Genencor Reports Third Quarter Financial Results

Genencor Reports Third Quarter Financial Results
Record Quarterly Product Revenues 


PALO ALTO, Calif., Oct. 28  /PRNewswire-FirstCall/ -- Genencor International,
Inc. (NASDAQ:GCOR) today reported that for the quarter ended September 30,
2004, product revenues increased by 11% to $99.5 million, compared to $89.8
million in the third quarter of 2003.  Total revenues in the third quarter were
$101.9 million, compared to $94.1 million for the same period in 2003. Net
income available to common stockholders was $1.2 million, or $0.02 per diluted
share, compared to $2.3 million or $0.04 per diluted share during the same
period in 2003.  Fees and royalty revenues were $2.4 million in the third
quarter of 2004 as compared to $4.3 million in the prior year, primarily due to
the end of the amortizable period for an upfront research payment from Dow
Corning in the 2003 period. Lower net income available to stockholders was due
in part to increased general and administrative expenses and third party
consulting fees. For the third quarter of 2004, Genencor generated $4.0 million
in operating income and $16.7 million in cash flow from operations.

For the nine months ended September 30, 2004, total revenues were $306.1
million, compared to $286.2 million for the same period in 2003.  Net income
available to common stockholders was $24.4 million, or $0.40 per diluted share
for the nine months ended September 30, 2004, compared to $12.8 million or
$0.21 per diluted share for that same period in 2003.

"Although this quarter's earnings were reduced by higher expenses, our record
product revenues reflect the strength of our core enzyme business," said Ray
Land, senior vice president and chief financial officer. "Our cash balance grew
by $12.6 million to $167.7 million during the quarter providing us with
additional flexibility in executing our financial and operating strategy."

Financial Results by Segment

The Bioproducts segment develops and delivers products and services for the
industrial, consumer and agri-processing markets to a global customer base. 
All of the company's current product revenues are derived from this segment. 
For the third quarter of 2004, the Bioproducts segment increased our gross
profit by 9% to $41.1 million, compared to $37.7 million in third quarter of
2003. For the third quarter of 2004, the Bioproducts segment achieved operating
income of  $11.6 million as compared to operating income of $15.4 million for
the third quarter of 2003.  The lower operating income was due to higher
operating expenses and lower fees and royalty revenues, as discussed above. For
the nine months ended September 30, 2004, the Bioproducts segment achieved
operating income of $49.7 million as compared to operating income of $52.2
million for the same period in 2003.

The Health Care segment is primarily engaged in the performance of research and
development, securing intellectual property and the establishment of strategic
investments and collaborations in support of our product objectives in the
health care market.  For the third quarter of 2004, the Health Care segment
reported an operating loss of $7.8 million as compared to an operating loss of
$9.2 million for the same period in 2003.  For the nine months ended September
30, 2004, the Health Care segment experienced an operating loss of $11.3
million as compared to an operating loss of $24.6 million for the same period
in 2003.

Business Update

"We are delighted with the excellent growth in product revenues during the
third quarter, which established a new quarterly record for the company," said
Jean-Jacques Bienaime, chairman, chief executive officer and president of
Genencor.  "Market acceptance of new products, expansion of our core enzyme
business and favorable currency have produced strong product revenue growth
throughout the year.  In addition to solid expansion in its core markets,
Genencor has exciting growth opportunities in safety and protection, biomass
conversion, personal care, the Silicon Biotechnology(TM) platform and health
care, providing us with confidence in the future growth of our company.
Although we continue to look into selective partnering opportunities as the
financial strength of the company grows, we are reducing our dependence on
third party research funding so as to retain more of the value created by our
technology. This should help reduce future total revenues variability," said
Bienaime.

Bioproducts

During the third quarter of 2004, Genencor's Bioproducts segment set a
quarterly product revenue record with gains noted in all regions.  Assisted by
the market's acceptance of new products, particular strength was seen in the
fermentation alcohol, carbohydrate processing (formerly referred to as
sweeteners) and the food, feed and specialty categories, with double-digit
growth in the Asia Pacific, European, and Latin American regions.

As announced during the quarter, scientists from Genencor and Stanford Linear
Accelerator Center announced an important breakthrough in the ability to
compute, in record time, all possible metabolic behaviors open to a
microorganism.  This development is expected to facilitate engineering of a
microorganism to assist in the creation of an array of desired products. A
significant decrease in the time to compute the reaction spectrum paves the way
for new applications in metabolic engineering.  Moving from a small target
molecule back to the pathway and then back to the gene, industrializes the
process of developing co-products in, for example, a biorefinery.

Genencor's progress in developing low cost enzymes for cellulosic biomass
conversion to ethanol has exceeded the contractual goals and expectations of
the National Renewable Energy Laboratory (NREL) and the Department of Energy.
Based upon NREL's model, Genencor scientists have achieved an estimated enzyme
cost in the range of $0.10 to $0.20 per gallon of bioethanol, which represents
an approximate 30-fold improvement in enzyme cost for the process.  NREL is
expected to validate these results at pilot scale within the next quarter.
While other technology challenges continue to be addressed, Genencor believes
that the enzymatic conversion of cellulose into fermentable sugars is no longer
the major technical hurdle.  As biorefineries come on line, Genencor expects to
be ready with technology that is instrumental in the production of bioethanol.

During the quarter Genencor continued its progress in commercializing new
products for the safety and protection opportunities within its specialty
business category.  Biodefense enzymes for the neutralization of
organophosphate nerve agents, like sarin, are expected to generate initial
revenue in the near term.  It is expected that the military and civilian first
responders such as fire and police departments plus hazardous materials teams
will be the first targeted customer base for this product.  Genencor's
proprietary enzyme system for the elimination of prion infectivity also
continues to advance through development and is currently under regulatory
review.  Once approved, the company expects to commercialize the product in
2005 for use in hospitals and other medical settings, along with future
possible uses in the meat packing and processing industries.

Within the Bioproducts segment, progress continues with several growth
opportunities, including personal care and the Silicon Biotechnology(TM)
platform.  Focusing on oral, hair and skin care applications, leading consumer
products companies are evaluating Genencor's performance ingredients.
Biosensors for the home medical market is one of the early targets of the
technology and business efforts being employed in the Silicon Biotechnology(TM)
collaboration with Dow Corning.

As announced earlier this month, Genencor was included in Forbes Magazine list
of the "200 Best Small Companies."  To qualify, companies with sales between $5
million and $750 million must have demonstrated a consistent pattern of
positive growth during a five-year period as well as over the last 12 months. 
This is Genencor's first appearance on Forbes' elite list.

Health Care

During the third quarter of 2004, Genencor's Health Care segment continued to
make progress in advancing its first product candidate for treating cancer
through development toward filing an investigational new drug application (IND)
in late 2005.  This product candidate, GCR-8886/2141, is intended to target
significant unmet medical needs in colorectal and pancreatic carcinoma. In
support of the IND-enabling program, key steps are underway at Genencor's newly
opened cGMP facility in Rochester, New York toward preparing protein drug
supply for toxicology studies, and preparation of prodrug supply by selected
cGMP vendors is also underway.

With a focus on targeted cancer biotherapeutics, Genencor's Health Care
research team continues building and qualifying additional follow-on leads,
expanding the range of cancer targets served by its product development
pipeline.  As part of this research effort, Genencor has established a
collaboration with Ablynx, a biotechnology company whose proprietary Nanobody
technology platform could be helpful in discovering new targeting sequences
against specific tumor targets that may be incorporated by Genencor into its
cancer drug candidates.

As previously announced, the strategy of Genencor's Health Care segment is to
create a biotherapeutics product pipeline which is focused entirely on the
oncology market.  To support this strategy, the company continues to
investigate new in-licensing opportunities in oncology.

2004 Guidance

Annual guidance remains unchanged from last quarter. Total revenues for 2004
are estimated to be in the range of $400 million to $406 million. Genencor
anticipates research and development expenses for the full year 2004 to fall in
the range of $73 million to $74 million. Operating income is expected to be in
the $41 million to $42 million range. Genencor estimates net income available
to common stockholders of between $24 million and $25 million, or between $0.38
and $0.40 earnings per diluted share, in 2004. Genencor does not provide
quarterly guidance.

About Genencor

Genencor International is a diversified biotechnology company that develops and
delivers innovative products and services into the health care,
agri-processing, industrial and consumer markets. Using an integrated set of
technology platforms, Genencor's products deliver innovative and sustainable
solutions to many of the problems of everyday life.

Genencor traces its history to 1982 and has grown to become a leading
biotechnology company, with over $380 million in year 2003 annual revenues.
Genencor has principal offices in Palo Alto, California; Rochester, New York;
and Leiden, the Netherlands.

This press release contains forward-looking statements as defined by the
Private Securities Litigation Reform Act of 1995. These include statements
concerning plans, objectives, goals, strategies, future events or performance
and all other statements which are other than statements of historical fact,
including without limitation, statements containing words such as "believes,"
"anticipates," "expects," "estimates," "projects," "will," "may," "might" and
words of a similar nature. Such statements involve risks and uncertainties that
could cause actual results to differ materially from those projected. Some
important factors that could cause actual results to differ include dependence
on the efforts of third parties, such as Dow Corning; dependence on new and
uncertain technology and its uncertain application to new business ventures;
regulatory actions or delays, such as those pending on Genencor's prion
decontamination technology, or uncertainties related to product development,
testing or manufacturing; ability to form and maintain strategic alliances;
ability to complete certain transactions and to realize anticipated benefits
from acquisitions; dependence on certain intellectual property rights of both
Genencor and third parties, such as Ablynx;  the competitive nature of
Genencor's industry and risks of obsolescence of certain technology; and the
high risk nature of efforts to develop viable products for the health care
market including the possibility that clinical or preclinical testing may
reveal unsuccessful results or undesirable side effects. These and other risk
factors are more fully discussed in Genencor's most recent Annual Report on
Form 10-K and Quarterly Report on Form 10-Q filed with the United States
Securities and Exchange Commission. The forward-looking statements contained in
this release represent the judgment of Genencor as of the date of this report.
Genencor disclaims, however, any intent or obligation to update any
forward-looking statements.

Conference Call Information

You are invited to listen to Genencor's third quarter financial results
conference call that will be broadcast live over the Internet on October 28 at
5:00 p.m., EDT, with Jean-Jacques Bienaime, chairman, chief executive officer
and president of Genencor, and Raymond J. Land, senior vice president and chief
financial officer of Genencor. The company will discuss forward-looking
information and review financial results on this call. To access the webcast,
please log on to the Internet at
http://www.shareholder.com/genencor/medialist.cfm . Please connect to the
website at least 15 minutes prior to the call to ensure adequate time to
register and log on.  The webcast will be made available at this URL, as well
as posted to the "Investor Relations" section of Genencor's website,
http://www.genencor.com/. You may also dial-in to the conference call at
800-450-0785 (domestic) or 612-332-0637 (international). Please call in
approximately ten minutes before the call is scheduled to begin.

              Genencor International, Inc. and Subsidiaries
             Condensed Consolidated Statements of Operations
              (Amounts in thousands, except per share data)


                             Three Months Ended        Nine Months Ended
                               September 30,             September 30,
                             2004          2003        2004        2003
                                 (unaudited)             (unaudited)
  Revenues:
   Product revenue           $99,469     $89,795    $287,181    $269,577
   Fees and royalty revenues   2,385       4,349      18,968      16,575
    Total revenues           101,854      94,144     306,149     286,152

  Operating expenses:
   Cost of products sold      58,366      52,096     163,862     154,723
   Research and development   18,450      18,315      52,857      51,608
   Sales, marketing and
    business development       9,680       8,320      27,366      23,921
   General and administrative 10,506       7,946      28,420      23,729
   Amortization of intangible
    assets                     1,159       1,414       3,482       4,304
   Other expense/(income)      (339)       (351)     (8,334)         408
   Total operating expenses   97,822      87,740     267,653     258,693

  Operating income             4,032       6,404      38,496      27,459

  Non operating expenses/
   (income):
   Investment expense             --          --          --       1,018
   Interest expense            1,163       1,539       3,705       5,128
   Interest income             (897)       (601)     (2,590)     (3,004)
   Total non operating
    expenses/(income)            266         938       1,115       3,142


  Income before income taxes   3,766       5,466      37,381      24,317

  Provision for income taxes     753       1,367       7,476       6,079

  Net income                  $3,013     $ 4,099    $ 29,905     $18,238
  Net income available
   to holders of common stock $1,195     $ 2,281    $ 24,449     $12,782

  Earnings per common share:
   Basic                       $0.02       $0.04       $0.41       $0.22
   Diluted                     $0.02       $0.04       $0.40       $0.21

  Weighted average common
   shares:
   Basic                      59,468      58,895      59,346      58,655
   Diluted                    61,199      61,859      61,100      60,296


              Genencor International, Inc. and Subsidiaries
                  Condensed Consolidated Balance Sheets
                          (Amounts in thousands)


                                              September 30,   December 31,
                                                   2004            2003
                                                                (unaudited)

  Assets
  Current assets:
   Cash and cash equivalents                      $167,663       $166,551
   Other current assets                            165,646        158,661
    Total current assets                           333,309        325,212
  Property, plant and equipment, net               227,515        232,902
  Goodwill                                          29,381         29,380
  Intangible assets, net                            43,205         47,075
  Other assets                                      71,808         77,853
  Total assets                                    $705,218       $712,422


  Liabilities, Redeemable Preferred Stock
   and Stockholders' Equity
  Current liabilities                              $93,380       $102,168
  Long-term debt and capital lease obligations      35,131         65,308
  Other long-term liabilities                       32,383         32,259
    Total liabilities                              160,894        199,735

  Redeemable preferred stock                       182,482        177,025

  Stockholders' equity                             361,842        335,662
  Total liabilities, redeemable preferred
   stock and stockholders' equity                 $705,218       $712,422


              Genencor International, Inc. and Subsidiaries
                      Unaudited Segment Information
                          (Amounts in thousands)

  For the three months ended September 30, 2004

               Bioproducts     Health    Segment   Corporate Consolidated
                                Care     Subtotal   and Other     Totals


  Product
   revenue        $99,469         $--     $99,469        $--     $99,469
  Fees and
   royalty
   revenues         2,235         150       2,385         --       2,385
  Total revenues  101,704         150     101,854         --     101,854
  Research
   and development 12,229       6,221      18,450         --      18,450
  Operating
   income/(loss)   11,553     (7,753)       3,800        232       4,032


  For the three months ended September 30, 2003

               Bioproducts     Health    Segment   Corporate Consolidated
                                Care      Subtotal   and Other    Totals


  Product
   revenue       $89,795          $--     $89,795         $--     $89,795
  Fees and
   royalty
   revenues        4,149          200       4,349          --       4,349
  Total revenues  93,944          200      94,144          --      94,144
  Research and
   development    10,925        7,390      18,315          --      18,315
  Operating
   income/(loss)  15,379      (9,183)       6,196         208       6,404


  For the nine months ended September 30, 2004

               Bioproducts     Health    Segment   Corporate  Consolidated
                                Care      Subtotal   and Other    Totals

  Product
   revenue       $287,181         $--    $287,181         $--    $287,181
  Fees and
   royalty
   revenues         8,593      10,375      18,968          --      18,968
  Total revenues  295,774      10,375     306,149          --     306,149
  Research and
   development     35,403      17,454      52,857          --      52,857
  Operating
   income/(loss)   49,707    (11,334)      38,373         123      38,496


  For the nine months ended September 30, 2003

               Bioproducts     Health    Segment   Corporate Consolidated
                                Care      Subtotal   and Other    Totals



  Product
   revenue       $269,577           $--   $269,577        $--    $269,577
  Fees and
   royalty
   revenues        16,150           425     16,575         --      16,575
  Total revenues  285,727           425    286,152         --     286,152

  Research and
   development     32,159        19,449     51,608         --      51,608
  Operating
   income/(loss)   52,174      (24,625)     27,549       (90)      27,459


DATASOURCE: Genencor International, Inc.



CONTACT:  investors, Tom Rathjen, [phone], or media,

Valerie Tucker, [phone], both of Genencor



Web site:  http://www.genencor.com/

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