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Tag: bid

Fallout Continues on Roche Bid for Genentech

Written by on Monday, August 18th, 2008

Despite Genentech’s rejection of Roche’s $43.7 billion offer last week, coverage of the fallout from the "failed" bid continues as industry observers speculate on Roche’s next move. 

According to a report by the Silicon Valley Business Journal and San Francisco Business Times, Reuters has forecasted that the final purchase price of Genentech will be $53 billion or $107.50 per share.  According to The Pink Sheet Daily, such a high price could prove to be problematic for Roche, who may be forced to make operational cuts as a direct result of the deal.

Speculation is also growing as to whether or not Genentech is going to be able to keep its talent in anticipation of a potential acquisition by Roche.  SF Gate reported that, as anticipated by analysts, there already is a flurry of recruiter activity erupting at Genentech as a result of the initial Roche bid.  The Pink Sheet Daily noted that it will be difficult to retain Genentech’s current talent, as many of the senior-level people will have no financial incentive to stay.   Of course, it goes without saying that the general atmosphere of uncertainty and the anticipated change of culture will likely start driving employees out the doors of Genentech.  However, observers seem to agree that Roche has likely worked the loss of key Genentech employees into the equation in deciding to pursue a bid to acquire the company. 

The Genentech/Roche deal is viewed as just the first of  a new wave of big pharma acquisitions of biotech companies to come in the near future, as pharma companies continue to explore opportunities to replenish their pipelines.  Seeking Alpha explained as follows:

Big Pharma is feeling the need to find new products with blockbuster potential as several important drugs approach the expiration of their patent protection. . .  . Many large pharmaceuticals have lots of cash on their balance sheets, making acquisitions an affordable option. The weaker dollar has also made U.S. companies look more attractive to biotech and pharmaceutical firms abroad. Another major factor is the difficult process of receiving FDA approval. This lengthy and grueling process provides an additional incentive to buy companies that have already received FDA approval on their drugs, ensuring smooth pipeline production going forward.



Potential buyout targets to keep an eye on: Amylin Pharmaceuticals (AMLN), United Therapeutics (UTHR),  Alexion Pharmaceuticals (ALXN), Onyx Pharmaceuticals (ONXX), Vertex Pharmaceuticals (VRTX).

To date, there has been no word on Roche’s next move or when it is likely to take place.  How high will Roche go with the next offer?  The California Biotech Law Blog will keep you posted on any developments.

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Genentech Declines Roche $43.7 Billion Acquisition Offer

Written by on Thursday, August 14th, 2008

Following up on our July 24th posting about Roche’s bid to acquire Genentech, it is now official: Genentech has declined Roche’s $43.7 Billion Acquisition offer.

A Genentech press release explained the decision as follows:

The special committee of the Board of Directors of Genentech, Inc. announced that, after careful consideration, it has unanimously concluded that Roche’s proposal to acquire the shares of Genentech not owned by Roche for $89.00 per share substantially undervalues the company. Therefore, the special committee does not support the proposal. However, the special committee would consider a proposal that recognizes the value of the company and reflects the significant benefits that would accrue to Roche as a result of full ownership.

The Genentech press release further indicated that the special committee also approved the "implementation of a broad-based employee retention program to address any employee concerns created by the Roche proposal."

Will Roche increase its offer, now that its opening bid has been rejected? If so, what will it cost for Roche to close the deal? 

My expectation is that Roche will make another offer and that the next offer will be larger than the first.  However, it is an open question as to how much money Roche will have to pay to get the deal done.  According to Seeking Alpha, the final sale price is likely to be over $105 per share and could even be as high as $130 per share.   Either way, there is no question that Roche is going to have to come up with more money to get the deal done. 

The California Biotech Law Blog will continue to keep you posted as any new developments regarding the Roche-Genentech talks arise.

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