, its directors, its  
officers who sign the Registration Statement and each person, if any, who       
controls the Company (within the meaning of either the 1933 Act or of the 1934  
Act) to the same extent as the foregoing indemnity from the Company to such     
holder, but only with respect to information relating to such holder furnished  
to the Company in writing by Roche expressly for use in the Registration        
Statement, the prospectus, any amendment or supplement thereto, or any          
preliminary prospectus.                                                         

(c) Conduct of Indemnification Proceedings.  In case any proceeding   
(including any governmental investigation) shall be instituted involving any    
person in respect of which indemnity may be sought pursuant to Section 5.07(a)  
or Section 5.07(b), such person (hereinafter called the indemnified party) shall
promptly notify the person against whom such indemnity may be sought            
(hereinafter called the indemnifying party) in writing and the indemnifying     
party, upon request of the indemnified party, shall retain counsel reasonably   
satisfactory to the indemnified party to represent the indemnified party and any
others the indemnifying party may designate in such proceeding and shall pay the
fees and disbursements of such counsel related to such proceeding. In any such  
proceeding, any indemnified party shall have the right to retain its own        
counsel, but the fees and expenses of such counsel shall be at the expense of   
such indemnified party unless (i) the indemnifying party and the indemnified    
party shall have mutually agreed to the retention of such counsel or (ii) the   
named parties to any such proceeding (including any impleaded parties) include  
both the indemnifying party and the indemnified party and the indemnified party 
shall have been advised by counsel that representation of both parties by the   
same counsel would be inappropriate due to actual or potential differing        
interests between them. It is understood that the indemnifying party shall not, 
in connection with any proceeding or related proceedings in the same            
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all such indemnified parties, and that   
all such fees and expenses shall be reimbursed as they are incurred. In the case
of any such separate firm for the indemnified parties, such firm shall be       
designated in writing by the indemnified parties. The indemnifying party shall  
not be liable for any settlement of any proceeding effected without its written 
consent, but if settled with such consent or if there be a final judgment for   
the plaintiff, the indemnifying party agrees to indemnify the indemnified party 
from and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party     
shall have requested an indemnifying party to reimburse the indemnified party   
for fees and expenses of counsel as contemplated by the third sentence of this  
Section 5.07(c), the indemnifying party agrees that it shall be liable for any  
settlement of any proceeding effected without its written consent if (i) such   
settlement in entered into more than 30 days after receipt by such indemnifying 
party of the aforesaid request and (ii) such indemnifying party shall not have  
reimbursed the indemnified party in accordance with such request or reasonably  
objected in writing, on the basis of the standards set forth herein, to the     
propriety of such reimbursement prior to the date of such settlement. No        
indemnifying party shall, without the prior written consent of the indemnified  
party, effect any settlement of any pending or threatened proceeding in respect 
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement    
includes an unconditional release of such indemnified party from all liability  
on claims that are the subject matter of such proceeding.                       

     (d) Contribution.  If the indemnification provided for in this Section 5.07
from the indemnifying party is unavailable to an indemnified party hereunder in 
respect of any losses, claims, damages, liabilities or expenses referred to in  
this Section 5.07, then the indemnifying party, in lieu of indemnifying such    
indemnified party, shall contribute to the amount paid or payable by such       
indemnified party as a result of such losses, claims, damages, liabilities or   
expenses in such proportion as is appropriate to reflect the relative fault of  
the indemnifying party and indemnified parties in connection with the actions   
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such      
indemnifying party and indemnified parties shall be determined by reference to, 
among other things, whether any action in question, including any untrue or     
alleged untrue statement of a material fact or omission or alleged omission to  
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such indemnifying party or indemnified parties, and the parties' relative       
intent, knowledge, access to information and opportunity to correct or prevent  
such action. The amount paid or payable by a party as a result of the losses,   
claims, damages, liabilities and expenses referred to above shall be deemed to  
include, subject to the limitations set forth in Section 5.07(c), any legal or  
other fees or expenses reasonably incurred by such party in connection with any 
investigation or proceeding.                                                    

The parties hereto agree that it would not be just and equitable if   
contribution pursuant to this Section 5.07(d) were determined by pro rata       
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section 
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.                                

   If indemnification is available under this Section 5.07, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in   
Sections 5.06(a) and (b) without regard to the relative fault of said           
indemnifying party or indemnified party or any other equitable consideration    
provided for in this Section 5.06(d).                                           

SECTION 5.07. Rule 144.  The Company covenants that it will file the  
reports required to be filed by it under the 1933 Act and the 1934 Act and the  
rules and regulations adopted by the SEC thereunder, and it will take such      
further action as Roche may reasonably request, all to the extent required from 
time to time to enable Roche to sell shares of Common Stock without registration
under the 1933 Act within the limitation of the exemptions provided by (a) Rule 
144 under the 1933 Act, as such Rule may be amended from time to time, or (b)   
any similar rule or regulation hereafter adopted by the SEC. Upon the request of
Roche, the Company will deliver to Roche a written statement as to whether it   
has complied with such requirements.                                            

  SECTION 5.08. No Inconsistent Agreements; etc.  (a) The Company will not
hereafter enter into any agreement with respect to its securities which is      
inconsistent with the rights granted to Roche in this Agreement.                

     (b) Any determination required to be made by the Company under this Article
V shall be made by the Independent Directors.                                   

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

    SECTION 6.01. Representations of the Company.  (a) The execution, delivery
and performance by the Company of this Agreement and the consummation by the    
Company of the transactions contemplated hereby are within the Company's        
corporate powers and have been duly authorized by all necessary corporate       
action. This Agreement constitutes a valid and binding agreement of the Company.

(b) The execution, delivery and performance by the Company of this    
Agreement require no action by or in respect of, or filing with, any            
governmental body, agency, official or authority, other than (i) compliance with
any applicable requirements of the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder, as amended (the "1934 Act"); (ii)       
compliance with any applicable requirements of the Securities Act of 1933, as   
amended (the "1933 Act"); and (iii) compliance with any applicable foreign or   
state securities or Blue Sky laws.                                              

(c) The execution, delivery and performance by the company of this    
Agreement and the consummation by the Company of the transactions contemplated  
hereby do not and will not (i) contravene or conflict with the certificate of   
incorporation or bylaws of the Company, and (ii) assuming compliance with the   
matters referred to in Section 6.01(b), contravene or conflict with or          
constitute a violation of any provision of any law, regulation, judgment,       
injunction, order or decree binding upon or applicable to the Company.          

  SECTION 6.02. Representations of Roche.  (a) The execution, delivery and
performance by Roche of this Agreement and the consummation by Roche of the     
transactions contemplated hereby are within Roche's                             

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corporate powers and have been duly authorized by all necessary corporate       
action. This Agreement constitutes a valid and binding agreement of Roche.      

(b) The execution, delivery and performance by Roche of this Agreement
require no action by or in respect of, or filing with, any governmental body,   
agency, official or authority, other than (i) compliance with any applicable    
requirements of the 1934 Act; (ii) compliance with any applicable requirements  
of the 1933 Act; and (iii) compliance with any applicable foreign or state      
securities or Blue Sky laws.                                                    

    (c) The execution, delivery and performance by Roche of this Agreement and
the consummation by Roche of the transactions contemplated hereby do not and    
will not (i) contravene or conflict with the certificate of incorporation or    
bylaws of Roche, and (ii) assuming compliance with the matters referred to in   
Section 6.01(b), contravene or conflict with or constitute a violation of any   
provision of any law, regulation, judgment, injunction, order or decree binding 
upon or applicable to Roche.                                                    

ARTICLE VII 

COVENANTS 

  SECTION 7.01. Severance Arrangements.  The Company will not and will not
permit any of its subsidiaries to, (i) enter into any contract, agreement, plan 
or arrangement covering any director, officer or employee of the Company or any 
Subsidiary that provides for the making of any payments, the acceleration of    
vesting of any benefit or right or any other entitlement contingent upon (A) the
Merger or the exercise by Roche of any of its rights under this Agreement to    
representation on the Board of Directors (and its committees) or any acquisition
by Roche of securities of the Company (whether by merger, tender offer, private 
or market purchases or otherwise) not prohibited by this Agreement or (B) the   
termination of employment after the occurrence of any such contingency if such  
payment, acceleration or entitlement would not have been provided but for such  
contingency or (ii) amend any existing contract, agreement, plan or arrangement 
to so provide.                                                                  

SECTION 7.02. Marketing Agreements.  Roche and the Company agree to   
negotiate in good faith with respect to the establishment of a marketing        
arrangement under which the Company would market, on agreed terms, certain      
products of Roche and its Affiliates.                                           

ARTICLE VIII

MISCELLANEOUS 

   SECTION 8.01. Notices.  All notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar writing) 
and shall be given,                                                             

If to the Company:                                                    

Genentech, Inc.                                           
490 Point San Bruno Boulevard                             
South San Francisco, California 94080                     
Attn: John P. McLaughlin                                  
Telecopy: 415-952-9881                                    

With a copy to:                                                       

Richard D. Katcher, Esq.                                  
Wachtell, Lipton, Rosen & Katz                            
51 West 52nd Street                                       
New York, New York 10019                                  
Telecopy: 212-403-2000                                    

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If to Roche:                                                          

Roche Holdings, Inc.                                      
c/o Roche Holding Ltd                                     
Grenzacherstrasse 124                                     
CH-4002 Basel                                             
Switzerland                                               
Telecopy: 011-41-61-688-1396                              
Attn: Dr. Felix Amrein                                    

with a copy to:                                                       

Peter R. Douglas, Esq.                                    
Davis Polk & Wardwell                                     
450 Lexington Avenue                                      
New York, New York 10017                                  
Telecopy: 212-450-4800                                    

or such other address or telecopier number as such party may hereafter specify  
for the purpose by notice to the other parties hereto. Each such notice, request
or other communication shall be effective (i) if given by telecopier, when such 
telecopy is transmitted to the telecopier number specified in this Section and  
the appropriate answerback is received or (ii) if given by any other means, when
delivered at the address specified in this Section.                             

    SECTION 8.02. Amendments; No Waivers.  (a) Any provision of this Agreement
may be amended or waived if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by Roche and the Company, or in the    
case of a waiver, by the party against whom the waiver is to be effective;      
provided that no such amendment or waiver shall be effective without the        
approval of a majority of the Independent Directors.                            

(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or   
partial exercise thereof preclude any other or further exercise thereof or the  
exercise of any other right, power or privilege. The rights and remedies herein 
provided shall be cumulative and not exclusive of any rights or remedies        
provided by law.                                                                

 SECTION 8.03. Successors and Assigns.  The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their  
respective successors and assigns; provided that no party may assign, delegate  
or otherwise transfer any of its rights or obligations under this Agreement     
without the consent of the other party hereto except that, subject to the       
limitations set forth in Section 4.01(d), Roche may assign its rights to any    
transferee of its shares of Common Stock permitted under clause (iii) or (iv) of
Section 4.01.                                                                   

SECTION 8.04. Governing Law.  This Agreement shall be construed in    
accordance with and governed by the law of the State of Delaware.               

     SECTION 8.05. Counterparts; Effectiveness.  This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same   
effect as if the signatures thereto and hereto were upon the same instrument.   
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by the other party hereto.                           

  SECTION 8.06. Specific Performance.  The Company acknowledges and agrees
that Roche's and the Company's respective remedies at law for a breach or       
threatened breach of any of the provisions of this Agreement would be inadequate
and, in recognition of that fact, agrees that, in the event of a breach or      
threatened breach by the Company or Roche of the provisions of this Agreement,  
in addition to any remedies at law, Roche and the Company, respectively, without
posting any bond shall be entitled to obtain equitable relief in the form of    
specific performance, a temporary restraining order, a temporary or permanent   
injunction or any other equitable remedy which may then be available.           

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  SECTION 8.07. Termination.  This Agreement (other than Sections 1.03 and
1.04 hereof) shall terminate at such time as Roche and its Affiliates           
beneficially own 100% of the voting stock of the Company.                       

 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year    
first above written.                                                            

                   GENENTECH, INC.

      By

                                            ------------------------------------
              Title:

                        ROCHE HOLDINGS, INC.

      By

                                            ------------------------------------
              Title:

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                                                                       EXHIBIT B

GUARANTY

SECTION 1. The Guaranty.  Roche Holding Ltd, a Swiss corporation      
("Guarantor"), hereby unconditionally and irrevocably guarantees to Genentech,  
Inc., a Delaware corporation (the "Company"), the prompt and full discharge by  
Roche Holdings, Inc., a Delaware corporation ("Roche"), of all of Roche's       
covenants, agreements, obligations and liabilities under Section 2.03 of the    
Amended and Restated Governance Agreement between Roche and the Company (the    
"Amended and Restated Governance Agreement") (collectively, the "Obligations"), 
in accordance with the terms hereof and thereof. Guarantor hereby so guarantees 
full and complete performance by Roche of each and all of the Obligations,      
including, without limitation, the due and punctual payment of all amounts which
may become due and payable to the Company and/or to the holders of Callable     
Putable Common Stock, par value $.02 per share (the "Special Common Stock"), of 
the Company. Guarantor acknowledges and agrees that, with respect to all        
obligations to pay money, such guaranty shall be a guaranty of payment and not  
of collection. If Roche shall default in the due and punctual performance of any
of the Obligations or in the full and timely payment of any amounts owed        
pursuant to the Obligations, Guarantor will forthwith perform or cause to be    
performed such Obligations and will forthwith make full payment of any amount   
due with respect thereto at its sole cost and expense.                          

SECTION 2. Guaranty Unconditional.  The liabilities and obligations of
Guarantor to the Company pursuant to this Guaranty shall be unconditional and   
irrevocable and shall not be conditioned or contingent upon the pursuit of any  
remedies against Roche or any other person.                                     

  SECTION 3. Waivers of Guarantor.  (a) Guarantor hereby waives any right,
whether legal or equitable, statutory or non-statutory, to require the Company  
to proceed against or take any action against or pursue any remedy with respect 
to Roche or any other person or make presentment or demand for performance or   
give any notice of nonperformance before the Company may enforce rights against 
Guarantor hereunder. The unconditional obligation of Guarantor hereunder will   
not be affected, impaired or released by any extension, waiver, amendment or    
thing whatsoever which would release a guarantor (other than performance).      

   (b) Guarantor hereby waives irrevocably any defense based upon or arising
by reason of any disability or incapacity of Roche or lack of authority of any  
officer or director of Roche, and any immunity (whether on the basis of         
sovereignty or otherwise) from the jurisdiction, attachment or execution to     
which it or its property might otherwise be entitled in any action arising out  
of or based upon this Guaranty which may be instituted in the courts of the     
State of Delaware, the State of New York, the United States of America, or any  
other domestic or foreign jurisdiction.                                         

    SECTION 4. Definitions.  Terms used herein that are defined in the Amended
and Restated Governance Agreement are, unless otherwise defined, used herein as 
therein defined.                                                                

 SECTION 5. Representations and Warranties.  (a) Corporate Existence and
Power.  The Guarantor is a corporation duly incorporated, validly existing and  
in good standing under the laws of Switzerland, and has all corporate powers    
required to carry on its business as now conducted. The Guarantor is duly       
qualified to do business as a foreign corporation and is in good standing in    
each jurisdiction where the character of the property owned or leased by it or  
the nature of its activities makes such qualification necessary, except for     
those jurisdictions where the failure to be so qualified would not, individually
or in the aggregate, have a material adverse effect on the financial condition, 
business or results of operations of the Guarantor.                             

  (b) Corporate Authorization.  The execution, delivery and performance by
the Guarantor of this Guaranty and the consummation by the Guarantor of the     
transactions contemplated hereby are within the Guarantor's corporate powers.   
This Guaranty is a valid and binding obligation of the Guarantor, enforceable in
accordance with its terms, except as (i) the enforceability hereof may be       
limited by bankruptcy, insolvency or similar laws affecting creditors' rights   
generally and (ii) the availability of equitable remedies may be limited by     
equitable principles of general applicability.                                  

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     (c) Governmental Authorization.  The execution, delivery and performance by
the Guarantor of this Guaranty require no action by or in respect of, or filing 
with, any governmental body, agency, official or authority other than such      
filings or registrations with, or authorizations, consents or approvals of,     
governmental bodies, agencies, officials or authorities, (i) as may be required 
by applicable Federal and state securities laws or as may be required in        
connection with a tender offer or (ii) the failure of which to make or obtain   
would not reasonably be expected to prevent performance hereof or have a        
material adverse effect on the financial condition, business or results of      
operations of Guarantor.                                                        

(d) Non-Contravention.  The execution, delivery and performance by the
Guarantor of this Guaranty and the consummation by the Guarantor of the         
transactions contemplated hereby do not and will not (i) contravene or conflict 
with the certificate of incorporation or bylaws of the Guarantor, (ii) assuming 
compliance with the matters referred to in Section 5(c), contravene or conflict 
with or constitute a violation of any provision of any law, regulation,         
judgment, injunction, order or decree binding upon or applicable to the         
Guarantor or any of its Subsidiaries or (iii) constitute a default under or give
rise to a right of termination, cancellation or acceleration of any right or    
obligation of the Guarantor or to a loss of any benefit to which the Guarantor  
is entitled under any provision of any agreement, contract or other instrument  
binding upon the Guarantor or any license, franchise, permit or other similar   
authorization held by the Guarantor, except such as would not prevent           
performance hereof or have a material adverse effect on the business, financial 
condition or results of operations of the Guarantor and its subsidiaries, taken 
as a whole.                                                                     

SECTION 6. Covenants of Guarantor.  Guarantor, for itself and its     
affiliates (as such term is defined in Rule 12b-2 promulgated under the         
Securities Exchange Act of 1934, as amended), agrees to be bound by the         
provisions of the Amended and Restated Governance Agreement and abide, and to   
cause its affiliates to abide, by the obligations and limitations set forth     
therein as if it were Roche, and agrees and acknowledges that any limitation or 
restriction on Roche set forth therein shall be deemed to be, and shall be      
construed as, a limitation or restriction on Guarantor and its affiliates taken 
as a whole.                                                                     

   SECTION 7. Notice.  All notices, requests and other communications to any
party hereunder shall be in writing (including telecopy or similar writing) and 
shall be given,                                                                 

if to Guarantor:                                                      

Roche Holdings, Inc.                                        
c/o Roche Holding Ltd                                       
Grenzacherstrasse 124                                       
CH-4002 Basel                                               
Switzerland                                                 

Attn.: Dr. Felix Amrein                                     

Telecopy: 011-41-61-688-1396                                

with a copy to:                                                       

Peter R. Douglas, Esq.                                      
Davis Polk & Wardwell                                       
450 Lexington Avenue                                        
New York, New York 10017                                    
Telecopy: 212-450-4800                                      

If to the Company to:                                                 

Genentech, Inc.                                             

460 Point San Bruno Boulevard                               

South San Francisco, California 94080                       

Attn.: John P. McLaughlin                                   

Telecopy: 415-952-9881                                      

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with a copy to:                                                       

Richard D. Katcher, Esq.                                    

Wachtell, Lipton, Rosen & Katz                              

51 West 52nd Street                                         

New York, New York 10019                                    

Telecopy: 212-403-2000                                      

or such other address or telecopier number as such party may hereafter specify  
in writing. Each such notice, request or other communication shall be effective 
(i) if given by telecopier, when such telecopy is transmitted to the telecopier 
number specified in this Section or (ii) if given by any other means, when      
delivered at the address specified in this Section.                             

  SECTION 8. Authorized Agent.  The Guarantor hereby appoints Davis Polk &
Wardwell as its authorized agent upon whom process may be served in any action  
or proceeding arising out of or based upon this Guaranty. The Guarantor hereby  
expressly submits to the jurisdiction of any State or Federal court in New York 
City or the State of Delaware.                                                  

   SECTION 9. Successors and Assigns.  The provisions of this Guaranty shall
be binding upon and inure to the benefit of the Company and Guarantor and their 
respective successors and assigns.                                              

     SECTION 10. Governing Law.  THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.                         

    IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed
as of this           day of             , 1995.                                 

                     ROCHE HOLDING LTD

      By
                                          --------------------------------------
              Title:

Agreed and Accepted:                                                            

GENENTECH, INC.                                                                 

By                                                                              
----------------------------------------------------                            
Title:                                                                    

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                                                                       EXHIBIT C

THIRD: (a) The corporation is authorized to issue three (3) classes of
stock to be designated, respectively, preferred stock, callable putable common  
stock and common stock. The total number of shares which the corporation is     
authorized to issue is four hundred million (400,000,000) shares. One hundred   
million (100,000,000) shares shall be designated preferred stock, par value $.02
per share ("Preferred Stock"), one hundred million (100,000,000) shares shall be
designated callable putable common stock, par value $.02 per share ("Special    
Common Stock"), and two hundred million (200,000,000) shares shall be designated
common stock, par value $.02 per share ("Common Stock").                        

(b) The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized to fix or alter the dividend
rights, dividend rate, conversion rights, voting rights, rights and terms of    
redemption (including sinking fund provisions), the redemption price or prices, 
and the liquidation preferences of any wholly unissued series of Preferred      
Stock, and the number of shares constituting any such series and the designation
thereof, or any of them; and to increase or decrease the number of shares of any
series subsequent to the issue of shares of that series, but not below the      
number of shares of such series then outstanding. In case the number of shares  
of any series shall be so decreased, the shares constituting such decrease shall
resume the status which they had prior to the adoption of the resolution        
originally fixing the number of shares of such series.                          

(c) The holders of Special Common Stock and Common Stock shall, on all
matters submitted to a vote of the stockholders of the corporation, each be     
entitled to one vote per share, voting together as a single class unless        
otherwise provided for in this certificate of incorporation or required by      
applicable law. The rights, preferences, privileges and restrictions of Special 
Common Stock and Common Stock shall be identical in all respects, except as     
follows:                                                                        

(i) Liquidation, Dissolution or Winding Up.  Upon any liquidation,    
dissolution or winding up of the corporation, no distribution shall be made (1) 
to the holders of shares of Common Stock unless, prior thereto, the holders of  
shares of Special Common Stock shall have received $.01 per share, plus an      
amount equal to declared and unpaid dividends and distributions thereon to the  
date of such payment; provided that the holders of shares of Special Common     
Stock shall be entitled to receive an aggregate amount per share equal to the   
aggregate amount to be distributed per share to holders of Common Stock, or (2) 
to the holders of stock ranking on a parity (either as to dividends or upon     
liquidation, dissolution or winding up) with the Special Common Stock, except   
distributions made ratably on the Special Common Stock and all such other parity
stock in proportion to the total amounts to which the holders of all such shares
are entitled upon such liquidation, dissolution or winding up.                  

 (ii) Redemption.  Subject to the provisions of the Amended and Restated
Governance Agreement, dated as of                          , 1995, between Roche
Holdings, Inc., a Delaware corporation ("Roche"), and the Company, as such      
agreement may be amended from time to time (such agreement, as amended from time
to time, the "Governance Agreement"), the Special Common Stock may, and, where  
the Governance Agreement so requires, shall be redeemed, in whole but not in    
part (the "Call") during the periods and at the prices and upon the terms and   
conditions set forth below.                                                     

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     (A) Price.  The redemption price for any redemption date during the periods
set forth below shall be the price set forth opposite such period in the        
following table, adjusted as set forth in paragraph (C) below (the "Redemption  
Price"):                                                                        

                                                                [Download Table]

                               PERIOD                                 PRICE 
--------------------------------------------------------------------  ------
                                                                            
July 1, 1995 to September 30, 1995..................................  $61.25
October 1, 1995 to December 31, 1995................................  $62.50
January 1, 1996 to March 31, 1996...................................  $63.75
April 1, 1996 to June 30, 1996......................................  $65.00
July 1, 1996 to September 30, 1996..................................  $66.25
October 1, 1996 to December 31, 1996................................  $67.50
January 1, 1997 to March 31, 1997...................................  $68.75
April 1, 1997 to June 30, 1997......................................  $70.00
July 1, 1997 to September 30, 1997..................................  $71.50
October 1, 1997 to December 31, 1997................................  $73.00
January 1, 1998 to March 31, 1998...................................  $74.50
April 1, 1998 to June 30, 1998......................................  $76.00
July 1, 1998 to September 30, 1998..................................  $77.50
October 1, 1998 to December 31, 1998................................  $79.00
January 1, 1999 to March 31, 1999...................................  $80.50
April 1, 1999 to June 30, 1999......................................  $82.00

    (B) Notice.  Notice of any proposed redemption of the Special Common Stock
shall be given by mailing a copy of such notice (the "Call Notification"),      
postage prepaid, to the holders of record of the shares of Special Common Stock 
at their respective addresses then appearing on the books of the corporation,   
not more than 30 or less than 10 days prior to the date fixed for redemption,   
but neither failure to mail such notice nor any defect therein or in the mailing
thereof shall affect the validity of the proceeding for the redemption of the   
Special Common Stock.                                                           

     (C) Adjustments.  Upon "final Court approval of the Settlement", as defined
in the Memorandum of Understanding dated July 7, 1995 relating to the           
consolidated action pending in the Delaware Chancery Court entitled In re       
Genentech, Inc. Shareholders Litigation, Cons. C.A. No. 14265 (or in any        
superseding stipulation of settlement accepted by the corporation and the Roche 
defendants in that action), each Redemption Price set forth in paragraph (A)    
above shall be increased by $0.50 per share of Special Common Stock. If such    
"final Court approval of Settlement" occurs after payment of the Redemption     
Price pursuant to the Call, such $0.50 increase shall be promptly thereafter    
paid by the corporation pursuant to Section (c)(iv)(A)(1) of this Article THIRD 
for each share of Special Common Stock for which payment of the Redemption Price
had previously been paid pursuant to such Call. If the corporation shall at any 
time after the initial issuance of any Special Common Stock pay any dividend on 
Special Common Stock payable in Special Common Stock or effect a subdivision or 
combination of the Special Common Stock (by reclassification or otherwise) into 
a greater or lesser number of shares of Special Common Stock, then in each such 
case the Redemption Prices set forth above shall be adjusted by multiplying each
Redemption Price in effect immediately prior to such event by the ratio of the  
number of shares of Special Common Stock outstanding immediately prior to such  
event to the number of shares of Special Common Stock outstanding immediately   
after such event. If the corporation shall at any time after the initial        
issuance of any Special Common Stock declare or pay any dividend on Special     
Common Stock in cash, securities or other property other than Special Common    
Stock, the Redemption Prices in effect for each period after such event shall   
each be reduced by the per share value of such dividend multiplied by a fraction
the numerator of which equals the Redemption Price which would otherwise be in  
effect for such period and the denominator of which equals the Redemption Price 
in effect at the time of such event; provided that such adjustment shall not be 
made with respect to cash dividends determined by the majority of the Board of  
Directors to be in the ordinary course and approved by the majority of the      
Investor Directors (as defined in the Governance Agreement). The Board of       
Directors shall determine in good faith the value of any noncash dividend for   
purposes of those adjustments.                                                  

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(iii) Put by Holders.  Unless the Call has been previously exercised, 
during the Put Period (as defined below), each holder of the Special Common     
Stock shall have the option (the "Put") to require the corporation to redeem all
or part of the Special Common Stock held by such holder.                        

 (A) Price.  In connection with the exercise of the Put by any holder of
Special Common Stock, the corporation shall redeem each share of Special Common 
Stock subject to the Put at a redemption price per share equal to the Put Price 
(as defined below). The holder shall have the right to require the corporation  
to redeem all or part of the Special Common Stock held by such holder by        
delivery of the Put Notice (as defined below) during the Put Period to the      
corporation or the Depositary (as defined below) electing to have shares of     
Special Common Stock redeemed by the corporation and specifying therein the     
number of whole shares of Special Common Stock which such holder has elected to 
cause the corporation to redeem, accompanied by a certificate or certificates   
representing such shares.                                                       

(B) Notice.  At least ten and not more than thirty days prior to the  
beginning of the Put Period or, in the event of an acceleration of the Put in   
accordance with the terms of Section (c)(v) of this Article THIRD, as soon as   
practicable following the date of the occurrence of the Insolvency Event giving 
rise to such acceleration (but in no event later than the tenth day following   
such date), the corporation shall mail the Put Notification (as defined below)  
to each holder of Special Common Stock at such holder's address as it appears on
the transfer books of the corporation and to each holder of an option to        
purchase shares of the Special Common Stock at the address for such holder set  
forth in the records of the corporation, in each case together with a form of   
Put Notice to be used by such holder in exercising the Put. The Put Notification
shall comply in all respects with applicable provisions of the Securities       
Exchange Act as in effect at the time the Put Notification is given. A notice   
similar to the Put Notification shall be given by the corporation by publication
in a newspaper of general circulation in the State of New York, City of New York
at least ten and no more than thirty days prior to the beginning of the Put     
Period or, in the event of an acceleration of the Put in accordance with the    
terms of Section (c)(v) of this Article THIRD, as soon as practicable following 
the date of the occurrence of the Insolvency Event giving rise to such          
acceleration (but in no event later than the tenth day following such date). If 
the corporation shall fail to give the Put Notification to the holders of       
Special Common Stock at least ten days prior to the beginning of the Put Period 
or, in the event of an acceleration of the Put in accordance with the terms of  
Section (c)(v) of this Article THIRD, as soon as practicable following the date 
of the occurrence of the Insolvency Event giving rise to such acceleration (but 
in no event later than the tenth day following such date), as provided herein,  
the rights of the holders of Special Common Stock shall not be prejudiced       
thereby and the Put shall nevertheless become exercisable at the beginning of   
the Put Period as herein provided but the expiration of the Put Period shall be 
extended to that date which is thirty-five Business Days, or, in the event of   
such acceleration, sixty-five Business Days, from the date the Put Notification 
is given to holders of Special Common Stock. To facilitate the giving of the Put
Notification to the holders of Special Common Stock, the Board of Directors may 
fix a record date for determination of holders of Special Common Stock entitled 
to be given the Put Notification, which record date may not be more than five   
days prior to the date the Put Notification is given pursuant to this paragraph 
(B).                                                                            

  (C) Adjustments.  If the corporation shall at any time after the initial
issuance of any Special Common Stock effect a subdivision or combination of the 
Special Common Stock (by reclassification or otherwise) into a greater or lesser
number of shares of Special Common Stock, then in each such case the Put Price  
shall be adjusted by multiplying the Put Price in effect immediately prior to   
such event by the ratio of the number of shares of Special Common Stock         
outstanding immediately prior to such event to the number of shares of Special  
Common Stock outstanding immediately after such event.                          

    (D) Condition to the Corporation's Obligations.  Notwithstanding any other
provision of this Article THIRD, the corporation's obligation to pay the Put    
Price in respect of shares of Special Common Stock with respect to which the Put
has been properly exercised (and to deposit with the Depositary funds pursuant  
to Section (c)(iv)(A)(2) of this Article THIRD) shall be conditioned upon the   
corporation's having received from Roche, or any affiliate of Roche, (i) funds  
in an amount equal to the product of the number of shares of Special Common     
Stock with respect to which the Put has been properly exercised multiplied by   
the Put Price plus (ii) such additional funds, if any, sufficient to permit the 
corporation to redeem the shares of Special                                     

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Common Stock with respect to which the Put has been properly exercised without  
violating Section 160 of the Delaware General Corporation Law, any bankruptcy or
insolvency law or other law or regulation for the protection of creditors.      

(E) Enforcement of Roche Obligations.  The corporation shall take (and
shall have no corporate power or capacity not to take) such action as may be    
necessary to enforce the obligations of Roche and its affiliates to pay the Put 
Price (and any other amounts payable pursuant to Section 2.03 of the Governance 
Agreement), including, without limitation, all actions required to cause Roche  
and its affiliates to perform their respective obligations under Section 2.03 of
the Governance Agreement and under the Guaranty, dated             , 1995, by   
Roche Holding Ltd, a Swiss corporation, of the obligations of Roche under       
Section 2.03 of the Governance Agreement.                                       

(iv) Procedures.                                                      

  (A) Payment.  (1) On or prior to the date any Call Notification is first
sent or given, the corporation shall deposit or cause to be deposited the       
aggregate of the Redemption Price (in each case, together with accrued and      
unpaid dividends to such date) of the shares to be redeemed with the Depositary,
in trust for payment to the holders of the Special Common Stock, and deliver    
irrevocable written instructions authorizing the Depositary to apply such       
deposit solely to the redemption of the shares to be redeemed. The amount of    
funds required to be deposited in connection with the Call pursuant to the first
sentence of this Section (c)(iv)(A) shall be reduced by the aggregate Redemption
Price of any shares of Special Common Stock deposited by Roche Holdings, Inc., a
Delaware corporation, in lieu of such funds. In the case of the exercise of the 
Call, each holder of shares of Special Common Stock will be paid within three   
Business Days following the surrender of the certificate or certificates        
representing such shares to the Depositary together with a properly executed    
letter of transmittal covering such shares of stock, the Redemption Price for   
such shares. The corporation's written instructions to the Depositary may       
provide that any of such deposit remaining unclaimed, at the expiration of two  
years after the date fixed for redemption pursuant to the Call, by the holder of
any of such shares be returned to the corporation and revert to the general     
funds of the corporation, after which return such holder shall have no claim    
against the Depositary but shall have a claim as an unsecured creditor against  
the corporation for the Redemption Price together with accrued and unpaid       
dividends to such redemption date, without interest. The Call Notification      
having been duly given, or the Depositary having been irrevocably authorized by 
the corporation to give said notice, and the Redemption Price (together with    
accrued and unpaid dividends to such redemption date) of the shares to be       
redeemed having been deposited, all as aforesaid, then all shares of Special    
Common Stock with respect to which such deposit shall have been made pursuant to
exercise of the Call shall forthwith, whether or not the date fixed for such    
redemption shall have occurred or the certificates for such shares shall have   
been surrendered for cancellation, be deemed no longer to be outstanding for any
purpose, and all rights with respect to such shares shall thereupon cease and   
terminate, except the right of the holders of such shares to receive, out of    
such deposit in trust, on the redemption date the Redemption Price (together    
with accrued and unpaid dividends to such redemption date) to which they are    
entitled, without interest.                                                     

 (2) Promptly following the end of the Put Period, the corporation shall
deposit or cause to be deposited with the Depositary funds in an amount         
sufficient to pay the Put Price for all shares of Special Common Stock with     
respect to which the Put has been properly exercised and for which certificates 
representing such shares, together with a properly executed Put Notice, have    
been surrendered to the Depositary. Each holder of shares of Special Common     
Stock who has properly exercised the Put, and who has surrendered the shares of 
Special Common Stock with respect to which the Put has been exercised, together 
with a properly executed Put Notice, shall be paid promptly following the end of
the Put Period. In the event of the exercise of the Put for less than all of the
shares of Special Common Stock represented by a certificate, a new certificate  
representing the shares of Common Stock into which the shares of Special Common 
Stock not redeemed pursuant to the exercise of the Put have been converted      
pursuant to Section (c)(vi) of this Article THIRD shall be issued to the holder 
of such shares.                                                                 

  (B) Redeemed Shares.  All shares of Special Common Stock redeemed by the
corporation pursuant to the Call or the Put, as the case may be, shall be       
retired and cancelled promptly after the redemption thereof.                    

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All such shares shall upon their cancellation become authorized but unissued    
shares of common stock without designation as to series and may be reissued as  
part of any series of common stock existing or to be created by resolution or   
resolutions of the Board of Directors as permitted by this Certificate of       
Incorporation or as otherwise permitted under Delaware law. No shares of Special
Common Stock shall be issued after the date of redemption of the Special Common 
Stock pursuant to the Call.                                                     

   (v) Default.  Unless the Call has been previously exercised, if, prior to
the last day of the Put Period, (i) the corporation shall file a voluntary      
petition in bankruptcy, or seek reorganization, in order to effect a plan or    
other arrangement with creditors or any other relief under the Bankruptcy Reform
Act, Title 11 of the United States Code, as amended or recodified from time to  
time (the "Bankruptcy Code"), or under any state or federal law granting relief 
to debtors, whether now or hereafter in effect, or (ii) any involuntary petition
or proceeding pursuant to the Bankruptcy Code or any other applicable state or  
federal law relating to bankruptcy, reorganization or other relief for debtors  
is filed or commenced against the corporation and the same is not dismissed     
within thirty (30) days, or the corporation shall file an answer admitting the  
jurisdiction of the court and the material allegations of any involuntary       
petition, or (iii) the corporation shall be adjudicated a bankrupt, or an order 
for relief shall be entered by any court of competent jurisdiction under the    
Bankruptcy Code or any other applicable state or federal law relating to        
bankruptcy, reorganization or other relief for debtors, then, and upon the      
occurrence of such event (an "Insolvency Event"), without notice of any kind    
whatsoever, the right of the holders of the Special Common Stock to exercise the
Put shall accelerate, and the Put shall be exercisable immediately upon the     
occurrence of such event and until the end of the Put Period.                   

    (vi) Conversion.  Each share of Special Common Stock outstanding following
the close of business on the last day of the Put Period (the "Conversion Date"),
shall, unless previously called for redemption on or prior to such date,        
automatically be converted into one share of Common Stock in accordance with the
terms and conditions set forth below; provided, however, that the conversion    
provided in this Section (c)(vi) shall not impair or otherwise affect the right 
of the holder of any Special Common Stock to receive the Put Price for any      
shares of Special Common Stock with respect to which the Put has been exercised 
prior to the Conversion Date.                                                   

    (A) Notice; Replacement of Shares.  Notice of the Conversion Date shall be
given by mailing a copy of such notice, postage prepaid, to the holders of      
record of the shares of Special Common Stock at their respective addresses then 
appearing on the books of the corporation, not more than 30 nor less than 10    
days prior to the Conversion Date, but neither failure to mail such notice nor  
any defect therein or in the mailing thereof shall affect the validity of the   
conversion of the Special Common Stock. Upon request of any holder, the         
corporation shall issue and deliver to the holder as promptly as practicable    
after the Conversion Date a replacement certificate for the number of shares    
issuable upon conversion of such Special Common Stock. Thereafter, all Special  
Common Stock shall immediately cease to be outstanding for any purpose, except  
the right to request Common Stock certificates upon surrender of the            
certificates representing Special Common Stock and the right to receive declared
and unpaid dividends on such Special Common Stock. No shares of Special Common  
Stock shall be issued after the Conversion Date.                                

(B) Reservation of Shares.  The corporation shall provide, free from  
preemptive rights, out of its authorized but unissued shares, or out of shares  
held in its treasury, sufficient shares of Common Stock to provide for the      
conversion of the Special Common Stock of all issued and outstanding shares of  
Special Common Stock on the Conversion Date. The corporation covenants that all 
shares of Common Stock which may be issued upon conversion of Special Common    
Stock will upon issue be fully paid and non-assessable by the corporation and   
free from all taxes, liens and charges with respect to the issue thereof. The   
corporation further covenants that, if on the Conversion Date the Special Common
Stock shall be listed on the New York Stock Exchange or an any other national   
securities exchange or the NASDAQ National Market System, the corporation will, 
if permitted by the rules of such exchange, seek to list on each such exchange  
or the NASDAQ National Market System, as the case may be, all Common Stock      
issuable upon conversion of the Special Common Stock.                           

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  (vii) Dividends, etc.  Subject to the rights of the holders of Preferred
Stock, and subject to any other provisions of this Certificate of Incorporation,
holders of Special Common Stock and Common Stock shall be entitled to receive   
such dividends and other distributions in cash, Preferred Stock, stock of any   
corporation other than the corporation or property of the corporation as may be 
declared thereon by the Board of Directors from time to time out of assets or   
funds of the corporation legally available therefor and shall share equally on a
per share basis in all such dividends and other distributions. In the case of   
dividends or other distributions payable in stock of the corporation other than 
Preferred Stock, including distributions pursuant to stock splits or divisions  
of stock of the corporation other than Preferred Stock which occur after the    
initial issuance of shares of Special Common Stock by the corporation, only     
shares of Common Stock shall be paid or distributed with respect to Common Stock
and only shares of Special Common Stock in an amount per share equal to the     
amount per share paid or distributed with respect to Common Stock shall be paid 
or distributed with respect to Special Common Stock. In the case of any         
combination or reclassification of the Special Common Stock or the Common Stock,
the shares of the Common Stock or the Special Common Stock, as the case may be, 
shall also be combined or reclassified so that the number of shares of Special  
Common Stock outstanding immediately following such combination or              
reclassification shall bear the same relationship to the number of shares of    
Special Common Stock outstanding immediately prior to such combination or       
reclassification as the number of shares of Common Stock outstanding immediately
following such combination or reclassification bears to the number of shares of 
Common Stock outstanding immediately prior to such combination or               
reclassification.                                                               

 (viii) Consolidation, Merger, etc.  In case the corporation shall enter
into any consolidation, merger, combination or other transaction in which the   
shares of Common Stock are exchanged for or changed into other stock or         
securities, cash and/or any other property, then in any such case, each share of
Special Common Stock shall at the same time be similarly exchanged or changed   
into an amount per share, equal to the aggregate amount of stock, securities,   
cash and/or any other property (payable in kind), as the case may be, into which
or for which each share of Common Stock is changed or exchanged; provided that  
any such stock may be made redeemable on terms no less favorable to the holder  
thereof than the terms upon which the Special Common Stock is redeemable; and   
provided further, that any such stock shall be subject to a right on the part of
the holder to put such stock on terms no less favorable to the holder thereof   
than the terms upon which the Special Common Stock is required to be redeemed by
the corporation pursuant to the Put.                                            

     (ix) Rank.  The Special Common Stock shall rank junior (as to dividends and
upon liquidation, dissolution and winding up) to all series of the corporation's
Preferred Stock.                                                                

   (x) Legend.  Each certificate representing shares of Special Common Stock
shall bear the following legend:                                                

   "The shares of Callable Putable Common Stock represented hereby are
     subject to (i) redemption at the option of the corporation during the
       periods, at the prices and on the terms and conditions specified in the
      corporation's certificate of incorporation, (ii) an option on the part
      of the holder, under certain circumstances, to require the corporation
        to redeem such shares of Callable Putable Common Stock, at the price and
      on the terms and conditions specified in the corporation's certificate
        of incorporation and (iii) conversion into Common Stock, par value $.02,
of the corporation on the date specified, and upon the terms and
 conditions set forth in, such certificate of incorporation. After
       redemption the shares represented by this certificate shall cease to be
       outstanding for all purposes and the holder hereof shall be entitled to
   receive only the redemption price of such shares, without interest.
      After conversion this certificate shall represent the shares of Common
        Stock into which the shares of Callable Putable Common Stock represented
       hereby shall have been converted, and this certificate may be exchanged
for a new certificate representing such shares of Common Stock."

     (d) In addition to any affirmative vote required by law or this Certificate
of Incorporation, any amendment of the provisions of this Article THIRD shall   
require the affirmative vote of the holders of a majority of the shares of      
Common Stock entitled to vote and of the holders of a majority of the shares of 
Special Common Stock entitled to vote, each voting separately as a class.       

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     (e) Certain Definitions.  For purposes of this Article THIRD, the following
terms shall have the following meaning:                                         

(1) "Business Day" means any day which is not a Saturday, Sunday or a 
federal holiday.                                                                

 (2) "Depositary" shall mean the bank or trust company in the Borough of
Manhattan, the City and State of New York, having combined capital, surplus and 
undivided profits of at least $500,000,000 which is appointed by the corporation
to serve as agent for the purpose of receiving certificates representing shares 
of the Special Common Stock upon exercise of the Put or Call, as the case may   
be, and distributing the Redemption Price or the Put Price therefor, as the case
may be.                                                                         

 (3) "Put Notice" shall mean a written notice electing to have shares of
Special Common Stock redeemed by the corporation pursuant to the exercise of the
Put.                                                                            

    (4) "Put Notification" shall mean a written notice from the corporation to
the holders of the Special Common Stock and the holders of options to purchase  
shares of the Special Common Stock informing each such holder of (A) the rights 
of such holder to cause the corporation to redeem shares of Special Common Stock
during the Put Period, (B) the date of the commencement and termination of the  
Put Period, (C) the Put Price, (D) the identity and address of the Depositary   
and (E) instructions as to how to exercise the Put. The Put Notification shall, 
in all respects, comply with the requirements of the Securities Exchange Act (as
defined below).                                                                 

(5) "Put Period" shall mean, subject to paragraph (B) of subsection   
(c)(iii) of this Article THIRD, the period commencing on July 1, 1999 and ending
on the close of business on the thirtieth Business Day thereafter or such later 
date as may be required under the Securities Exchange Act; provided, that in the
event of acceleration of the Put Period pursuant to subsection (c)(v) of this   
Article THIRD, the Put Period shall be the period commencing as soon as         
practicable following the date of the occurrence of the Insolvency Event giving 
rise to such acceleration (but in no event later than ten days following such   
date) and ending on the close of business on the sixtieth Business Day          
thereafter or such later date as may be required under the Securities Exchange  
Act.                                                                            

    (6) "Put Price" shall mean a purchase price of $60.00 per share of Special
Common Stock, subject to adjustment as provided in paragraph (C) of subsection  
(c)(iii) of this Article THIRD.                                                 

 (7) "Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.         

(f) Put and Call Not Business Combinations.  Notwithstanding any other
provision of this Article THIRD or of Article ELEVENTH of this Certificate of   
Incorporation, the transactions to be consummated pursuant to exercise of the   
Put or the Call shall not be deemed to be "Business Combinations" for purposes  
of Article ELEVENTH of this Certificate of Incorporation.                       

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                                                                         ANNEX B

[LEHMAN BROTHERS LETTERHEAD]

                                                                  April 30, 1995

Special Committee of the Board of Directors                                     
Genentech, Inc.                                                                 
460 Point San Bruno Boulevard                                                   
South San Francisco, CA 94080                                                   

Members of the Special Committee:                                               

     We understand that Genentech, Inc. (the "Company") and Roche Holdings, Inc.
("Roche") are proposing to enter into a Transaction Agreement, to be dated as of
the date hereof (together with all exhibits thereto, the "Transaction           
Agreement"), pursuant to which the Company and Roche would, among other matters,
agree to: (i) amend the terms of the Redeemable Common Stock ("Redeemable Common
Stock") of the Company to (x) extend the redemption period with respect to the  
Redeemable Common Stock (which will be renamed "Special Common Stock") for an   
additional four years, (y) establish prices at which the Company may redeem such
shares, and (z) provide a right on the part of holders of such shares to require
the Company to purchase such shares during a specified period (the "Put"). The  
four-year extension of the redemption period will have a schedule of redemption 
prices starting at a price of $61.25 per share for the quarter ending September 
30, 1995 and increasing over time on a quarterly basis to $82 per share for the 
quarter ending June 30, 1999, after which the Company's redemption option       
expires. Under the terms of the Special Common Stock, each holder of shares of  
Special Common Stock will have the right pursuant to the Put to sell all or a   
portion of such holder's shares to the Company, at a price of $60 per share,    
exercisable during a thirty-day period following the expiration of the          
redemption option, or under certain circumstances, during a sixty-day period    
following certain insolvency events of the Company. The obligation of the       
Company with respect to the Put is to be guaranteed by Roche, with Roche's      
obligations guaranteed by Roche Holding Ltd. Such extension of the redemption   
period and grant and guarantee of the Put are referred to herein as the         
"Extension."                                                                    

    We further understand that as a condition to entering into the Transaction
Agreement, the Company and Roche propose to extend and modify certain governance
arrangements between the Company and Roche (the "Governance Arrangements") and  
to enter into certain marketing and licensing agreements with respect to certain
of the Company's products (the "Marketing Agreement"). The Governance           
Arrangements provide, among other matters, for (i) the composition of the Board 
of Directors of the Company, (ii) limitations on business combinations with and 
acquisitions of additional Company securities by Roche, (iii) Roche's rights and
obligations in respect of the Extension, (iv) Roche's rights in connection with 
certain extraordinary transactions involving the Company, (v) voting            
arrangements with respect to the Common Stock and Special Common Stock owned and
to be owned by Roche, and (vi) restrictions on the transfer of such shares by   
Roche. The Marketing Agreement provides, among other matters, for the grant to  
F. Hoffmann-LaRoche Ltd., an affiliate of Roche, of certain product rights and  
options with respect to certain other product rights of the Company, outside the
United States. The Extension, the Governance Arrangements and the commercial    
arrangements contemplated by the Marketing Agreement are herein referred to     
together as the "Proposed Transactions" and the terms and conditions of the     
Proposed Transactions are set forth in more detail in the Transaction Agreement.

 We also understand that the Company and Roche may, if the timing of the
consummation of the Proposed Transactions so requires, enter into an agreement  
and plan of merger (the "Contingent Merger Agreement") among the Company, Roche 
and a subsidiary of Roche ("Merger Sub"). We further understand that the        
Contingent Merger Agreement would provide for the merger of Merger Sub with and 
into the Company, the effect of which would be the same to the Company and its  
stockholders as the                                                             

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Special Committee of the Board of Directors                                     
Genentech, Inc.                                                                 
April 30, 1995                                                                  
Page 2                                                                          

consummation of the transactions contemplated by the Transaction Agreement and  
that all of the transactions contemplated by the Contingent Merger Agreement    
would be effected in a manner that would put the Company, Roche and the holders 
of Redeemable Common Stock in the same position (with the same rights and       
obligations) as they would have been had the Proposed Transactions been         
consummated pursuant to the Transaction Agreement. Accordingly, our opinion set 
forth herein with respect to the Proposed Transactions also would constitute an 
opinion with respect to the transactions contemplated by the Contingent Merger  
Agreement, in the event that such an agreement is entered into by the parties.  

     We have been requested by the Company to render our opinion with respect to
the fairness, from a financial point of view, to the holders of the Redeemable  
Common Stock (other than Roche) of the consideration to be received by such     
holders and the Company in connection with the Proposed Transactions.           

In arriving at our opinion, we have reviewed and analyzed: (1) the    
Transaction Agreement, (2) the Certificate of Incorporation and By-Laws of the  
Company, (3) the Merger Agreement dated February 2, 1990 between Roche and the  
Company, (4) the existing governance arrangements between the Company and Roche,
(5) publicly available information concerning the Company which we believe to be
relevant to our inquiry including, but not limited to, the latest annual report 
on Form 10-K of the Company dated December 31, 1994 and the draft of the latest 
quarterly report on Form 10-Q of the Company dated March 31, 1995, (6) financial
and operating information with respect to the business, operations and prospects
of the Company furnished to us by the Company, (7) a trading history of the     
Company's common stock from 1991 to the present and a comparison of that trading
history with those of other companies which we deemed relevant, (8) a comparison
of the historical financial results and present financial condition of the      
Company with those of other companies which we deemed relevant, (9) the         
financial terms of certain other recent transactions which we deemed relevant,  
(10) reports of research analysts with respect to the Company and the potential 
effect of the expiration of Roche's current option on the price of the          
Redeemable Common Stock, (11) valuations of the Redeemable Common Stock using   
various methodologies, (12) the financial terms of certain other commercial     
arrangements between biotechnology and pharmaceutical companies which we deemed 
relevant, and (13) analyses of the potential pro forma effects on the Company of
the commercial arrangements contemplated by the Marketing Agreement. In         
addition, we have held discussions with the management of the Company concerning
its business, operations, assets, financial condition and prospects and         
undertook such other studies, analyses and investigations as we deemed          
appropriate.                                                                    

  In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without      
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of management of the Company that they  
are not aware of any facts that would make such information inaccurate or       
misleading. With respect to the financial projections of the Company, upon      
advice of the Company we have assumed that such projections have been reasonably
prepared on a basis reflecting the best currently available estimates and       
judgments of the management of the Company as to the future financial           
performance of the Company and that the Company will perform substantially in   
accordance with such projections. In arriving at our opinion, we have not made  
nor obtained any evaluations or appraisals of the assets or liabilities of the  
Company. Our opinion is necessarily based upon market, economic and other       
conditions as they exist on, and can be evaluated as of, the date of this       
letter. In addition, we do not express any opinion as to the actual prices at   
which shares of the Special Common Stock will trade following the consummation  
of the Proposed Transactions.                                                   

  Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be       
received by the holders of shares of the Redeemable Common Stock (other than    
Roche) and the Company in connection with the Proposed Transactions is fair to  
such holders.                                                                   

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Special Committee of the Board of Directors                                     
Genentech, Inc.                                                                 
April 30, 1995                                                                  
Page 3                                                                          

  We have acted as financial advisor to the Company in connection with the
Proposed Transactions, have received a fee for the rendering of this opinion and
will receive an additional fee for our services which is contingent upon the    
consummation of the Extension. In addition, the Company has agreed to indemnify 
us for certain liabilities which may arise out of the rendering of this opinion.
We also have performed various investment banking services for the Company in   
the past (including acting as advisor to the Company with respect to the 1990   
transaction between Roche and the Company) and have received customary fees for 
such services. In the ordinary course of our business, we actively trade in the 
Redeemable Common Stock and the debt and equity securities of Roche for our own 
account and for the accounts of our customers and, accordingly, may at any time 
hold a long or short position in such securities.                               

 This opinion is for the use and benefit of the Special Committee of the
Board of Directors of the Company. This opinion is not intended to be and does  
not constitute a recommendation to any stockholder of the Company as to how such
stockholder should vote with respect to the proposed amendment to the Company's 
certificate of incorporation.                                                   

                     Very truly yours,

                   LEHMAN BROTHERS

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                                                                         ANNEX C

[MORGAN STANLEY LETTERHEAD] 

                                                                    July 7, 1995

Independent and Special Committees of the Board of Directors                    

Genentech, Inc.                                                                 

460 Point San Bruno Boulevard                                                   

South San Francisco, CA 94080                                                   

Members of the Independent and Special Committees:                              

     We understand that Genentech, Inc. (the "Company") and Roche Holdings, Inc.
("Roche") have entered into an Agreement and Plan of Merger (together with all  
exhibits thereto, the "Merger Agreement"), dated May 23, 1995, among Roche, HLR 
(U.S.) II, Inc. ("Merger Sub") and the Company, as contemplated by the          
Transaction Agreement, dated April 30, 1995 (together with all exhibits thereto,
the "Transaction Agreement"). We further understand that the Merger Agreement   
provides for (i) the merger of Merger Sub with and into the Company (the        
"Merger"), (ii) the conversion of each issued and outstanding share of common   
stock, par value $0.02 per share ("Common Stock"), of the Company, other than   
shares of Common Stock held by Roche or any affiliate thereof and shares held in
the treasury of the Company, into one share of special common stock, par value  
$0.02 per share ("the Special Common Stock"), of the Company, (iii) the         
cancellation of all shares of Common Stock held by Roche and its affiliates, and
(iv) the conversion of the aggregate number of issued and outstanding shares of 
common stock, par value $0.02 per share, of Merger Sub into a number of shares  
of Common Stock equal to, in the aggregate, the number of shares of Common Stock
held by Roche and its affiliates immediately prior to the Merger. The terms of  
the Special Common Stock will have the effect of (x) establishing a Special     
Common Stock for four years, (y) establishing prices at which the Company may   
redeem such shares, and (z) providing a right on the part of holders of such    
shares to require the Company to purchase such shares during a specified period 
(the "Put"). The four-year redemption period will have a schedule of redemption 
prices starting at a price of $61.25 per share for the quarter ending September 
30, 1995 and increasing over time on a quarterly basis to $82 per share for the 
quarter ending June 30, 1999, after which the Company's redemption option       
expires. Under the terms of the Special Common Stock, each holder of shares of  
Special Common Stock will have the right pursuant to the Put to sell all or a   
portion of such holder's shares to the Company, at a price of $60 per share,    
exercisable during a thirty-day period following the expiration of the          
redemption option, or under certain circumstances, during the sixty-day period  
following certain insolvency events of the Company. The obligation of the       
Company with respect to the Put is to be guaranteed by Roche, with Roche's      
obligations guaranteed by Roche Holding Ltd. Such establishment of the          
redemption period and grant and guarantee of the Put are referred to herein as  
the "Redemption Rights."                                                        

We further understand that as a condition to the consummation of the  
Merger, the Company and Roche propose to extend and modify certain governance   
arrangements between the Company and Roche (the "Governance Arrangements") and  
to enter into certain marketing and licensing agreements with respect to certain
of the Company's products (the "Marketing Agreement"). The Governance           
Arrangements provide, among other matters, for (i) the composition of the Board 
of Directors of the Company, (ii) limitations on business combinations with and 
acquisitions of additional Company securities by Roche, (iii) Roche's rights and
obligations in respect of the Redemption Rights, (iv) Roche's rights in         
connection with certain extraordinary transactions involving the Company, (v)   
voting arrangements with respect to the Common Stock and Special Common Stock to
be owned by Roche, and (vi) restrictions on the transfer of such shares by      
Roche. The Marketing Agreement provides, among other matters, for the grant to  
F. Hoffman-LaRoche Ltd., an affiliate of Roche, of certain product rights and   
options with respect to certain other product rights of the Company, outside the
United States. The Redemption Rights, the Governance Arrangements and the       

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Independent and Special Committees of the Board of Directors                    

Genentech, Inc.                                                                 

July 7, 1995                                                                    

Page 2                                                                          

commercial arrangements contemplated by the Marketing Agreement are herein      
referred to together as the "Proposed Transactions" and the terms and conditions
of the Proposed Transactions are set forth in more detail in the Merger         
Agreement.                                                                      

You have asked for our opinion as to whether the consideration to be  
received by the holders of shares of Common Stock (other than Roche and its     
affiliates) and the Company pursuant to the Merger Agreement is fair from a     
financial point of view to such holders, in connection with the Proposed        
Transactions.                                                                   

For purposes of the opinion set forth herein, we have:                

        (i)   analyzed certain publicly available financial statements and other
information of the Company;                         

        (ii)  analyzed certain internal financial statements and other financial
     and operating data concerning the Company prepared by the
management of the Company;                          

        (iii)  analyzed certain financial projections prepared by the management
of the Company;                                   

       (iv)  discussed the past and current operations and financial condition
          and the prospects of the Company with senior executives of the
        Company, and analyzed the pro forma impact of the commercial
       arrangements contemplated by the Marketing Agreement on the
Company's earnings per share;                       

(v)   reviewed the reported prices and trading activity for the 
Redeemable Common Stock and the Common Stock;       

      (vi)  compared the financial performance of the Company and the prices
         and trading activity of the Common Stock with that of certain
            other comparable publicly-traded companies and their securities;

      (vii)  reviewed the financial terms, to the extent publicly available,
      of certain comparable acquisition transactions and other
commercial arrangements which we deemed relevant; 

(viii) reviewed the Merger Agreement, the Merger Agreement dated
             February 2, 1990 between Roche and the Company and the existing
        governance arrangements between the Company and Roche; and

  (ix)  performed such other analyses as we have deemed appropriate.

We have assumed and relied upon without independent verification the  
accuracy and completeness of the information reviewed by us for the purposes of 
this opinion. With respect to the financial projections, we have assumed that   
they have been reasonably prepared on bases reflecting the best currently       
available estimates and judgments of the future financial performance of the    
Company. We have not made any independent valuation or appraisal of the assets  
or liabilities of the Company, nor have we been furnished with any such         
appraisals. Our opinion is necessarily based on economic, market and other      
conditions as in effect on, and the information made available to us as of, the 
date hereof. In addition we do not express any opinion as to the actual price at
which the Special Common Stock will trade following the consummation of the     
Proposed Transactions.                                                          

    In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition of the Company 
or any of its assets, nor did we negotiate with any of the parties, other than  
in one meeting with Roche.                                                      

     This opinion is not intended to be and does not constitute a recommendation
to any stockholder of the Company as to how such stockholder should vote with   
respect to the Proposed Transactions.                                           

We have acted as financial advisor to the Independent and Special     
Committees of the Board of Directors of the Company in connection with this     
transaction and will receive a fee for our services.                            

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Independent and Special Committees of the Board of Directors                    

Genentech, Inc.                                                                 

July 7, 1995                                                                    

Page 3                                                                          

     It is understood that this letter is for the information of the Independent
and Special Committees of the Board of Directors of the Company only and may not
be used for any other purpose without our prior written consent. We hereby      
consent, however, to the inclusion of this opinion as an exhibit to any proxy or
registration statement distributed in connection with the Proposed Transactions.

   Based on the foregoing, we are of the opinion on the date hereof that the
consideration to be received by the holders of shares of Common Stock (other    
than Roche and its affiliates) and the Company pursuant to the Merger Agreement 
is fair from a financial point of view to such holders in connection with the   
Proposed Transactions.                                                          

                     Very truly yours,

                                     MORGAN STANLEY & CO. INCORPORATED

                             By: /s/ GEORGE F. BOUTROS
                                             ---------------------------------

                               George F. Boutros

                               Managing Director

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PART II 

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20.  INDEMNIFICATION OF OFFICERS AND DIRECTORS.                            

  The Registrant's Certificate of Incorporation empowers the Registrant to
indemnify any director, officer, employee or agent of the Registrant or any     
other person who is serving at the Registrant's request in any such capacity    
with another corporation, partnership, joint venture, trust or other enterprise 
(including, without limitation, an employee benefit plan) to the fullest extent 
permitted under the Delaware General Corporation Law (the "DGCL") as the same   
exists or may be amended (but, in the case of any such amendment, only to the   
extent that such amendment permits the Registrant to provide broader            
indemnification rights than said law permitted the Registrant to provide prior  
to such amendment), and any such indemnification shall continue as to any person
who has ceased to be a director, officer, employee or agent and may inure to the
benefit of the heirs, executors and administrators of such a person.            

    The Registrant's Certificate of Incorporation also empowers the Registrant
to purchase and maintain insurance, at its expense, to protect itself and any   
director, officer, employee or agent of the Registrant or another corporation,  
partnership, joint venture, trust or other enterprise against any such expense, 
liability or loss, whether or not the Registrant would have the power to        
indemnify any such person against such expense, liability or loss under the     
DGCL.                                                                           

    In addition, the By-laws of the Registrant provide that the Registrant may
purchase and maintain insurance on behalf of any person who is or was a         
director, officer, employee or agent of the Registrant or is or was serving at  
the request of the Registrant as a director, officer, employee or agent of      
another corporation, partnership, joint venture, trust or other enterprise      
against any liability asserted against him and incurred by him in any such      
capacity, or arising out of his status as such, whether or not the Registrant   
would have the power to indemnify him against such liability under the          
provisions of the DGCL.                                                         

ITEM 21.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.                           

(a) The following exhibits are filed herewith or incorporated herein by         
reference:                                                                      

                                                        [Enlarge/Download Table]

EXHIBIT                                                                                        
NUMBER                                                                                         
-------                                                                                        
                                                                                               
   2.1   --  Agreement and Plan of Merger, dated May 23, 1995, as amended and restated, among  
             Roche Holdings, Inc. ("Roche"), HLR (U.S.) II, Inc. ("Merger Sub") and the        
             Registrant (incorporated by reference to Annex A to the Proxy Statement/Prospectus
             forming a part of this Registration Statement).                                   
   2.2   --  Agreement, dated as of July 7, 1995, among Roche, Merger Sub and the Registrant.  
   2.3   --  Agreement dated as of September 6, 1995, among Roche, Merger Sub and the          
             Registrant.                                                                       
   4.1   --  Form of Article THIRD of the Amended Certificate of Incorporation of the          
             Registrant, as amended (incorporated by reference to Exhibit C to Annex A to the  
             Proxy Statement/Prospectus forming a part of this Registration Statement).        
   5.1   --  Opinion of Wachtell, Lipton, Rosen & Katz as to the legality of the securities    
             being registered.                                                                 
   8.1   --  Opinion of Wachtell, Lipton, Rosen & Katz as to certain federal income tax        
             consequences.                                                                     
  10.1   --  Amended and Restated Governance Agreement, as amended, to be dated as of the      
             effective date of the merger contemplated by the Merger Agreement included as     
             Exhibit 2.1 hereof, between Roche Holdings, Inc. and the Registrant (incorporated 
             by reference to Exhibit A to Annex A to the Proxy Statement/Prospectus forming a  
             part of this Registration Statement).                                             
  10.2   --  Guaranty of Roche Holding Ltd, as amended, and certain subsidiaries of the        
             Registrant (incorporated by reference to Exhibit B to Annex A to the Proxy        
             Statement/Prospectus forming a part of this Registration Statement).              
  10.3   --  Licensing Agreement, to be dated as of the effective date of the merger           
             contemplated by the Merger Agreement included as Exhibit 2.1 hereof, among F.     
             Hoffmann-LaRoche Ltd, the Registrant and certain subsidiaries of the Registrant.* 

---------------                                                                 

* Previously filed as an exhibit to the Registration Statement on Form S-4 (Reg.
Statement No. 33-59949) filed on June 5, 1995.                              

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                                                        [Enlarge/Download Table]

EXHIBIT                                                                                        
NUMBER                                                                                         
-------                                                                                        
                                                                                               
  10.4   --  Agency Agreement, dated as of September 6, 1995, by and among the Registrant,     
             Citibank, N.A., as agent, and Roche Holding.                                      
  10.5   --  Letter Agreement, dated September 6, 1995, among Genentech, Roche and Roche       
             Holding.                                                                          
  15.1   --  Letter re: Unaudited Interim Financial Information.                               
  23.1   --  Consent of Wachtell, Lipton, Rosen & Katz (included as part of Exhibits 5.1 and   
             8.1).                                                                             
  23.2   --  Consent of Ernst & Young LLP, independent auditors.                               
  23.3   --  Consent of Price Waterhouse AG, Roche Group Auditors.                             
  24.1   --  Powers of Attorney.                                                               
  27.1   --  Financial Data Schedule.                                                          
  99.1   --  Form of proxy for Special Meeting of Stockholders of the Registrant.              
  99.2   --  Opinion of Lehman Brothers Inc. (incorporated by reference to Annex B to the Proxy
             Statement/Prospectus).                                                            
  99.3   --  Opinion of Morgan Stanley & Co. Incorporated (incorporated by reference to Annex C
             to the Proxy Statement/Prospectus).                                               

(b) The following Financial Statement Schedule is incorporated herein by        
reference:                                                              

    Schedule II -- Valuation and Qualifying Accounts for each of the three years
in the period ended December 31, 1994 (incorporated by reference to the 
Registrant's Annual Report on Form 10-K for the year ended December 31, 
1994).                                                                  

ITEM 22.  UNDERTAKINGS.                                                         

The undersigned registrant hereby undertakes:                         

    (1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to     
   directors, officers and controlling persons of the registrant pursuant to
 the foregoing provisions, 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 Securities 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, 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 whether such indemnification by it is against
  public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.                                 

   (2) That for the purpose of determining any liability under the
   Securities Act, each filing of the registrant's annual report pursuant to
    Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (the
    "Exchange Act") (and, where applicable, each filing of an employee benefit
     plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
    incorporated by reference in the 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.                                   

        (3) To deliver or cause to be delivered with the prospectus, to each
     person to whom the prospectus is sent or given, the latest annual report to
  security holders that is incorporated by reference in the prospectus and
  furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule
14c-3 under the Exchange Act; and, where interim financial information
     required to be presented by Article 3 of Regulation S-X is not set forth in
     the prospectus, to deliver, or cause to be delivered to each person to whom
the prospectus is sent or given, the latest quarterly report that is  
  specifically incorporated by reference in the prospectus to provide such
interim financial information.                                        

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        (4) That prior to any public reoffering of the securities registered
    hereunder through use of a prospectus which is a part of this registration
     statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable  
    registration form with respect to reofferings by persons who may be deemed
    underwriters, in addition to the information called for by the other Items
of the applicable form.                                               

         (5) That every prospectus (i) that is filed pursuant to paragraph (1)
  immediately preceding, or (ii) that purports to meet the requirements of
  Section 10(a)(3) of the Securities Act and is used in connection with an
   offering of securities subject to Rule 415, will be filed as a part of an
 amendment to the registration statement and will not be used until such
     amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment 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.                  

       (6) To respond to requests for information that are incorporated by
   reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
   Form, within one business day of receipt of such request, and to send the
   incorporated documents by first class mail or other equally prompt means.
  This includes information contained in documents filed subsequent to the
     effective date of the registration statement through the date of responding
to the request.                                                       

        (7) To supply by means of a post-effective amendment all information
    concerning a transaction, and the company being acquired involved therein,
     that was not the subject of and included in the registration statement when
it became effective.                                                  

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SIGNATURES

     Pursuant to the requirements of the Securities Act, 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 September 8, 1995.                                      

                   GENENTECH, INC.

                                 By: /s/    ARTHUR D. LEVINSON

                                            ------------------------------------

                                Name: Arthur D. Levinson

                                            Title: President and Chief Executive
                   Officer

Pursuant to the requirements of the Securities Act of 1933, this      
registration statement has been signed by the following persons in the          
capacities and on the dates indicated.                                          

                                                        [Enlarge/Download Table]
                                                                                        
PRINCIPAL EXECUTIVE OFFICER:                                                            
By: /s/     ARTHUR D. LEVINSON                 President and Chief Executive Officer    
---------------------------------------------                                           
            Arthur D. Levinson                                                          

PRINCIPAL FINANCIAL OFFICER:                                                            
By: /s/      LOUIS J. LAVIGNE, JR.             Senior Vice President and Chief Financial
---------------------------------------------  Officer                                  
             Louis J. Lavigne, Jr.                                                      

PRINCIPAL ACCOUNTING OFFICER:                                                           
By: /s/       BRADFORD S. GOODWIN              Vice President and Controller            
---------------------------------------------                                           
              Bradford S. Goodwin                                                       

DIRECTORS:                                                                              
/s/          ARTHUR D. LEVINSON                                                         
---------------------------------------------                                           
             Arthur D. Levinson                                                         

Herbert W. Boyer*                                                                       
Jurgen Drews*                                                                           
Franz B. Humer*                                                                         
Linda Fayne Levinson*                                                                   
J. Richard Munro*                                                                       
Donald L. Murfin*                                                                       
John T. Potts, Jr.*                                                                     
C. Thomas Smith, Jr.*                                                                   
Robert A. Swanson*                                                                      
David S. Tappan, Jr.*                                                                   

*By: /s/      JOHN P. MCLAUGHLIN                                                        
     ----------------------------------------                                           
     Attorney-in-fact                                                                   

September 8, 1995                                                     

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(a) The following exhibits are filed herewith or incorporated herein by         
reference:                                                              

                                                        [Enlarge/Download Table]

EXHIBIT                                                                                       
NUMBER                                                                                        
------                                                                                        
                                                                                              
  2.1    --  Agreement and Plan of Merger, dated May 23, 1995, as amended and restated, among 
             Roche Holdings, Inc. ("Roche"), HLR (U.S.) II, Inc. ("Merger Sub") and the       
             Registrant (incorporated by reference to Annex A to the Proxy                    
             Statement/Prospectus forming a part of this Registration Statement).             
  2.2    --  Agreement, dated as of July 7, 1995, among Roche, Merger Sub and the Registrant. 
  2.3    --  Agreement dated as of September 6, 1995, among Roche, Merger Sub and the         
             Registrant.                                                                      
  4.1    --  Form of Article THIRD of the Amended Certificate of Incorporation of the         
             Registrant, as amended (incorporated by reference to Exhibit C to Annex A to the 
             Proxy Statement/ Prospectus forming a part of this Registration Statement).      
  5.1    --  Opinion of Wachtell, Lipton, Rosen & Katz as to the legality of the securities   
             being registered.                                                                
  8.1    --  Opinion of Wachtell, Lipton, Rosen & Katz as to certain federal income tax       
             consequences.                                                                    
 10.1    --  Amended and Restated Governance Agreement, as amended, to be dated as of the     
             effective date of the merger contemplated by the Merger Agreement included as    
             Exhibit 2.1 hereof, between Roche Holdings, Inc. and the Registrant (incorporated
             by reference to Exhibit A to Annex A to the Proxy Statement/Prospectus forming a 
             part of this Registration Statement).                                            
 10.2    --  Guaranty of Roche Holding Ltd, as amended, to be dated as of the effective date  
             of the merger contemplated by the Merger Agreement included as Exhibit 2.1 hereof
             (incorporated by reference to Exhibit B to Annex A to the Proxy                  
             Statement/Prospectus forming a part of this Registration Statement).             
 10.3    --  Licensing Agreement, dated as of the effective date of the merger contemplated by
             the Merger Agreement included as Exhibit 2.1 hereof, among F. Hoffmann-LaRoche   
             Ltd., the Registrant, and certain subsidiaries of the Registrant.*               
 10.4    --  Agency Agreement, dated as of September 6, 1995, by and among the Registrant,    
             Citibank N.A., as agent, and Roche Holding.                                      
 10.5    --  Letter Agreement, dated September 6, 1995, among Genentech, Roche and Roche      
             Holding.                                                                         
 15.1    --  Letter re: Unaudited Interim Financial Information.                              
 23.1    --  Consent of Wachtell, Lipton, Rosen & Katz (included as part of Exhibits 5.1 and  
             8.1).                                                                            
 23.2    --  Consent of Ernst & Young LLP, independent auditors.                              
 23.3    --  Consent of Price Waterhouse AG, Roche Group Auditors.                            
 24.1    --  Powers of Attorney.                                                              
 27.1    --  Financial Data Schedule.                                                         
 99.1    --  Form of Proxy for Special Meeting of Stockholders of the Registrant.             
 99.2    --  Opinion of Lehman Brothers Inc. (incorporated by reference to Annex B to the     
             Proxy Statement/Prospectus).                                                     
 99.3    --  Opinion of Morgan Stanley & Co. Incorporated (incorporated by reference to Annex 
             C to the Proxy Statement/Prospectus).                                            

---------------                                                                 

* Previously filed as an exhibit to the Registration Statement on Form S-4 (Reg.
Statement No. 33-59949) filed on June 5, 1995.