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.

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After years of owning a majority share in Genentech, Roche makes a play to buy out the rest of the biotech firm.

Roche Makes $44B Offer for Control of Genentech

Time to divvy up the cash. Last week, the 44 states involved in a massive lawsuit against Bristol Meyers Squibb for illegal off-label marketing of its anti-psychotic drug Abilify have begun distributing monies collected from the $515 million settlement.

Of the states that have begun seeing checks: Missouri will be receiving $11 million, the Massachusetts Medicaid program will take $9 million, Indiana will see $2 million, Georgia will get $12 million, and Delaware expects about a $1 million.

While some are pleased that the settlement is leading to financial reparations, others are concerned that these illegal off-label practices will continue. 

"The allegations were that these companies not only engaged in a pattern of kickbacks and false reporting to drive up both the sales and prices for its drugs, they also encouraged healthcare providers to prescribe a potent drug to both children and seniors for uses that had not been approved by the FDA," Georgia Attorney General Thurbert Baker stated in a release. 

BMS also agreed last week to pay New York City $7.5 million, and the state of New York $40 million for inflating wholesale prices of its drugs. The settlement stems from a 2004 lawsuit brought by the city against 44 pharmaceutical companies. 

"This lawsuit is one of several that the city brought in an effort to rein in the widespread fraudulent practices that unlawfully inflate the city's Medicaid costs," said Michael Cardozo, corporation counsel of the City of New York. "The settlement will return to the city almost the full value of its claims against Bristol-Myers Squibb. We are pleased at the successful resolution reached with one of the defendants, and hope to reach similarly successful resolutions with others."

Bristol-Meyers Squibb will pay more than half a billion dollars to settle charges that it illegally promoted the sale of the anti-psychotic drug Abilify for off-label uses.

Pharmaceutical Executive-07-23-2008

Roche Makes $44B Offer for Control of Genentech

BMS Settlement Cash Distributed