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Genentech Resists Takeover

Executives focus on Avastin's potential in spurning Roche's hostile offer of $86.50

by Rick Mullin
March 9, 2009 | A version of this story appeared in Volume 87, Issue 10

ATTEMPTING to bolster resistance to a hostile takeover bid by Roche, Genentech executives told investors at a meeting in New York City that their company expects to meet or exceed its financial goals through 2015.

Speakers, including CEO Arthur D. Levinson, highlighted prospects for Avastin, a cancer drug now being tested against several new cancers. The company says sales of Avastin, about $2.6 billion in 2008, could reach $10.0 billion in 2015 and will help boost Genentech's overall sales from $9.5 billion last year to $17.0 billion in 2015.

These were among the projections made to illustrate that the firm is worth more than what Roche is offering. Genentech's board rejected the Swiss company's July 2008 offer of $89.00 per share, or $43.7 billion, as well as an $86.50 offer in January, after the stock market's fall. On the basis of its growth prospects, Genentech's board has said, the company is worth $112.00 per share.

David A. Ebersman, Genentech's chief financial officer, demonstrated the extent to which Roche, which now owns 56% of Genentech, depends on Genentech's R&D. He presented a pair of slides showing the Swiss company's pipeline with and without candidates codeveloped with Genentech. Well over half of the prospects disappeared in the second slide, which drew applause from the audience.

Analysts agree Genentech made a strong case. Given its loyal investors, though, that wasn't hard to do, points out Eric Schmidt, a stock analyst with Cowen & Co. "Management could have gone up there and done shadow puppets, and I don't think shareholders would have tendered shares to Roche," Schmidt says.


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