All In The Family: Genentech and Roche Together At ASCO

In the immortal words of one Archie Bunker those were the days, weren’t they? Back when biotechs were biotechs (small and innovative—and usually cash poor) and pharma companies were pharma companies (big and blockbuster-focused and hugely profitable), everyone knew their place in the industry. But the disappearance of the DNA ticker symbol has made things so much more confusing. Should we think of Roche as pharma or biotech? Is Genentech a stand-alone biotech within Roche or the Swiss pharma’s future?

In one of their first appearances together since Roche officially took Genentech private, the two drug makers chose to make a big splash at the American Society of Clinical Oncology. (The Roche-Genentech business development dynamic duo of Joe McCracken and Dan Zabrowski also stepped out at BIO. Look for an indepth Q&A in a coming issue of IN VIVO.)

And what a splash they made. The newly consolidated Roche-Genentech oncology portfolio is soooo big that the industrious executives at the newly blended company couldn’t fit it into one night.

Indeed, the two organizations dominated ASCO, presenting 12% of the entire scientific content in various break-out sessions, plenaries, and posters. But it was the two-night event aimed at analysts—four hours of oncology updates—that illustrated what the future might look like for Rochetech (or is it Genenroche? It doesn’t have quite the same ring as Wy-Pfi, does it?)

The IN VIVO Blog couldn’t help but see the occasion as a wedding of sorts, with the requisite awkwardness and strained politeness of a rehearsal dinner on full display. (We aren’t revealing the identity of the drunk uncle.) The “head table” on stage was loaded 8 across with managers. And by night two, Roche felt compelled to put up nameplates—a move necessitated by the fact that analysts typically follow either Roche OR Genentech but not both and so might not have a sense of the cast of characters.

Much of the first night was spent rehashing the failed adjuvant colorectal cancer trial for Avastin, C-08. (There’s a slight possibility you’ve already heard about that, but see “The Pink Sheet” DAILY coverage here.) The firms also talked about new uses for old drugs – Herceptin’s move out of breast cancer with the ToGA trial in gastric cancer – and some new offerings from the early stage pipeline, like hedgehog inhibitor GDC-0449 and the BRAF-targeted PLX4032 partnered with Plexxikon. (Check back with the DAILY and “The Pink Sheet” in coming weeks for more coverage.)

But time was also spent addressing two particularly large elephants in the room: the on-going Roche/Genentech integration; and the impact the C-08 trial failure had on both the deal offer and the newly combined organization’s bottom line. Outgoing Roche head of U.S. pharma Bill Burns gave a finely orchestrated bit of messaging as he tried to dispel certain misperceptions.

“Since we are all sitting together as a united family now, and I know that this may be something in the back of many of your minds, I want to lay to rest two or three elements I think the mischief makers in the media were playing on in the run up to the family coming together.” (Us? Make mischief? Your Honor, in our defense, Roche made it fairly easy to categorize “the family” as dysfunctional.)

Burns delved first into continued questions about the ability of Genentech to remain an independent entity with its traditional characteristics of a quirky culture, high science, and individually-driven success. Ever since Roche announced its hostile bid for Genentech last July, that fear has been one of the brightest issues burning. Noting incessant references in the press to questions such as “Will people stay?” and “What will happen?” Burns emphasized the quick steps Roche took to establish a management team.

IVB cannot tell a lie. Roche did in fact move swiftly—within weeks of the disappearance of the DNA ticker came the April 14th announcement outlining changes at Genentech. But what Burns conveniently forgot to mention is that those changes included losing some of Genentech’s most talented leaders: Arthur Levinson and Susan Desmond-Hellman stepped down from their roles as CEO and Product development president, becoming mere advisors. A few weeks later Desmond-Hellman confirmed what media had speculated: she would be leaving Genentech to take the reins as UCSF’s chancellor, a position that starts in August.

Burns also pointed out that Roche has followed up on its intention to keep some of the innovation coming out of the Genentech labs operating “as is” in South San Francisco. (We are willing to bet however, that G’s researchers would have given up their iphones and their apple computers if it would have kept Levinson and Desmond-Hellman on board.) Moreover, said Burns, operations are continuing as normal under the leadership of Richard Scheller and his more than able assistants, Marc Tessier-Lavigne and Andy Chan.

“The team is fully in place and we have given them also the elements like business development that are required to make sure that accessing some of the bright new elements, either enablers in science or early programs, can continue,” he told investors.

Along with those tortured phrasings, Burns unveiled the creation of an internal acronym that describes Genentech’s function in the Roche family: “GReD”, for Genentech Research and early Development. IVB’s reaction? The “pharmafication” of Genentech is complete—it has its own nutty alphabet descriptor that is just one letter shy of the word greed. (Defn. Greed: (noun) the excessive desire to acquire or possess more—especially more material wealth—than one needs or deserves.)

Burns also tried to “put on the table and lay to rest” allegations that the then-pending C-08 trial results played a critical role in both the timing and the price of Roche’s even more hostile move in January, when it lowered its offer price from $89 to $86.50. Acknowledging that the potential for Avastin use in the adjuvant setting had “raised the rates” and was clearly “an inflection point for the then independent Genentech stock,” he maintained it was just one more data point Roche execs used to calculate their valuation. Acknowledging that the C-08 trial results were significant, Burns asserted “you do not go into a $46 billion privatization on the basis of one clinical trial.”

--by Mary Jo Laffler and Ellen Foster Licking