Posted by: tristar3research | March 12, 2009

Roche Bids Up for DNA- Biotech Booming in U.S.

So Roche finally paid up to buy the crown jewel of the U.S. biotech industry, Genentech or DNA as we ticker monkeys know it. The willingness to step up to buy the stub is a very good sign for the future of health care related R&D. The Swiss are smart and South San Francisco will benefit from their concentration of U.S. operations there.

Okay, so were partners now- RIGHT?

Okay, so we're partners now- RIGHT?

The deal, approved and recommended by Genentech’s board, offers $95 per share for the 44 percent of Genentech Inc. that Roche Holding AG doesn’t already own. The agreement ends a long corporate struggle between the Basel, Switzerland-based drug maker and its cancer drug partner headquartered in South San Francisco.  Hanging over the negotiations have been expectations of study data on the effectiveness of Genentech’s Avastin in treating early-stage colon cancer. The drug, Genentech’s best-selling product, is already approved for various types of breast, lung and colon cancers. Some analysts said a positive study could increase the value of Genentech shares.

The combined company would be the seventh-largest U.S. pharmaceutical company in terms of market share and would generate about $17 billion in annual revenues with a payroll of around 17,500 employees in the U.S. pharmaceuticals business alone.

A 21st Century Industrial City

A 21st Century Industrial City Driving Biotech along with BoWash

Roche said its Pharma commercial operations in the U.S. will be moved from Nutley, New Jersey, to Genentech’s site in South San Francisco. Research and early development will operate as an independent center within Roche from its existing campus in South San Francisco, it said. Genentech, which calls itself the “founder of the biotechnology industry,” was created in 1976 and has worked closely with Roche for two decades. Roche acquired a 60 percent interest in Genentech in 1990. It bought out the rest of the shares nine years later, but then reduced its stake through three public offerings between July 1999 and March 2000. The size of the Roche-Genentech deal eclipses the $39 billion takeover of U.S. eye care company Alcon announced last April by Roche’s Swiss rival Novartis AG. And a lot of this money will be poured back into large biotechs as big pharma seeks to “buy pipelines”.

Fariba Ghodsian, portfolio manager of Dafna Capital Management, believes the majority of the Genentech shareholder funds will be reallocated within the biotech industry. She sees some trickle down to mid-cap companies that either have approved drugs or medicines with a relatively clear path to approval — “companies like Isis Pharmaceuticals Inc(ISIS.O) and specialty companies like United Therapeutics Corp(UTHR.O).”


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