Roche Lowers Genentech Bid

In a dramatic twist in the ongoing saga between Roche and Genentech, the Swiss drug giant has lowered its offer for Genentech. The new $86.50-per-share offer values the biotech at $42.8 billion, shaving about $1.2 billion off the original bid, made in July. And now, rather than continue to court Genentech???s board for approval, Roche is taking its case directly to minority shareholders.

In July, Roche made a surprise bid for full control of Genentech, in which Roche has owned a 56% stake since 1990. At the time, analysts were confident that Roche would have to up the ante by 15 to 20% to secure the deal. (C&EN, July 28, 2008, page 13)

Indeed, Genentech's board rejected the offer in August, and the companies have since made little progress toward reaching an agreement to complete the deal.

"We are disappointed that the discussions over the last six months between Roche and the special committee of Genentech have not produced a negotiated agreement," Roche Chairman Franz B. Humer said in a statement issued today. "We feel it is now time to give the Genentech minority shareholders the opportunity to decide on our offer. Especially in the current market environment the offer provides an opportunity for all public shareholders to achieve liquidity and to receive a fair price for all their shares."

The financial crisis has taken its toll on the biotech industry, particularly investors who have seen their fortunes dwindle. Some analysts now think shareholders should take Roche's money and run. Weak results from the third and fourth quarters of 2008 "highlight to us that Genentech's best days may be over," Leerink Swann analyst Bill Tanner says. He suggests investors tender their shares, saying the biotech's stock price is overvalued, even at the lower offer.

Roche says that despite the hostile approach, it has no intention of changing its original plan to retain the biotech's unique, science-driven culture. Genentech's South San Francisco site would operate as an independent research and early development center and also serve as the headquarters of combined U.S. commercial operations. Meanwhile, Roche's five disease biology areas—oncology, virology, inflammation, metabolic disorders, and central nervous system—would continue to operate fairly autonomously.