<PAGE>

                                UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                  FORM 10-K

(Mark One)
X      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934
       For the fiscal year ended December 31, 1998

       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
       EXCHANGE ACT OF 1934
       For the transition period from   to   .

                    Commission file number: 1-9813

                                GENENTECH, INC.


           Delaware                                         94-2347624
(State or other jurisdiction of                          (I.R.S. employer
incorporation or organization)                        identification number)

                 1 DNA Way, South San Francisco, California  94080
                (Address of principal executive offices and zip code)

                                    (650) 225-1000
                 (Registrant's telephone number, including area code)

         Securities registered pursuant to Section 12(b) of the Act:         

=============================================================================
  Title of Each Class               Name of Each Exchange on Which Registered
-----------------------------------------------------------------------------
Common Stock $.02 par value                 New York Stock Exchange
Callable Putable Common Stock               Pacific Exchange
$.02 par value
=============================================================================
Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days.  Yes  X    No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 
405 of Regulation S-K is not contained herein, and will not be contained, to 
the best of registrant's knowledge, in definitive proxy or information 
statements incorporated by reference in Part III of this Form 10-K or any 
amendment to this Form 10-K.  [   ]

The approximate aggregate market value of voting stock held by nonaffiliates 
of the registrant is $2,772,135,122 as of December 31, 1998. (A)

Number of shares of Common Stock outstanding as of December 31, 1998: 
  76,621,009
Number of shares of Callable Putable Common Stock outstanding as of
  December 31, 1998:   50,493,631

             Documents incorporated by reference:
                                                          PARTS INCORPORATED
                       DOCUMENT                               BY REFERENCE

(1) Annual Report to stockholders for the year ended                 II
    December 31, 1998 (specified portions)

(2) Definitive Proxy Statement with respect to the 1999             III
    Annual Meeting of Stockholders to be filed by Genentech, 
    Inc. with the Securities and Exchange Commission 
    (hereinafter referred to as "Proxy Statement")
-----------------------------------------------------------------------------
(A) Excludes 92,327,062 shares of Common Stock and Callable Putable Common 
    Stock held by Directors, Officers and stockholders whose ownership 
    exceeds five percent of either the Common Stock or Callable Putable 
    Common Stock outstanding at December 31, 1998 (the holdings of FMR Corp., 
    Goldman Sachs & Co., The Goldman Sachs Group, L.P. and Roche Holdings, 
    Inc. were calculated based on their filings as of December 31, 1998, with 
    the Securities and Exchange Commission pursuant to Section 13(g) of the 
    Securities Exchange Act of 1934.  As of January 22, 1999, it is 
    unconfirmed whether any other person or entity holds greater than five 
    percent of the registrant's Common Stock and Callable Putable Common 
    Stock.  Exclusion of shares held by any person should not be construed to 
    indicate that such person possesses the power, direct or indirect, to 
    direct or cause the direction of the management or policies of the 
    registrant, or that such person is controlled by or under common control 
    with the registrant.


<PAGE>

                                    PART I

ITEM 1.   BUSINESS

Genentech, Inc. (the Company) is a biotechnology company that uses human 
genetic information to discover, develop, manufacture and market human 
pharmaceuticals for significant unmet medical needs.  Twelve of the approved 
products of biotechnology stem from Genentech science.  The Company 
manufactures and markets eight products (see also the Actimmune section 
below) directly in the United States (U.S.).

Relationship with Roche Holdings, Inc.

On October 25, 1995, the Company and Roche Holdings, Inc. (Roche) entered 
into an agreement (the Agreement) to extend until June 30, 1999, Roche's 
option to cause the Company to redeem (call) the outstanding Callable Putable 
Common Stock (Special Common Stock) of the Company at predetermined prices.  
Should the call be exercised, Roche will concurrently purchase from the 
Company a like number of shares of Common Stock for a price equal to the 
Company's cost to redeem the Special Common Stock.  If Roche does not cause 
the redemption as of June 30, 1999, the Company's stockholders will have the 
option to cause the Company to redeem none, some, or all of their shares of 
Special Common Stock (and Roche will concurrently provide the necessary 
redemption funds to the Company by purchasing a like number of shares of 
Common Stock) within thirty business days commencing July 1, 1999.  See the 
Relationship with Roche Holdings, Inc. note in the Notes to Consolidated 
Financial Statements in the Company's 1998 Annual Report to Stockholders 
(Part II, Item 8 of this Form 10-K) for further information.

     In conjunction with the Agreement, F. Hoffman-La Roche Ltd (HLR), a 
subsidiary of Roche, was granted an option for ten years for licenses to use 
and sell certain of the Company's products in non-U.S. markets.  See below 
and in the Relationship with Roche Holdings, Inc. note in the Notes to 
Consolidated Financial Statements in the Company's 1998 Annual Report to 
Stockholders (Part II, Item 8 of this Form 10-K) for further information.

Products

The Company has developed seven products, co-developed one product and 
manufactures and markets eight of its products (see also the Actimmune 
section below) in the U.S.:  Herceptin, registered trademark, (trastuzumab) 
anti-HER2 antibody; Rituxan, registered trademark, (rituximab, C2B8) 
monoclonal antibody, which was co-developed with IDEC Pharmaceuticals 
Corporation (IDEC); Activase, registered trademark, (alteplase, recombinant) 
recombinant tissue plasminogen activator (t-PA); Protropin, registered 
trademark, (somatrem for injection) recombinant growth hormone; Nutropin, 
registered trademark, [somatropin (rDNA origin) for injection] growth 
hormone; Nutropin AQ, registered trademark, [somatropin (rDNA origin) 
injection] liquid formulation of growth hormone; Pulmozyme, registered 
trademark, (dornase alfa, recombinant) inhalation solution; and Actimmune, 
registered trademark, (interferon gamma-1b) recombinant interferon gamma.

     As part of the Agreement, the Company receives royalties on sales of its 
products in Canada, on sales of Pulmozyme outside of the U.S. and on sales of 
rituximab outside of the U.S. (excluding Japan) from HLR.  The Company 
receives royalties on sales of two of its products, growth hormone and t-PA, 
outside of the U.S. and Canada through other licensees.  The Company also 
receives worldwide royalties on five additional licensed products, and 
received royalties on one other licensed product for which those royalties 
expired in August 1998, that originated from the Company's technology and are 
marketed by other companies.

Herceptin:  In September 1998, the Company received U.S. Food and Drug 
Administration (FDA) approval to market Herceptin for use as first line 
therapy in combination with paclitaxel and as a single agent in second and 
third line therapy in patients with metastatic breast cancer who have tumors 
that overexpress the human epidermal growth factor receptor2 (HER2) protein.  
Herceptin is the first humanized monoclonal antibody for the treatment of 
HER2 overexpressing metastatic breast cancer and the second U.S. approval in 
this new class of monoclonal antibody biotherapeutic cancer drugs.  The first 
was Rituxan, which was approved in November of 1997.  Pursuant to an 
agreement entered into with the Company, HLR received exclusive marketing 
rights to Herceptin outside of the U.S.

Rituxan:  Rituxan is marketed in the U.S. for the treatment of relapsed or 
refractory low-grade or follicular, CD20-positive B-cell non-Hodgkin's 
lymphoma (B-cell NHL), a cancer of the immune system.  In November 1997, 
Rituxan was cleared for marketing in the U.S. by the FDA.  B-cell NHL 
affects approximately 250,000 people in the U.S. of which one-half are 
follicular or low-grade lymphoma patients.  A portion of these patients will 
have multiple relapses and may be eligible for Rituxan therapy.  Rituxan was 
co-developed by the Company and IDEC, from whom the Company licenses 
Rituxan, and was the first monoclonal antibody approved to treat cancer.  
IDEC and the Company are jointly promoting Rituxan in the U.S. and share 
responsibility for the manufacturing of the product.  HLR is responsible for 
marketing MabThera, trademark, (rituximab) in the rest of the world, 
excluding Japan.

     In December 1998, a letter was sent to physicians advising them of some 
deaths associated with administration of Rituxan.  As a result, the Company 
and IDEC have updated the Warning section of the package insert to include 
information on infusion-related reactions and cardiovascular events.

Activase:  T-PA is an enzyme that is produced naturally by the body to 
dissolve blood clots.  However, when a blood clot obstructs blood flow in the 
coronary artery and causes a heart attack, the body is unable to produce 
enough t-PA to dissolve the clot rapidly enough to prevent damage to the 
heart.  Through recombinant DNA technology, Genentech produces Activase, a 
recombinant form of t-PA, in sufficient quantity for therapeutic use.  The 
FDA approved Activase for marketing in the U.S. in 1987 for the treatment of 
acute myocardial infarction (AMI or heart attack); in 1990 for use in the 
treatment of acute pulmonary embolism (blood clots in the lungs); and in June 
1996 for the treatment of acute ischemic stroke (AIS) or brain attack (blood 
clots in the brain) within three hours of symptom onset. 

     In exchange for royalty payments, the Company has licensed marketing 
rights to a recombinant t-PA in Japan to Kyowa Hakko Kogyo, Ltd. (Kyowa) and 
Mitsubishi Kasei Corporation (Mitsubishi).  Kyowa and Mitsubishi are 
marketing forms of a recombinant t-PA under the trademarks Activacin, 
registered trademark, and GRTPA, registered trademark, respectively.  In a 
number of countries outside of the U.S., Canada and Japan, the Company has 
licensed t-PA marketing and manufacturing rights to Boehringer Ingelheim 
International GmbH (Boehringer).  The Company has also licensed certain 
rights to Boehringer regarding future sales of a second generation t-PA, TNK, 
which is currently under late stage development.  Boehringer markets a 
recombinant t-PA under the trademark Actilyse, registered trademark.

     In July 1998, the Company discontinued development of Activase for 
treating AIS in patients presenting later than three hours from symptom onset 
after the termination of two clinical trials, one in AIS patients presenting 
three to five hours from symptom onset, and another in AIS patients 
presenting zero to six hours from symptom onset.  Neither study showed 
clinical benefit.  Activase is approved for the treatment of AIS within three 
hours of symptom onset.

Protropin:  Human growth hormone is a naturally occurring human protein 
produced in the pituitary gland that regulates metabolism and is responsible 
for growth in children.  A recombinant growth hormone product developed by 
the Company, Protropin, was approved by the FDA in 1985 for marketing in the 
U.S. for the treatment of growth hormone inadequacy in children.

     In exchange for royalty payments, the Company licensed rights to 
recombinant growth hormone outside the U.S. and Canada to Pharmacia & 
Upjohn(P&U), which manufactures and markets recombinant growth hormone under 
the trademarks Somatonorm and Genotropin.  Under the terms of the agreement 
with P&U, commencing in late 1995, the Company has the right to sell growth 
hormone in most European countries and Japan and P&U has the right to sell 
their own growth hormone in the U.S. and Canada.

Nutropin:  Nutropin is a human growth hormone similar to Protropin; however, 
it does not have the additional N-terminal amino acid, methionine, found in 
the Protropin chemical structure.  Nutropin was approved in November 1993 and 
launched in January 1994 for marketing in the U.S. for the treatment of 
growth failure in children associated with chronic renal insufficiency (CRI) 
up to the time of renal transplantation.  CRI causes irreversible damage to 
the kidneys and a variety of other medical problems.  The condition affects 
an estimated 3,000 children in the U.S.  Nutropin has been designated as a 
U.S. Orphan Drug for treatment of growth failure in children with CRI.  
Nutropin was approved by the FDA in March 1994 for marketing for the 
treatment of growth hormone inadequacy in children. In December 1996, the FDA 
approved Nutropin for the treatment of short stature associated with Turner 
syndrome.  In December 1997, the Company received FDA approval to market 
Nutropin for the treatment of growth hormone deficiency in adults.  

Nutropin AQ:  In December 1995, the Company received regulatory approval to 
market Nutropin AQ, a liquid formulation of Nutropin, aimed at providing 
improved convenience in administration.  Nutropin AQ is the first and only 
liquid (aqueous) recombinant human growth hormone product available.  
Nutropin AQ was approved for the treatment of growth hormone inadequacy in 
children, growth hormone failure in children associated with CRI up to the 
time of renal transplantation and short stature associated with Turner 
syndrome. In December 1997, the Company received FDA approval to market 
Nutropin AQ for the treatment of growth hormone deficiency in adults. As part 
of the strategic alliance formed with Sumitomo Pharmaceuticals Co., Ltd. 
(Sumitomo) in December 1997, the Company has agreed to provide Sumitomo 
exclusive rights to develop, import and distribute in Japan, Nutropin AQ and 
a sustained release formulation of human growth hormone (see below in 
Products in Development).  

Pulmozyme:  Pulmozyme is marketed in the U.S. for the management of cystic 
fibrosis (CF), for which it has U.S. Orphan Drug designation.  In November 
1996, Pulmozyme was cleared for marketing by the FDA for the management of CF 
patients with advanced disease.  In February 1998, the Company received 
approval from the FDA for a label extension which includes the safety and 
alternative administration of Pulmozyme in children with CF under the age of 
five, adding to the product's previous approvals for patients five years of 
age and older.

Actimmune:  Actimmune is approved in the U.S. for the treatment of chronic 
granulomatous disease (CGD), a rare, inherited disorder of the immune system 
which affects an estimated 250 to 400 Americans.  Actimmune received 
designation by the FDA in 1990 as a U.S. Orphan Drug for the treatment of 
CGD.  During the quarter ended June 30, 1998, the Company licensed U.S. 
marketing and development rights to interferon gamma, including Actimmune, 
to Connetics Corporation (Connectics).  Following a transition period ending 
January 1999, the Company will no longer market Actimmune, and has agreed to 
supply bulk materials to Connetics at cost plus a mark-up and a royalty.  
The Company receives royalty payments from Boehringer from the sale of 
interferon gamma in certain countries outside of the U.S., Canada and Japan.

Licensed Products:  

In addition to the royalties mentioned above, the Company also receives 
royalties on the following products:

<TABLE>
<CAPTION>

Product                          Trademark      Company
----------------------------     ----------     -----------------------------
<S>                              <C>            <C>
Human growth hormone             Humatrope      Eli Lilly and Company (Lilly)
Recombinant interferon alpha     Roferon-A      HLR
Hepatitis B vaccine              Recombivax     Merck and Company, Inc.
Hepatitis B vaccine              Engerix-B      Smith-Kline Beecham 
                                                  Pharmaceuticals 
Factor VIII                      Kogenate       Bayer Corporation
Bovine growth hormone            Posilac        Monsanto Corporation

</TABLE>

Under a December 1994 settlement agreement with Lilly regarding certain of 
the Company's patents, royalties of $30.0 million per year were payable to 
the Company through 1998, subject to possible offsets and contingent upon 
Humulin, registered trademark, continuing to be marketed in the U.S.  These 
royalty obligations have now expired.  Under a prior license agreement with 
Lilly, the Company received royalties from Lilly's sales of Humulin.  These 
royalty payments on Humulin sales expired in August 1998.

Products in Development:

As part of the Company's program of research and development (R&D), a number 
of other products are in various stages of development.  Product development 
efforts cover a wide range of disorders or medical conditions, including 
cancer, respiratory disorders, cardiovascular diseases, endocrine disorders, 
inflammatory and immune problems, and neurological disorders.

Below is a summary of products in clinical development:

<TABLE>
<CAPTION>

Product                            Description
-------------------------------    ---------------------------------------------
<S>                                <C>
Phase III
---------

Anti-IgE Antibody                  A humanized IgE monoclonal antibody designed 
                                   to interfere early in the process that leads 
                                   to symptoms of allergic asthma (being 
                                   developed in collaboration with Tanox 
                                   Biosystems, Inc. and Novartis Pharmaceuticals 
                                   Corporation).  Phase III development in both 
                                   allergic asthma and allergic rhinitis began 
                                   in 1998.

Neuleze, trademark,                A protein that may aid the treatment of 
(Nerve Growth Factor)              diabetic peripheral neuropathy (HLR has 
                                   exercised its option for this product outside 
                                   of the U.S.).  The Company is in the process 
                                   of concluding Phase III clinical trials.

Nutropin Depot, trademark,         A sustained release version of human growth 
(Sustained-Release Growth          hormone based on Alkermes' ProLease, 
  Hormone)                         registered trademark, injectable sustained 
                                   release drug delivery system designed to 
                                   reduce the need for daily injections (being 
                                   developed in collaboration with Alkermes, 
                                   Inc.).  The Company is currently preparing 
                                   FDA regulatory filings.

Pulmozyme Inhalation Solution      An approved treatment for the management of 
                                   CF in patients with mild, moderate or severe 
                                   disease.  The Company is conducting a trial 
                                   to determine the effect of Pulmozyme on 
                                   pulmonary functions in patients with early 
                                   stage CF. 

TNK-tPA                            A second generation t-PA that is a 
                                   selectively mutated version of natural t-PA.  
                                   This t-PA version may be faster acting, 
                                   easier to administer and may restore blood 
                                   flow faster.  The Company has completed 
                                   enrollment in Phase III clinical trials in 
                                   AMI patients (being developed in collaboration
                                   with Boehringer Ingelheim, GmbH.)

gp120                              A recombinant form of the gp120 envelope 
                                   protein of human immunodeficiency virus (HIV-1), 
                                   which may serve as the basis for the development 
                                   of a prophylactic HIV/Acquired Immune Deficiency 
                                   Syndrome (AIDS) vaccine.  Under a license 
                                   agreement entered into with VaxGen Inc. (VaxGen), 
                                   the Company is responsible for supplying 
                                   specified amounts of clinical quantities of 
                                   gp120 (and has an option to supply additional 
                                   clinical supplies); VaxGen is responsible for 
                                   conducting all clinical trials necessary for 
                                   worldwide product approvals.  Currently, 
                                   VaxGen is conducting phase III trials with 
                                   gp120.  The Company has separate options for 
                                   worldwide marketing rights and commercial 
                                   supply of gp120 in the event that gp120 is 
                                   approved as an AIDS vaccine. 

Xubix, trademark, (Sibrafiban)     An inhibitor of platelet aggregation that may 
 oral IIb/IIIa antagonist          be useful in the prevention of unwanted 
                                   clotting in certain cardiovascular conditions 
                                   (HLR is conducting global development of this 
                                   molecule, and the Company retains certain 
                                   opt-in rights with respect to the U.S.).

Phase II
--------
Anti-CD11a antibody                An antibody designed to block certain 
                                   immune cells as a potential treatment for 
                                   psoriasis (being developed in collaboration 
                                   with Xoma Corporation).

Anti-CD18 antibody                 An antibody designed to address problems 
                                   related to loss of blood flow.  The Company 
                                   is conducting Phase II clinical trials aimed 
                                   at increasing blood flow in AMI patients.

Anti-VEGF antibody                 An antibody developed to inhibit angiogenesis 
                                   (the formation of new blood vessels) as a 
                                   potential treatment for several types of 
                                   cancer.  In pre-clinical studies the anti-
                                   VEGF antibody resulted in decreased 
                                   vascularization and a decline in growth and 
                                   metastasis of a variety of solid tumors.  
                                   Phase II studies are ongoing in prostate 
                                   cancer, breast cancer, renal cell carcinoma, 
                                   lung cancer and colorectal cancer.

Herceptin                          An approved treatment for metastatic breast 
                                   cancer, Herceptin will also be evaluated for 
                                   broader application in breast cancer as well 
                                   as in other tumor types.  The Company is 
                                   planning to conduct Phase II studies alone or 
                                   in collaboration with HLR, the National Cancer 
                                   Institute or other clinical research groups.

Rituxan                            A monoclonal antibody marketed to treat 
                                   relapsed or refractory low-grade or 
                                   follicular, CD20-positive B-cell non-
                                   Hodgkin's lymphoma, a cancer of the immune 
                                   system.  The Company is in Phase II clinical 
                                   trials for the treatment of intermediate and 
                                   high-grade non-Hodgkin's lymphoma (being 
                                   developed in collaboration with IDEC).

Thrombopoietin (TPO)               A protein that is being studied for treatment 
                                   of thrombocytopenia, a reduction in clot-
                                   inducing platelets, in cancer patients 
                                   treated with chemotherapy.  This molecule has 
                                   been exclusively licensed to, and is being 
                                   co-developed for one indication with, P&U.

Vascular Endothelial Growth        A protein that ischemic tissues (tissues 
 Factor (VEGF)                     lacking in oxygen) secrete.  It binds to 
                                   receptors on nearby blood vessels and causes 
                                   angiogenesis, the formation of new blood 
                                   vessels.  The Company is currently 
                                   investigating the use of VEGF for the 
                                   treatment of coronary ischemia and is 
                                   currently in Phase II clinical trials. 

Phase I
-------
LDP-02                             A humanized monoclonal antibody for the 
                                   treatment of inflammatory bowel diseases 
                                   (licensed from and being developed in 
                                   collaboration with LeukoSite, Inc.).  The 
                                   Company is currently conducting Phase I 
                                   clinical trials in Canada and the United 
                                   Kingdom.

</TABLE>

In conjunction with the Agreement and revisions agreed upon in principle in 
the second quarter of 1997, HLR was granted an option for ten years for 
licenses to use and sell certain of the Company's products in non-U.S. 
markets (the License Agreement).  See the Relationship with Roche Holdings, 
Inc. note in the Notes to Consolidated Financial Statements in the Company's 
1998 Annual Report to Stockholders (Part II, Item 8 of this Form 10-K) for 
further information.

     In general, with respect to the Company's products, HLR pays a royalty 
of 12.5% until a product reaches $100.0 million in aggregate sales outside of 
the U.S., at which time the royalty rate on all sales increases to 15%. In 
addition, HLR has rights to, and pays the Company 20% royalties on, Canadian 
sales of Activase, Protropin, Nutropin, Pulmozyme and Actimmune, sales of 
Pulmozyme outside of the U.S. and sales of Rituxan outside of the U.S., 
excluding Japan.  The Company supplies its products to HLR, and has agreed to 
supply its products for which HLR has exercised its option, for sales outside 
of the U.S. at cost plus 20%.

In addition, in July 1998, the Company entered into an agreement with HLR to 
provide HLR exclusive marketing rights outside of the U.S. for Herceptin.  
Under the agreement, HLR paid $40.0 million and has agreed to pay cash 
milestones tied to future product development activities, to contribute 
equally with the Company up to a maximum of $40.0 million on global 
development costs and to make royalty payments on product sales.  As of 
December 31, 1998, no additional amounts have been paid.

In December 1997, the Company and Alteon Inc. (Alteon) entered into a 
collaborative agreement to develop and market pimagedine, an advanced 
glycosylation end-product formation inhibitor to treat kidney disease in 
diabetic patients.  Under the terms of the agreement, the Company licensed 
pimagedine and second generation compounds from Alteon and has made 
investments in Alteon stock of $37.5 million.  In 1998, as a result of 
unsuccessful clinical trials with pimagedine and the decline in the value of 
the Company's investment in Alteon, the Company wrote down $24.2 million of 
its marketable and nonmarketable equity investments in Alteon.  The Company 
is in discussions with Alteon as to the future direction of the 
collaboration.

The Company and CuraGen Corporation (CuraGen) entered into a research 
collaborative agreement in November 1997, whereby the Company invested $5.0 
million in equity of CuraGen and has agreed to provide a convertible equity 
loan to CuraGen of up to $26.0 million.  As of December 31, 1998, no loan 
amounts have been funded to CuraGen.

Also, in December 1997, the Company and LeukoSite Inc. (LeukoSite) entered 
into a collaboration agreement to develop and commercialize LeukoSite's LDP-
02, a humanized monoclonal antibody for the potential treatment of 
inflammatory bowel diseases.  Under the terms of the agreement, the Company 
made a $4.0 million equity investment in LeukoSite and has agreed to provide 
a convertible equity loan for approximately $15.0 million to fund Phase II 
development costs.  Upon successful completion of Phase II, if LeukoSite 
agrees to fund 25% of Phase III development costs, the Company has agreed to 
provide a second loan to LeukoSite for such funding.  As of December 31, 
1998, no loan amounts have been funded to LeukoSite.

Distribution

The Company has a U.S.-based pharmaceutical marketing, sales and distribution 
organization.  The Company's sales efforts are focused on specialist 
physicians based at major medical centers in the U.S.  In general, products 
are sold to distributors or directly to hospital pharmacies or medical 
centers.  The Company utilizes common pharmaceutical company marketing 
techniques, including advertisements, professional symposia, direct mail, 
public relations and other methods.

The Company's products are available at no charge to qualified patients under 
the Company's uninsured patient programs in the U.S.  The Company has 
established the Genentech Endowment for Cystic Fibrosis so qualified CF 
patients in the U.S. who need Pulmozyme can gain assistance in obtaining it.

During 1998, the Company provided certain marketing programs relating to 
Activase, including comprehensive wastage replacement and expired product 
programs for Activase that, subject to specific conditions, provides 
customers the right to return Activase to the Company for replacement related 
to both patient related product wastage and product expiration.  The Company 
maintains the right to renew, modify or discontinue the above programs.

As discussed in the Notes to Consolidated Financial Statements in the 
Company's 1998 Annual Report to Stockholders (Part II, Item 8 of this Form 
10-K), the Company had four major customers, including HLR, who provided over 
10% of total revenues. Also discussed in the note are revenues from foreign 
customers in 1998, 1997 and 1996.

Raw Materials

Raw materials and supplies required for the production of the Company's 
principal products are generally available in quantities adequate to meet the 
Company's needs.  

Proprietary Technology - Patents and Trade Secrets

The Company has a policy of seeking patents on inventions arising from its 
ongoing R&D activities.  Patents issued or applied for cover inventions 
ranging from basic recombinant DNA techniques to processes relating to 
specific products and to the products themselves.  The Company has either 
been granted patents or has patent applications pending which relate to a 
number of current and potential products including products licensed to 
others.  The Company considers that in the aggregate its patent applications, 
patents and licenses under patents owned by third-parties are of material 
importance to its operations.  Important legal issues remain to be resolved 
as to the extent and scope of available patent protection for biotechnology 
products and processes in the U.S. and other important markets outside of the 
U.S.  The Company expects that litigation will likely be necessary to 
determine the validity and scope of certain of its proprietary rights.  The 
Company is currently involved in a number of patent lawsuits, as either a 
plaintiff or defendant, and administrative proceedings relating to the scope 
of protection of its patents and those of others.  These lawsuits and 
proceedings may result in a significant commitment of Company resources in 
the future.  There can be no assurance that the patents the Company obtains 
or the unpatented proprietary technology it holds will afford the Company 
significant commercial protection.

In general, the Company has obtained licenses from various parties that it 
deems to be necessary or desirable for the manufacture, use or sale of its 
products.  These licenses (both exclusive and non-exclusive) generally 
require the Company to pay royalties to the parties on product sales.

The Company's trademarks, ACTIVASE, PROTROPIN, NUTROPIN, NUTROPIN AQ, 
PULMOZYME, HERCEPTIN and ACTIMMUNE in the aggregate are considered to be of 
material importance and are registered in the U.S. Patent and Trademark 
Office and in other countries throughout the world.

Royalty income recognized by the Company during 1998, 1997 and 1996 for 
patent licenses, know-how and other related rights amounted to $229.6 
million, $241.1 million and $214.7 million, respectively.  Royalty expenses 
for 1998, 1997 and 1996, were $66.3 million, $58.9 million and $58.9 million, 
respectively.

Competition

The Company faces competition, and believes significant long-term competition 
can be expected, from large pharmaceutical companies and pharmaceutical 
divisions of chemical companies as well as biotechnology companies.  This 
competition can be expected to become more intense as commercial applications 
for biotechnology products increase.  Some competitors, primarily large 
pharmaceutical companies, have greater clinical, regulatory and marketing 
resources and experience than the Company.  Many of these companies have 
commercial arrangements with other companies in the biotechnology industry to 
supplement their own research capabilities.

     The introduction of new products or the development of new processes by 
competitors or new information about existing products may result in price 
reductions or product replacements, even for products protected by patents.  
However, the Company believes its competitive position is enhanced by its 
commitment to research leading to the discovery and development of new 
products and manufacturing methods.  Other factors which should help the 
Company meet competition include ancillary services provided to support its 
products, customer service, and dissemination of technical information to 
prescribers of its products and to the health care community including 
payers.

     Over the longer term, the Company's collaborators' ability to 
successfully market current products, expand their usage and bring new 
products to the marketplace will depend on many factors, including but not 
limited to the effectiveness and safety of the products, FDA and foreign 
regulatory agencies' approvals for new indications, the degree of patent 
protection afforded to particular products, and the effect of managed care as 
an important purchaser of pharmaceutical products. 

Herceptin:  Herceptin is the first humanized monoclonal antibody for the 
treatment of HER2 overexpressing metastatic breast cancer and the second U.S. 
approval in this new class of monoclonal antibody biotherapeutic cancer 
drugs.  The first was Rituxan.

Rituxan:  Rituxan received designation as a U.S. Orphan Drug by the FDA in 
1994 for the treatment of B-cell NHL.  Genentech is aware of other 
potentially competitive biologic therapies in development.  Coulter 
Pharmaceuticals, Inc. (Coulter) recently filed for approval with the FDA with 
respect to one such product for a similar indication for which Rituxan is 
approved.

Activase:  The Company continues to face competition from Retavase, 
registered trademark, a thrombolytic agent.  Retavase received FDA approval 
in October 1996 for the treatment of AMI. The Company believes Retavase 
infringes on its patents and has filed a patent infringement action against 
Boehringer Mannheim (BM).  Centocor, Inc. (Centocor) purchased the U.S. and 
Canadian rights to Retavase from BM.  In addition, the market for 
thrombolytic therapy has declined as there is an increasing use of mechanical 
reperfusion in lieu of thrombolytic therapy for the treatment of AMI.  In 
April 1995, the FDA approved for marketing an accelerated dosage of Activase.  
In June 1996, the Company received clearance from the FDA to market Activase 
for the treatment of AIS or brain attack.  Activase is the first therapy to 
be indicated for the acute treatment of stroke.  In addition, the Company is 
conducting Phase III clinical trials on a second generation of t-PA.

     In March 1998, the Company received two new patents related to variant 
forms of t-PA.  Based on these patents, the Company filed an infringement 
action against Centocor in the Northern District of California which alleges 
that Centocor's sale, offer for sale, use in, and importation into, the U.S. 
of Retavase (Reteplase, recombinant), a t-PA, infringes these two new patents 
of the Company.  The Company is seeking a permanent injunction and damages.

     Genentech is aware of other companies actively pursuing the development 
for the U.S. market of nonrecombinant or recombinant t-PA or t-PA variants, 
and additional companies or combinations of companies pursuing the 
development of other types of potentially competitive thrombolytic agents. 

Protropin, Nutropin and Nutropin AQ:  Lilly received FDA approval in 1987 to 
market its growth hormone product for treatment of growth hormone inadequacy 
in children.  Three other companies - BioTechnology General (BTG), Novo 
Nordisk A/S (Novo) and P&U - received FDA approval in 1995 to market their 
growth hormone products, although BTG has been preliminarily enjoined from 
selling its product.  A fifth competitor, Serono Laboratories, Inc. (Serono), 
received FDA approval in October 1996 to market its growth hormone product.  
In the first quarter of 1997, Serono, Novo and P&U began selling their growth 
hormone products in the U.S. market.  In addition, three of the Company's 
competitors have received approval to market their existing human growth 
hormone products for additional indications. 

Pulmozyme:  Sales of Pulmozyme for the management of CF in the U.S., Canada 
and some countries in Europe began in early 1994.  In November 1996, 
Pulmozyme was cleared for marketing by the FDA for the management of CF 
patients with advanced disease; a condition that affects approximately 500 
patients in the U.S.  In February 1998, the Company received approval from 
the FDA for a label extension which includes the safety and alternative 
administration of Pulmozyme in children under the age of five with CF.  In 
accordance with the Agreement with Roche, in the fourth quarter of 1995, HLR 
obtained exclusive rights to sell Pulmozyme outside of the U.S., and the 
Company receives a royalty on such sales.

Actimmune:  Actimmune received designation as a U.S. Orphan Drug by the FDA 
in 1990 for the treatment of CGD.

Forward-Looking Statements 

The following section contains forward-looking statements that are based on 
the Company's current expectations.  Because the Company's actual results may 
differ materially from these and any other forward-looking statements made by 
or on behalf of the Company, this section also includes a discussion of 
important factors that could affect the Company's actual future results, 
including its product sales, royalties, contract revenues, expenses and net 
income.

Product Sales:  The Company's product sales may vary from period to period 
for several reasons including, but not limited to:  the overall competitive 
environment for the Company's products; the amount of sales to customers in 
the U.S.; the amount and timing of the Company's sales to HLR; the timing and 
volume of bulk shipments to licensees; the availability of third-party 
reimbursements for the cost of therapy; the effectiveness and safety of the 
products; the rate of adoption and use of the Company's products for approved 
indications and additional indications; and the potential introduction of new 
products and additional indications for existing products in 1999 and beyond.

Competition:  The Company faces growing competition in two of its 
therapeutic markets and expects new competition in a third.  First, Activase 
lost market share and could lose additional market share in the thrombolytic 
market to Centocor's Retavase and the resulting adverse effect on sales 
could be material.  Retavase received FDA approval in October 1996 for the 
treatment of AMI.  In addition, there is an increasing use of mechanical 
reperfusion in lieu of thrombolytic therapy for the treatment of AMI, which 
is expected to continue.  Second, in the growth hormone market, the Company 
continues to face increased competition from five other companies with 
growth hormone products, although one company has been preliminarily 
enjoined from selling its product.  As a result of this competition, the 
Company has experienced a loss in new patient market share.  Four of these 
competitors have also received approval to market their existing human 
growth hormone products for additional indications.  The Company expects 
that such competition could have an adverse effect on its sales of 
Protropin, Nutropin and Nutropin AQ and such effect could be material.  
Third, in the NHL market, Coulter recently filed for approval with the FDA 
with respect to a product for a similar indication for which Rituxan is 
approved.  Genentech is aware of other potentially competitive biologic 
therapies in development.

     Other competitive factors affecting the Company's product sales include, 
but are not limited to:  the timing of FDA approval, if any, of additional 
competitive products, pricing decisions made by the Company, the degree of 
patent protection afforded to particular products, the outcome of litigation 
involving the Company's patents and patents of competing companies for 
products and processes related to production and formulation of those 
products, the increasing use and development of alternate therapies, and the 
rate of market penetration by competing products.

Royalty and Contract Revenues:  Royalty and contract revenues in future 
periods could vary significantly from 1998 levels.  Major factors affecting 
these revenues include, but are not limited to:  HLR's decisions to exercise 
or not to exercise its option to develop and sell the Company's future 
products in non-U.S. markets and the timing and amount of related development 
cost reimbursements, if any; variations in HLR's sales and other licensees' 
sales of licensed products; fluctuations in foreign currency exchange rates; 
the initiation of other new contractual arrangements with other companies; 
the timing of non-U.S. approvals, if any, for products licensed to HLR and 
other licensees; whether and when contract benchmarks are achieved; and the 
conclusion of existing arrangements with other companies and HLR.

R&D:  The Company is committed to aggressive R&D investment to discover and 
develop new products.  The Company currently has several products in late-
stage clinical testing and anticipates that its R&D expenses will continue at 
a high percentage of revenues over the short-term.  Over the long-term, as 
revenues increase, R&D as a percent of revenues should decrease to the 20% to 
25% range.

     Successful pharmaceutical product development is highly uncertain and is 
dependent on numerous factors, many of which are beyond the Company's 
control. Products that appear promising in the early phases of development 
may fail to reach the market for numerous reasons: they may be found to be 
ineffective or to have harmful side effects in preclinical or clinical 
testing; they may fail to receive necessary regulatory approvals; they may 
turn out to be uneconomical because of manufacturing costs or other factors; 
or they may be precluded from commercialization by the proprietary rights of 
others or by competing products or technologies for the same indication.  
Success in preclinical and early clinical trials does not ensure that large 
scale clinical trials will be successful.  Clinical results are frequently 
susceptible to varying interpretations that may delay, limit or prevent 
regulatory approvals.  The length of time necessary to complete clinical 
trials and to submit an application for marketing approval for a final 
decision by a regulatory authority varies significantly and may be difficult 
to predict.  Factors affecting the Company's R&D expenses include, but are 
not limited to:  the number of and the outcome of clinical trials currently 
being conducted by the Company and/or its collaborators; the number of 
products entering into development from late-stage research; in-licensing 
activities, including the timing and amount of related development funding or 
milestone payments; and future levels of revenues.

Income Tax Provision:  The Company expects its effective tax rate to be at or 
near 35% for the next several years dependent upon several factors.  These 
factors include, but are not limited to, changes in tax laws and rates, 
interpretation of existing tax laws, future levels of R&D spending, the 
outcome of clinical trials of certain development products, the Company's 
success in commercializing such products, and potential competition regarding 
the products.

Uncertainties Surrounding Proprietary Rights:  The patent positions of 
pharmaceutical and biotechnology companies can be highly uncertain and 
involve complex legal and factual questions.  Accordingly, the breadth of 
claims allowed in such companies' patents cannot be predicted. Patent 
disputes are frequent and can preclude commercialization of products.  The 
Company has in the past been, is currently, and may in the future be involved 
in material patent litigation.  Such litigation is costly in its own right 
and could subject the Company to significant liabilities to third-parties 
and, if decided adversely, the Company may need to obtain third-party 
licenses at a material cost or cease using the technology or product in 
dispute.  The presence of patents or other proprietary rights belonging to 
other parties may lead to the termination of R&D of a particular product.  
The Company believes it has strong patent protection or the potential for 
strong patent protection for a number of its products that generate sales and 
royalty revenue or that the Company is developing; however, the courts will 
determine the ultimate strength of patent protection of the Company's 
products and those on which the Company earns royalties.

Year 2000:  The Company uses and relies on a wide variety of information 
technologies, computer systems and scientific and manufacturing equipment 
containing computer related components (such as programmable logic 
controllers and other embedded systems).  Some of the Company's older 
computer software programs and equipment are unable to distinguish between 
the year 1900 and the year 2000.  As a result, time-sensitive functions of 
those software programs and equipment may misinterpret dates after January 1, 
2000, to refer to the twentieth century rather than the twenty-first century.  
This could cause system or equipment shutdowns, failures or miscalculations 
resulting in inaccuracies in computer output or disruptions of operations, 
including, among other things, inaccurate processing of financial information 
and/or temporary inabilities to process transactions, manufacture products, 
or engage in similar normal business activities.

     The Company has a Year 2000 Project (Y2K Project) in place to address 
the potential exposures related to the impact on its computer systems and 
scientific and manufacturing equipment containing computer related components 
for the Year 2000 and beyond.  Approximately half of the Company's Year 2000 
(Y2K) scheduled work is complete. The remaining work is scheduled to be 
completed by the end of the third quarter of 1999.  The Y2K Project phases 
include:  (1) inventorying and prioritizing business critical systems; (2) 
Y2K compliance analysis; (3) remediation activities including repairing or 
replacing identified systems; (4) testing; and (5) developing contingency 
plans.

     An inventory of business critical financial, informational and 
operational systems, including manufacturing control systems, has been 
completed.  Compliance analysis is approximately 80% complete for these 
systems.  Remediation activities vary by department, however, on the average, 
remediation activities are approximately 50% complete.  Testing of the 
Company's information technology infrastructure is 60% complete.  Testing of 
business critical application programs began in the third quarter of 1998, 
and is scheduled to be complete by the third quarter of 1999.  Contingency 
planning will begin in the first quarter of 1999.  The Company believes that 
with the completed modifications, the Y2K issue will not pose significant 
operational problems for its computer systems and equipment.  However, if 
such modifications and conversions are not made, or are not completed in a 
timely fashion, the Year 2000 issue could have a material impact on the 
operations of the Company, the precise degree of which cannot be known at 
this time. 

     In addition to risks associated with the Company's own computer systems 
and equipment, the Company has relationships with, and is to varying degrees 
dependent upon, a large number of third parties that provide information, 
goods and services to the Company.  These include financial institutions, 
suppliers, vendors, research partners, governmental entities and customers.  
If significant numbers of these third parties experience failures in their 
computer systems or equipment due to Year 2000 non-compliance, it could 
affect the Company's ability to process transactions, manufacture products, 
or engage in similar normal business activities.  While some of these risks 
are outside the control of the Company, the Company has instituted programs, 
including internal records review and use of external questionnaires, to 
identify key third parties, assess their level of Year 2000 compliance, 
update contracts and address any non-compliance issues.

     The total cost of the Year 2000 systems assessments and conversions is 
funded through operating cash flows and the Company is expensing these costs 
as they are incurred.  The Company has created a mechanism to trace costs 
directly related to the Year 2000 issue and has budgeted funds to address the 
issues of assessment and conversion.  The financial impact of making the 
required systems changes cannot be known precisely at this time, but it is 
currently expected to be less than $10.0 million.  The actual financial 
impact could, however, exceed this estimate.

Liquidity:  The Company believes that its cash, cash equivalents and short-
term investments, together with funds provided by operations and leasing 
arrangements, will be sufficient to meet its foreseeable operating cash 
requirements.  In addition, the Company believes it could access additional 
funds from the capital and debt markets.  Factors affecting the Company's 
cash position include, but are not limited to, future levels of the Company's 
product sales, royalty and contract revenues, expenses, in-licensing 
activities, including the timing and amount of related development funding or 
milestone payments, and capital expenditures.

Roche Holdings, Inc.:  At December 31, 1998, Roche held approximately 65.3% 
of the Company's outstanding common equity.  The Company expects to continue 
to have material transactions with Roche, including royalty and contract 
revenues, product sales and joint product development costs.  See also 
Relationship with Roche Holdings, Inc. note in Notes to Consolidated 
Financial Statements in the Company's 1998 Annual Report to Stockholders 
(Part II, Item 8 of this Form 10-K) for a discussion of the terms of the put 
and call pursuant to the Agreement.

Market Risk:  The Company is exposed to market risk, including changes to 
interest rates, foreign currency exchange rates and equity investment prices.  
To reduce the volatility relating to these exposures, the Company enters into 
various derivative transactions pursuant to the Company's investment and risk 
management policies and procedures in areas such as hedging and counterparty 
exposure practices.  The Company does not use derivatives for speculative 
purposes.

A discussion of the Company's accounting policies for financial instruments 
and further disclosures relating to financial instruments is included in the 
Financial Review Section and Description of Business and Significant 
Accounting Policies and Financial Instruments notes in the Notes to 
Consolidated Financial Statements in the Company's 1998 Annual Report to 
Stockholders (Part II, Item 8 of this Form 10-K).

New Accounting Standard:  In June 1998, the Financial Accounting Standards 
Board issued Statement of Financial Accounting Standards (FAS) 133, 
"Accounting for Derivative Instruments and Hedging Activities," effective 
beginning in the first quarter of 2000.  FAS 133 establishes accounting and 
reporting standards for derivative instruments, including certain derivative 
instruments embedded in other contracts, and for hedging activities.  It 
requires companies to recognize all derivatives as either assets or 
liabilities on the balance sheet and measure those instruments at fair value.  
Gains or losses resulting from changes in the values of those derivatives 
would be accounted for depending on the use of the derivative and whether it 
qualifies for hedge accounting under FAS 133.  Based on the requirements of 
FAS 133, there may be changes to the balance sheet and reported assets and 
liabilities.  The Company is currently evaluating the impact of FAS 133 on 
its financial position and results of operations.

Credit Risk of Counterparties:  The Company could be exposed to losses 
related to the above financial instruments should one of its counterparties 
default.  This risk is mitigated through credit monitoring procedures.

Legal Proceedings:  The Company is a party to various legal proceedings 
including patent infringement cases and other matters.  See the Leases, 
Commitments and Contingencies note in the Notes to Consolidated Financial 
Statements in the Company's 1998 Annual Report to Stockholders (Part II, Item 
8 of this Form 10-K) for further information.

Government Regulation

The pharmaceutical industry is subject to stringent regulation with respect 
to product safety and efficacy by various federal, state and local 
authorities.  Of particular significance are the FDA's requirements covering 
research and development, testing, manufacturing, quality control, labeling 
and promotion of drugs for human use.  A pharmaceutical product cannot be 
marketed in the U.S. until it has been approved by the FDA, and then can only 
be marketed for the indications and claims approved by the FDA.  As a result 
of these requirements, the length of time, the level of expenditures and the 
laboratory and clinical information required for approval of a NDA (New Drug 
Application) or a BLA (Biologics License Application) are substantial and can 
require a number of years, although recently revised regulations are designed 
to reduce somewhat the time for approval of new products.

Although it is difficult to predict the ultimate effect, if any, these 
matters or any other pending or future legislation, regulations or government 
actions may have on its business, the Company believes that the development 
of new and improved products which address unmet medical needs should enable 
it to compete effectively within this environment.

Research and Development

A major portion of the Company's operating expenses to date have been related 
to the R&D of products either on its own behalf or under contracts.  During 
1998, 1997 and 1996 the Company's R&D expenses were $396.2 million, $470.9 
million and $471.1 million, respectively.  The Company has sponsored 
approximately 93%, 86% and 89% of its research and development for the years 
1998, 1997 and 1996, respectively.

The Company's R&D efforts have been the primary source of the Company's 
products.  The Company intends to maintain its strong commitment to R&D as an 
essential component of its product development effort.  Licensed technology 
developed by outside parties is an additional source of potential products.

Human Resources

As of December 31, 1998, the Company had 3,389 employees.

Environment

The Company seeks to comply with all applicable statutory and administrative 
requirements concerning environmental quality.  The Company has made, and 
will continue to make, the expenditures for environmental compliance and 
protection.  Expenditures for compliance with environmental laws have not had 
and are not expected to have a material effect on the Company's capital 
expenditures, results of operation, financial position or competitive 
position. 


ITEM 2.   PROPERTIES

The Company's primary facilities are located in a research and industrial 
park in South San Francisco, California in both leased and owned properties.  
The Company currently occupies twenty-two buildings for its research and 
development, manufacturing, marketing and administrative activities.  
Fourteen of the buildings are owned property and eight are leased.  The 
Company has made and continues to make improvements to these properties to 
accommodate its growth.  In addition, the Company owns approximately 17 acres 
adjacent to its current facilities that may be used for future expansion.  In 
1995, the Company began development of a new manufacturing facility of 
approximately 309.2 thousand square feet in Vacaville, California under an 
operating lease arrangement.  The project is expected to be operational by 
the third quarter of 1999, with licensure expected thereafter.  The Company 
also has leases for certain additional office facilities in several locations 
in the U.S.

The Company believes its facilities are in good operating condition and that 
the real property owned or leased, combined with the new Vacaville site, 
currently conducting start-up and validation checks, are adequate for all 
present and near term uses although additional manufacturing capacity may be 
added on the Vacaville site dependent on the success of products in clinical 
trials.  The Company believes any additional facilities could be obtained or 
constructed with the Company's capital resources.


ITEM 3.   LEGAL PROCEEDINGS

Contingencies:  The Company is a party to various legal proceedings, 
including patent infringement cases involving human growth hormone products 
and Activase, registered trademark, and other matters.

In July 1997, an action was filed in the U.S. District Court for the Northern 
District of California alleging that the Company's manufacture, use and sale 
of its Nutropin, registered trademark, human growth hormone products 
infringed a patent (the Goodman Patent) owned by the Regents of the 
University of California (UC).  This action is substantially the same as a 
previous action filed in 1990 against the Company by UC alleging that the 
Company's manufacture, use and sale of its Protropin, registered trademark, 
human growth hormone products infringed the Goodman Patent.  The 1997 case 
has been stayed pending the conclusion of the 1990 case, which is expected to 
commence trial in April 1999.

Based upon the nature of the claims made and the information available to 
date to the Company and its counsel through investigations and otherwise, the 
Company believes the outcome of these actions is not likely to have a 
material adverse effect on the financial position, results of operations or 
cash flows of the Company.  However, were an unfavorable ruling to occur in 
any quarterly period, there exists the possibility of a material impact on 
the net income of that period.  

In addition to the above, in 1995, the Company received and responded to 
grand jury document subpoenas from the U.S. District Court for the Northern 
District of California for documents relating to the Company's past clinical, 
sales and marketing activities associated with human growth hormone.  In 
February 1997, February 1998 and October 1998, the Company received grand 
jury document subpoenas from the same court related to the same subject 
matter.  The government is actively investigating this matter, and the 
Company is a target of that investigation.  At this time, the Company cannot 
reasonably estimate a possible range of loss, if any, that may result from 
this investigation due to uncertainty regarding the outcome.


ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.


<PAGE>

                                GENENTECH, INC.

                               EXECUTIVE OFFICERS

The executive officers of the Company and their respective ages (ages as of 
December 31, 1998) and positions with the Company are as follows: 

<TABLE>
<CAPTION>

Name                              Age   Position
-------------------------------   ---   ------------------------------------
<S>                               <C>   <C>
Arthur D. Levinson, Ph.D.         48    President and Chief Executive Officer
William D. Young                  54    Chief Operating Officer 
Louis J. Lavigne, Jr.             50    Executive Vice President and 
                                          Chief Financial Officer
Susan D. Hellmann, M.D., M.P.H.   41    Senior Vice President - Development and
                                          Chief Medical Officer
Dennis J. Henner, Ph.D.           47    Senior Vice President - Research
Judy Heyboer                      49    Senior Vice President, Human Resources
Stephen G. Juelsgaard             50    Senior Vice President, General Counsel and
                                          Secretary
W. Robert Arathoon, Ph.D.         46    Vice President - Process Sciences
Joffre B. Baker, Ph.D.            51    Vice President - Research Discovery
J. Joseph Barta                   51    Vice President - Quality
John G. Curd, M.D.                53    Vice President - Clinical Development
Stephn Dilly, M.D., Ph.D.         39    Vice President - Medical Affairs
Robert L. Garnick, Ph.D.          49    Vice President - Regulatory Affairs
Bradford S. Goodwin               44    Vice President - Finance 
Paula M. Jardieu, Ph.D.           48    Vice President - Pharmacological Sciences
Edmon R. Jennings                 51    Vice President - Corporate Development
Sean A. Johnston, Ph.D.           40    Vice President - Intellectual Property
Cynthia J. Ladd                   43    Vice President - Corporate Law and 
                                          Assistant Secretary
Walter Moore                      47    Vice President - Government Affairs
James P. Panek                    45    Vice President - Manufacturing, Engineering and 
                                          Facilities
Kimberly J. Popovits              40    Vice President - Sales
Nicholas J. Simon                 44    Vice President - Business and 
                                          Corporate Development
David C. Stump, M.D.              49    Vice President - Clinical Research and
                                          Genentech Fellow
John M. Whiting                   43    Controller and Chief Accounting Officer

</TABLE>

All officers are elected annually by the Board of Directors.  There is no 
family relationship among any of the officers or directors.

Business Experience

Dr. Levinson was appointed President and Chief Executive Officer of the 
Company in July 1995.  He had previously served as Senior Vice President of 
the Company since January 1993.  Dr. Levinson has held a number of other 
positions, including Vice President, Research, Vice President, Research 
Technology, Director, Cell Genetics Department and Staff Scientist subsequent 
to joining the Company in May 1980 as a Senior Scientist.

Mr. Young was appointed Chief Operating Officer of the Company in April 1997.  
He previously served as Executive Vice President of the Company from January 
1996 to April 1997, as Senior Vice President from September 1988 to January 
1996 and as Vice President, Manufacturing and Process Sciences from April 
1983 to September 1988.  Mr. Young joined the Company in September 1980 as 
Director, Manufacturing from Eli Lilly and Company.

Mr. Lavigne was appointed Executive Vice President of the Company in March 
1997 and Chief Financial Officer in August 1988.  He previously served as 
Senior Vice President from July 1994 to March 1997 and as Vice President from 
July 1986 to July 1994.  Mr. Lavigne joined the Company in July 1982 from 
Pennwalt Corporation and became Controller in May 1983 and an officer of the 
Company in February 1984.

Dr. Hellmann was appointed Senior Vice President, Development in December 
1997 and Chief Medical Officer in December 1996.  She joined the Company in 
March 1995 as Clinical Scientist and subsequently held the positions of 
Associate Director from August 1995 to January 1996, Senior Director from 
January 1996 to March 1996 and Vice President, Medical Affairs from March 
1996 to November 1997.  Prior to joining the Company, she held the positions 
of Associate Director at Bristol-Myers Squibb from February 1993 to February 
1995 and Medical Oncologist at Lexington Oncology Associates from June 1992 
to February 1993.

Dr. Henner was appointed Senior Vice President, Research in May 1998.  He had 
served as Vice President, Research from April 1996 to May 1998, Vice 
President, Research Technology from July 1994 to April 1996, and as Senior 
Director, Research Technology from December 1990 to July 1994.  From May 1990 
to December 1990, Dr. Henner was Director and Senior Scientist, Cell Genetics 
Department.  Dr. Henner joined the Company in 1981 as a Scientist in 
Research.  Prior to joining the Company, he was at the Scripps Clinic and 
Research Foundation.

Ms. Heyboer joined the Company as Senior Vice President, Human Resources in 
August 1996.  Prior to joining the Company, she held the positions of Vice 
President, Employee Relations and later Senior Vice President at Acuson 
Corporation from October 1983 to July 1996.

Mr. Juelsgaard was appointed Senior Vice President in April 1998, Vice 
President and General Counsel in July 1994 and Secretary in April 1997.  He 
joined the Company in July 1985 as Corporate Counsel and subsequently served 
as Senior Corporate Counsel from 1988 to 1990, Chief Corporate Counsel from 
1990 to 1993, Vice President, Corporate Law from 1993 to 1994, and Assistant 
Secretary from 1994 to 1997.

Dr. Arathoon was appointed Vice President, Process Sciences in April 1996.  
Since joining the Company in 1983 from The Wellcome Foundation, Dr. Arathoon 
has held a series of positions of increasing responsibility, most recently as 
Senior Director, Process Sciences from November 1994 to April 1996.

Dr. Baker was appointed Vice President, Research Discovery in February 1997.  
He previously held the positions of Senior Director, Research Discovery from 
March 1993 to February 1997 and Director, Cardiovascular Research Development 
from September 1990 to September 1993.  He has also been a member of the 
Research Review Committee (RRC) since March 1993.

Mr. Barta was appointed Vice President, Quality in October 1998.  He 
previously held the positions of Senior Director, Quality from March to 
October 1998, Senior Director, Quality Assurance from January 1994 to 
February 1998, Senior Director, Pharmaceutical Manufacturing from September 
to December 1993, Director, Pharmaceutical Manufacturing from September 1989 
to August 1993, and Associate Director, Validation and Technical Services 
from June to September 1989.  He joined the Company in March 1988 as Manager, 
Validation.  Prior to joining the Company, he held positions of Director, 
Quality Assurance and Quality Control at Codon from May 1986 to March 1988 
and Group Validation Manager at Miles Laboratories, Inc. from September 1979 
to March 1986.

Dr. Curd was appointed Vice President, Clinical Development in October 1997.  
He previously held the positions of Senior Director, Medical Affairs from 
January 1996 to October 1997 and Director, Oncology, Immunology and 
Infectious Diseases from December 1991 to January 1996.

Dr. Dilly joined the company as Vice President, Medical Affairs in 
December 1998.  Prior to joining the company he held various positions 
with SmithKline Beecham Pharmaceuticals from August 1988, including 
Director and Vice President Neurosciences Therapeutic Unit from December 
1996 to December 1998, Director and Vice President CardioPulmonary 
Therapeutic Team from December 1994 to December 1996 and Group Director 
Neurosciences Therapeutic Unit from April 1993 to December 1994.

Dr. Garnick was appointed Vice President, Regulatory Affairs in February 
1998.  He had previously served as Vice President, Quality since April 1994 
and was Senior Director, Quality Control from 1990 to 1994 and Director, 
Quality Control from 1988 to 1990.  Dr. Garnick joined the Company in August 
1984 from Armour Pharmaceutical, where he worked from 1980.  Prior to that, 
he was Manager of Analytical Development at Merrell National Labs from 1977 
to 1980. 

Mr. Goodwin was appointed Vice President, Finance in October 1997.  He had 
served as Vice President, Finance and Controller since December 1996.  He has 
been a Vice President of the Company since July 1993 and served as Controller 
from June 1989 to October 1997.  He has also held the positions of Director, 
Financial Planning and Analysis, the Assistant Controller and the General 
Auditor.  Before joining the Company in April 1987, Mr. Goodwin worked for 
Price Waterhouse, a public accounting firm.

Dr. Jardieu was appointed Vice President, Pharmacological Sciences in 
February 1997.  She previously held the positions of Senior Director, 
Pharmacological Sciences from 1996 to February 1997, Staff Scientist from 
1992 to 1996, Senior Scientist from 1989 to 1992 and Scientist from 1986 to 
1989.

Mr. Jennings was appointed Vice President, Corporate Development in December 
1995.  He was Vice President, Sales and Marketing from January 1994 to 
December 1995, and had served as Vice President, Sales since January 1991.  
He joined the Company in September 1985 as Western Area Sales Manager.  Prior 
to joining the Company, Mr. Jennings was Western Region Sales Manager of 
Bristol-Myers' Oncology Division.

Dr. Johnston was appointed Vice President, Intellectual Property in June 
1998.  He joined the Company in October 1990 as Patent Counsel and 
subsequently held the positions of Senior Patent Counsel from October 1993 to 
October 1995, Senior Patent Counsel and Manager of Patent Litigation from 
October 1995 to April 1998, and Associate General Counsel, Patent Law from 
April 1998 to June 1998.  Prior to joining the Company, he served as a Law 
Clerk at the U.S. District Court for the Central District of California from 
September 1989 to September 1990 and was a Research Scientist at 
International Genetic Engineering, Inc. from December 1984 to August 1986.

Ms. Ladd was appointed Vice President, Corporate Law in February 1996 and 
Assistant Secretary in April 1997.  She joined the Company in 1989 as 
Corporate Counsel and subsequently held the positions of Senior Corporate 
Counsel from November 1990 to June 1993 and Chief Corporate Counsel from June 
1993 to February 1996.

Mr. Moore was appointed Vice President, Government Affairs in May 1998.  He 
joined the Company in September 1993 as Senior Director of Government 
Affairs.  Prior to joining the Company, Mr. Moore served as Manager of 
Governmental Relations at Eli Lilly and Company.

Mr. Panek was appointed Vice President, Manufacturing, Engineering and 
Facilities in July 1997.  He joined the Company in September 1982 and 
subsequently held the positions of Director, Engineering and Facilities since 
May 1988, Senior Director, Engineering and Facilities since July 1991, and 
Vice President, Engineering and Facilities since July 1993.

Ms. Popovits was elected Vice President, Sales in October 1994.  She was 
Director, Field Sales from January 1993 to October 1994 and Regional Manager, 
Northeast Region from October 1989 to January 1993.  Ms. Popovits was at 
American Critical Care, a Division of American Hospital Supply Corporation, 
for six years prior to joining the Company in November 1987 as Division 
Manager, Southeast Region. 

Mr. Simon was appointed Vice President of Business and Corporate Development 
in December 1995.  He had been Vice President of Business Development from 
December 1994 to December 1995, and was Senior Director of Business 
Development from December 1993 to December 1994.  He joined the Company in 
1989 as Director of Business Development from Xoma Corporation.

Dr. Stump was appointed Genentech Fellow in January 1996, in addition to his 
responsibilities as Vice President, Clinical Research, a position he has held 
since July 1995.  He joined the Company in July 1989 as Director, Clinical 
Research and was appointed Senior Director, Clinical Research in August 1991.  
Prior to joining the Company, Dr. Stump was Associate Professor of Medicine 
and Biochemistry at the University of Vermont.

Mr. Whiting was appointed Controller and Chief Accounting Officer in October 
1997.  He previously held the positions of Director, Financial Planning and 
Analysis from January 1997 to October 1997; Director, Operations, Financial 
Planning and Analysis from December 1996 to January 1997; Associate Director, 
Operations, Financial Planning and Analysis from March 1996 to December 1996; 
Plant Controller from April 1993 to March 1996; and Group Controller from 
July 1991 to April 1993.


<PAGE>
                                    PART II

ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
           MATTERS

     The section labeled "Common Stock, Special Common Stock and Redeemable 
Common Stock Information," and footnotes labeled "Relationship with Roche 
Holdings, Inc." and "Capital Stock" in the Notes to Consolidated Financial 
Statements of the Company's 1998 Annual Report to Stockholders are 
incorporated herein by reference.

ITEM 6.   SELECTED FINANCIAL DATA

     The section labeled "11-Year Financial Summary" of the Company's 1998 
Annual Report to Stockholders is incorporated herein by reference.

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATION

     The section labeled "Financial Review" of the Company's 1998 Annual 
Report to Stockholders is incorporated herein by reference.

ITEM 8.   CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The Consolidated Financial Statements and Notes to Consolidated 
Financial Statements, the Report of Ernst & Young LLP, Independent Auditors 
and the section labeled "Quarterly Financial Data (unaudited)" of the 
Company's 1998 Annual Report to Stockholders are incorporated herein by 
reference.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE

     Not applicable.


<PAGE>

                                    PART III 

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     (a) The sections labeled "Nominees" and "Section 16 (a) Beneficial 
Ownership Reporting Compliance" of the Company's Proxy Statement in 
connection with the 1999 Annual Meeting of Stockholders are incorporated 
herein by reference.

     (b) Information concerning the Company's Executive Officers is set forth 
in Part I of the Form 10-K.

ITEM 11.   EXECUTIVE COMPENSATION

     The sections labeled "Executive Compensation," "Compensation of 
Directors," "Compensation of Executive Officers," "Summary of Compensation," 
"Summary Compensation Table," "Stock Option Grants and Exercises," "Option 
Grants in Last Fiscal Year," "Aggregated Option Exercises in Last Fiscal Year 
and FY-End Option Values," "Long-Term Incentive Plans," "Long-Term Incentive 
Plans - Awards in Last Fiscal Year," "Loans and Other Compensation" and 
"Compensation Committee Interlocks and Insider Participation" of the 
Company's Proxy Statement in connection with the 1999 Annual Meeting of 
Stockholders are incorporated herein by reference.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 

     The sections labeled "Merger with Roche Holdings, Inc.," "Security 
Ownership of Certain Beneficial Owners," "Security Ownership of Management" 
and "Amount and Nature of Beneficial Ownership" of the Company's Proxy 
Statement in connection with the 1999 Annual Meeting of Stockholders are 
incorporated herein by reference.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 

     The section labeled "Certain Relationships and Related Transactions" of 
the Company's Proxy Statement in connection with the 1999 Annual Meeting of 
Stockholders is incorporated herein by reference.


<PAGE>

                                    PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) 1. Index to Financial Statements

     The following Financial Statements and supplementary data are included 
in the Company's 1998 Annual Report to Stockholders and are incorporated 
herein by reference pursuant to Item 8 of this Form 10-K.

     Consolidated Statements of Income for each of the three years in the 
       period ended December 31, 1998

     Consolidated Statements of Cash Flows for each of the three years in the 
       period ended December 31, 1998

     Consolidated Balance Sheets at December 31, 1998 and 1997

     Consolidated Statements of Stockholders' Equity for each of the three 
       years in the period ended December 31, 1998

     Notes to Consolidated Financial Statements

     Report of Ernst & Young LLP, Independent Auditors 

     Quarterly Financial Data (unaudited)


    2. Financial Statement Schedule

     The following schedule is filed as part of this Form 10-K:

Schedule II- Valuation and Qualifying Accounts for each of the three years in 
the period ended December 31, 1998.

All other schedules are omitted because they are not applicable, or not 
required, or because the required information is included in the consolidated 
financial statements or notes thereto.


<PAGE>

    3. Exhibits

Exhibit No.   Description
-----------   -----------

   3.1        Certificate of Incorporation.(1)

   3.2        Amended Certificate of Incorporation.(5)

   3.3        Restated By-Laws.(3)

   4.1        Indenture, dated March 27, 1987 ("Indenture") for U.S. 
              $150,000,000 5% Convertible Subordinated Debentures due 
              2002.(2)

   4.2        First Supplemental to Indenture, dated August 17, 1990.(3)

   4.3        Second Supplemental to Indenture, dated October 18, 1995. (6)

  10.1        Patent License Agreement with Columbia University dated October 
              12, 1988.(2)

  10.2        Amended and Restated Contract for the Sale and Distribution of 
              Protropin dated as of March 1, 1991.(4)

  10.3        Agreement and Plan of Merger, dated as of May 23, 1995, as 
              amended and restated, among the Company, Roche Holdings, Inc. 
              and HLR (U.S.) II, Inc. with exhibits.(5)

  10.4        Amended and Restated Governance Agreement, dated October 25, 
              1995, between the Company and Roche Holdings, Inc.(5)

  10.5        Agreement between Genentech and F. Hoffman-La Roche Ltd 
              regarding commercialization of Genentech's products outside the 
              United States dated as of October 25, 1995.(5)

  10.6        Guaranty Agreement between Genentech and Roche Holding, Ltd 
              dated as of October 25, 1995.(5)

  10.7        Amended and Restated Lease Agreement, dated December 8, 1995, 
              between the Company and BNP Leasing Corporation.(6)

  10.8        Amended and Restated Purchase Agreement, dated December 8, 
              1995, between the Company and BNP Leasing Corporation.(6)

  10.9        Guiding Principles for the Genentech/Roche Relationship.(7)

  13.1        1998 Annual Report to Stockholders.(9)

  23.1        Consent of Ernst & Young LLP, Independent Auditors.(9)

  27.1        Financial Data Schedule.(9)

  28.1        Description of the Company's capital stock.(1)

  99.1*       1984 Incentive Stock Option Plan, as amended and restated as of 
              October 16, 1996.(7)

  99.2*       1984 Non-Qualified Stock Option Plan, as amended and restated 
              as of October 16, 1996.(7)

  99.3*       Restated Relocation Loan Program.(4)

  99.4*       Restated 401(k) Plan.(6)

  99.5*       1990 Stock Option/Stock Incentive Plan, as amended and restated 
              as of October 16, 1996.(7)

  99.6*       Supplemental Plan.(4)

  99.7*       1994 Stock Option Plan, as amended and restated as of October 
              16, 1996.(7)

  99.8*       1996 Stock Option/Stock Incentive Plan, as amended and restated 
              as of October 16, 1996.(7)

  99.9*       Deferred Compensation Plan.(7)

  99.10*      1991 Employee Stock Plan, as amended April 10, 1997.(8)

  99.11*      Incentive Units Plan, as amended on October 8, 1998.(9)

* As required by Item 14(a)(3) of Form 10-K, the Company identifies this 
  Exhibit as a management contract or compensatory plan or arrangement of the 
  Company.



----------------
(1)   Filed as an exhibit to Annual Report on Form 10-K for the year ended
      December 31, 1986 and incorporated herein by reference.
(2)   Filed as an exhibit to Annual Report on Form 10-K for the year ended
      December 31, 1987 and incorporated herein by reference.
(3)   Filed as an exhibit to Annual Report on Form 10-K for the year ended
      December 31, 1990 and incorporated herein by reference.
(4)   Filed as an exhibit to Annual Report on Form 10-K for the year ended
      December 31, 1991 and incorporated herein by reference.
(5)   Filed as an exhibit to Form S-4 dated October 25, 1995 (registration
      statement no. 33-59949) and incorporated herein by reference.
(6)   Filed as an exhibit to Annual Report on Form 10-K for the year 
      ended December 31, 1995 and incorporated herein by reference. 
(7)   Filed as an exhibit to Annual Report on Form 10-K for the year 
      ended December 31, 1996 and incorporated herein by reference.
(8)   Filed as an exhibit to the Quarterly Report on Form 10-Q filed for the
      quarterly period ended March 31, 1997.
(9)   Filed with this document.

(b) Reports on Form 8-K
    There were no reports on Form 8-K filed for the quarter ended December 
    31, 1998.


<PAGE>

                                  SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the registrant has duly caused this report to be signed 
on its behalf by the undersigned, thereunto duly authorized.


                                        GENENTECH, INC.
                                        Registrant
Date:  January 22, 1999
                                        By:  /S/JOHN M. WHITING
                                            ---------------------------------
                                             John M. Whiting
                                             Controller and Chief Accounting
                                              Officer
                                             (Principal Accounting Officer)



                              POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears 
below constitutes and appoints Louis J. Lavigne, Jr., Executive Vice 
President and Chief Financial Officer, and John M. Whiting, Controller and 
Chief Accounting Officer, his attorney-in-fact, with the full power of 
substitution, for him in any and all capacities, to sign any amendments to 
this report, and to file the same, with exhibits thereto and other documents 
in connection therewith, with the Securities and Exchange Commission, hereby 
ratifying and confirming all that said attorney-in-fact, or his substitute or 
substitutes, may do or cause to be done by virtue hereof.


Pursuant to the requirements of the Securities Exchange Act of 1934, this 
report has been signed below by the following persons on behalf of the 
registrant and in the capacities and on the dates indicated:


         Signature                         Title                    Date
----------------------------    ---------------------------   ----------------


Principal Executive Officer:

  /S/ARTHUR D. LEVINSON         President, Chief Executive    January 22, 1999
---------------------------     Officer and Director
     Arthur D. Levinson


Principal Financial Officer:

  /S/LOUIS J. LAVIGNE, JR.      Executive Vice President      January 22, 1999
---------------------------     and Chief Financial Officer
     Louis J. Lavigne, Jr.




Director:

  /S/HERBERT W. BOYER           Director                      January 22, 1999
---------------------------
     Herbert W. Boyer

  /S/JONATHAN K.C. KNOWLES      Director                      January 22, 1999
---------------------------
     Jonathan K.C. Knowles

  /S/FRANZ B. HUMER             Director                      January 22, 1999
---------------------------
     Franz B. Humer

  /S/LINDA F. LEVINSON          Director                      January 22, 1999
---------------------------
     Linda F. Levinson

  /S/J. RICHARD MUNRO           Director                      January 22, 1999
---------------------------
     J. Richard Munro

  /S/DONALD L. MURFIN           Director                      January 22, 1999
---------------------------
     Donald L. Murfin

  /S/JOHN T. POTTS, JR.         Director                      January 22, 1999
---------------------------
     John T. Potts, Jr.

  /S/C. THOMAS SMITH, JR.       Director                      January 22, 1999
---------------------------
     C. Thomas Smith, Jr.

  /S/DAVID S. TAPPAN, JR.       Director                      January 22, 1999
---------------------------
     David S. Tappan, Jr.



<PAGE>
<TABLE>
<CAPTION
                                                                                SCHEDULE II

                                       GENENTECH, INC.
                              VALUATION AND QUALIFYING ACCOUNTS
                        Years Ended December 31, 1998, 1997 and 1996
                                       (in thousands)

                                                     Additions
                                     Balance at     Charged to                  Balance at
                                    Beginning of     Costs and                    End of
                                       Period        Expenses    Deductions(1)    Period
                                     ----------     ----------    ----------    ----------
<S>                                  <C>            <C>           <C>           <C>
Allowance for doubtful accounts 
 and returns:

  Year Ended December 31, 1998:      $  14,535      $  11,389     $  (8,506)    $  17,418
                                     ==========     ==========    ==========    ==========
  Year Ended December 31, 1997:      $   7,869      $  13,976     $  (7,310)    $  14,535
                                     ==========     ==========    ==========    ==========
  Year Ended December 31, 1996:      $   6,672      $  12,320     $ (11,123)    $   7,869
                                     ==========     ==========    ==========    ==========

Inventory reserves:


  Year Ended December 31, 1998:      $  12,055      $   5,405     $  (2,556)    $  14,904
                                     ==========     ==========    ==========    ==========
  Year Ended December 31, 1997:      $   9,279      $   5,901     $  (3,125)    $  12,055
                                     ==========     ==========    ==========    ==========
  Year Ended December 31, 1996:      $   6,909      $   4,950     $  (2,580)    $   9,279
                                     ==========     ==========    ==========    ==========

Reserve for nonmarketable
 equity securities and
 convertible debt:


  Year Ended December 31, 1998:      $   5,490      $   7,958     $  (1,305)    $  12,143
                                     ==========     ==========    ==========    ==========
  Year Ended December 31, 1997:      $   4,990      $     500     $       -     $   5,490
                                     ==========     ==========    ==========    ==========
  Year Ended December 31, 1996:      $   5,092      $       -     $    (102)    $   4,990
                                     ==========     ==========    ==========    ==========

<FN>

(1)  Represents amounts written off or returned against the allowance or reserves.
</FN>
</TABLE>




<PAGE>

                     INDEX OF EXHIBITS FILED WITH FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 1998


Exhibit No.   Description
-----------   -----------


    
   13.1       1998 Annual Report to Stockholders

   23.1       Consent of Ernst & Young LLP, Independent Auditors

   27.1       Financial Data Schedule

   99.11      Incentive Units Plan, as amended on October 8, 1998
Page 1

1998 FORM 10K - Draft One				01/22/99  @  1:38 PM