Roche Ups Its Bid For Genentech

Roche announced on Friday that it will increase its offer for the outstanding shares of Genentech from $86.50 to $93.00 per share. The new bid, valued at $45.7 billion, is for the 44% of Genentech that Roche does not already own.

Roche's latest offer follows a meeting Genentech's executive committee held with investors in New York City on Monday March 2 at which speakers detailed how the biotech firm is on track to meet or exceed its financial goals through 2015. CEO Arthur D. Levinson and others 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, helping boost Genentech's overall sales from $9.5 billion last year to $17.0 billion in 2015.

Genentech's board rejected the Swiss drug 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.

At the investor meeting, David A. Ebersman, Genentech's chief financial officer, demonstrated the extent to which Roche depends on Genentech's R&D. He presented a pair of slides showing the Swiss company's pipeline with and without drug 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 on Monday but add that the new offer will be hard for minority shareholders to turn down because of the risks associated with the Avastin trials. "I think the sale is more likely to go through now," says Ziad Bakri, a stock analyst with Cowen & Co. "Most people view the outcome of the Avastin trials as a coin toss, so $93 on a risk-reward basis will look like a sweet offer."