Roche Makes $44B Offer for Control of Genentech

Jul 23, 2008

Roche announced that it has made an offer to acquire outstanding shares of biotech Genentech for $89 per share, or nearly $44 billion—a 19 percent premium to last month's closing price. Roche CEO Severin Schwan told investors this is a fair and generous offer, considering that Roche already has a controlling stake in Genentech. The offer was presented to Genentech's independent directors on Monday; Roche plans to enter into discussions shortly.

"This is not a mega merger or an acquisition in the typical sense, as we've seen in other parts of the industry, focused on cost rationalization," said Schwan. "We will strive for efficiency, but this is, above all, about strengthening how we innovate and bring novel medicines [to market] for the long term."

Since Roche took controlling interest in Genentech in 1990, the biotech has grown from a 2,000-person staff with a half a billion dollars in sales to a $12 billion revenue-producer that resembles a Big Pharma company more than a small biotech venture.

Roche plans to allow Genentech to continue its culture of diverse research, which will be kept independent. In addition, the combination of the two organizations will include sharing of IT and external partnerships. "We have a enormous respect for the company's achievements and for the unique, science-driven culture behind its success," said Schwan.

"Once we have 100 percent of Genentech, then a lot of the intellectual property within the group can travel without boundaries," said William M. Burns, CEO of Division Roche Pharma. For example, Genentech personnel will be able to access Roche-owned tools such as small molecule libraries and antibody technology platforms.

Schwan did note that some jobs could be transitioned or eliminated. Operational efficiencies in late-stage development, manufacturing, commercialization, and administration will be combined to reduce complexity and reduce redundancy, according to Schwan. Manufacturing facilities will also be streamlined, with a principal building in San Francisco and another operation in New Jersey. In addition, the sales team may be increased to cover new products.

Roche will run the commercial operations in the United States from San Francisco and will consolidate all headquarters functions to its West Coast base. The Nutley, NJ plant will close, furthering pharma's exodus from the Garden State.