Pharmaprojects R&D Pipeline News Feed
Roche purchases Genentech
07 Apr 2009
On Thursday 26 March 2009, the Swiss pharmaceutical company Roche completed its tender offer for Genentech shares, concluding the US$46 billion takeover bid of the US-based biotechnology firm. Shareholders received US$95 per share in this deal. Combined with the 56% of shares originally owned by Roche, this takes its ownership of Genentech to 93.2%, with a further 3% of shares are guaranteed within 3 business days. Roche intends to enter a short-form merger under Delaware law, to make Genentech a wholly-owned subsidiary of the Roche group.
The road to completion of the acquisition has been rocky, with an initial share purchase price of US$89 set by Roche being rejected by Genentech. Both companies quietly kept up negotiations, with the end result of US$95 per share valuing Genentech at just over US$100 billion. To put this in perspective, this is close to the $109 billion total value of Merck & Co’s now completed acquisition of Schering-Plough combined with the planned acquisition of Wyeth by Pfizer, expected to go through by the end of 2009.
Genentech were initially surprised by the sudden takeover bid made by Roche on 21 July 2008, only being informed of the move the night before the public announcement. Up until then, despite a long standing history together, Genentech had remained independent from Roche, maintaining its reputation as a stand-alone, pioneering biotechnology company in the Bay Area biotech cluster. The relationship between the two companies began in 1990, when Roche gained a majority stake in Genentech. Roche went on to buy Genentech outright in 1999, gaining all non-US marketing rights to its drugs. Roche then took Genentech public, selling 40% of the shares and recovering its original stake. Significantly, despite this history, Roche allowed Genentech to retain its independence, while benefiting from ever-increasing revenues from Genentech products it marketed outside the States. This fostered a unique and highly productive culture at Genentech, famed for being run primarily by scientists.
With the outright acquisition of Genentech, Roche gains valuable US marketing rights to significant drugs such as Avastin, as well as a free exchange of information between the two companies. Roche aims to streamline operations, cutting down on areas of overlap to reduce costs and refocus both companies, a common move in the industry at the moment. Since the first announcement many observers have voiced concerns that the science-focused, less structured Genentech environment will be crushed by full sublimation into the highly-structured Roche architecture. So far the Genentech approach has proved hugely successful, so in essence, why mess with a good thing? Roche, however, insisted from the first announcement of its intentions that it will retain the Genentech research structure, resisting full integration into the Roche research establishment, countering these arguments. Roche also announced plans to move its research facilities to the Genentech San Francisco site from its current New Jersey base, rather than vice versa.
For 30 years the unique culture and the consistent successes of Genentech have made it the biggest biotech firm in the world, and one of the most talked-about companies in the healthcare industry. Significant changes to its structure or practices could well have industry-wide repercussions, aside from within Genentech itself, making this one of the most closely-watched acquisitions to take place for some time.
