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VIDEORoche Takes Genentech
By
Scott Reeves Mar 12, 2009 3:15 pm
Brief scrutiny of today's headlines.
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The bet: Results on Avastin’s clinical trials for early stage colorectal cancer will be released soon, and if the drug is effective, it would drive up Genentech’s value. Roche apparently believes the results will be positive, and therefore rushed to complete the deal.
Avastin is already approved to treat breast and lung cancer. It generated about $4.8 billion in sales last year, and could become a top-selling drug worldwide.
In terms of market share, the combined company will be the seventh largest US drug company and will have annual sales of about $17 billion. Roche estimates initial savings at $750 million to $850 million.
US commercial operations will be moved to Genentech’s site in South San Francisco. Research and development of new drugs will continue independently.
In the last few months, Merck (MRK) acquired Schering-Plough (SGP) for $41 billion and Pfizer (PFE) bought Wyeth (WYE) for $68 billion.
Major drug companies need acquisitions -- especially companies with promising new drugs under development -- to replace existing drugs approaching the end of their patent life.
Roche has held shares of Genentech for about 20 years. Genentech’s drugs have boosted Roche’s sales growth and should continue to do so in the future.
The $95-a-share deal is sweet for Genentech’s stockholders. Initially, Roche offered $89 a share and later increased the offer to $93.
No positions in stocks mentioned.
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