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 Two weeks ago at a J.P. Morgan Chase & Co. conference, Roche Holdings AG's CFO said its $89 per share bid for the 44% of Genentech Inc. it didn't already own was "on track." Translated from the Swiss, that must mean Genentech better hang on for dear life.
Roche said early Friday it was lowering its offer to $86.50 a share and taking it hostile, skirting the special committee of Genentech directors that was charged with negotiations when the Swiss firm made its initial offer last July (see full story in The Deal's Pipeline).
The new price is a 3% discount to the old, and so far it's had a depressing effect on Genentech stock. Shares were trading down $3.32, or about 4%, early Friday. Roche, which wants the full share of Genentech's blockbuster biotech franchise that includes monoclonal antibodies Avastin, for colon and lung cancer, and Herceptin, for breast cancer, has said all along it wants to play nice. It would cut costs and consolidate some of Genentech clinical development and administrative staff with its own, but it would leave untouched Genentech's early R&D teams. But going hostile seems to blow that notion up, even though the firm is still paying the notion lip service. CEO Severin Schwan said in a statement Friday, "This offer does not change our initial plan on how we combine the two companies and operate the new entity. "We have great respect for our colleagues at Genentech and we will take the necessary steps to nurture Genentech's innovative and unique science-driven culture." There was no immediate timeline for the tender offer to begin, but one timeline looming is the release of key data from a trial testing Avastin for colon cancer in an adjuvant setting, a much wider patient population than it's currently used for. If the data, due as early as April, is positive and leads to FDA approval, it could boost Genentech's future earnings by several billion dollars a year, which would make Roche's new discount offer seem silly. Roche said the deal is contingent on at least two things: first, a majority of the publicly held Genentech shares being tendered, and second, Roche obtaining the financing to seal the deal. Roche said it will pay for the deal with a combination of cash, debt, corporate bonds and commercial paper. If the tender offer results in Roche owning 90% of more of Genentech shares, it will proceed with merger plans, it said. - Alex Lash Categories Deal Video
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