Monday, July 21, 2008

Roche/Genentech: End of an Era

OK, readers, have at it. Roche's proposed acquisition of the 44% of Genentech that it doesn't already own is going to dominate the biopharma chatter for the foreseeable future. So give us your initial impressions, and we'll give you ours.

Why is now the right time for Roche to move, considering that it risks screwing up what is generally considered the most successful alliance in the history of the industry? Certainly Roche probably feels like the price is right--and that it mightn't ever get righter. The dominant theme elsewhere in the media will very likely be about Roche bioteching itself with Genentech's capabilities; you might also be reminded of AZ's own increasingly precarious experience doing the same with MedImmune.

But let us suggest that this deal, for all the talk about innovation, in the end has more in common with Big Pharma megamergers--cost cutting, savings, gaining access to the US market and potentially Roche better positioning itself for the twin futures of personalized medicine and follow-on biologics.

We also realize that the price is likely to change, if today's early reaction from the market is any indication. But Roche has been there before with Ventana and it can leverage that experience. This isn't a done deal, but Roche is likely to eventually prevail.

Watch this space and our sister publications "The Pink Sheet" DAILY and "The Pink Sheet" for ongoing coverage.

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Anonymous said...

To most people (even in the industry), its been a well-kept secret that Roche already owns a significant portion of the South San Francisco biotech giant. However, what is no secret at all is Genentech's disdain for its older brother.

From a personality perspective, the two just don't match up well. Genentech has a air of superiority to Roche with all that it has been able to accomplish in the past 5 years. And while the combination of Roche's diagnostics reputation with GTech's powerhouse of oncology therapeutics looks like a match made in 'balance sheet' heaven, one must wonder how these two would really integrate in terms of culture, people & performance?

David Hamilton said...

Actually, I think it's a desperation play on Roche's part, and as such, it's short-sighted and stupid. My sense is that Roche is more concerned about bulking up to ward off Novartis than it is about what's going to happen to Genentech's drug-discovery program.

I've written more over at BNET.

Anonymous said...

Genentech's growth story has been over for a long time. It a bloated pharmaceutical company that should be trading at a PE multiple half of where it is.

Roche is overpaying for it unless they can strip out the products and shut the place down.

The researchers have been drinking the kool-aid for far too long.