A Diagnostics & Imaging Week
Swiss pharmaceutical and diagnostics powerhouse Roche (Basel, Switzerland) agreed Thursday to pay $46.8 billion in cash, or about $95 a share, to buy the remaining 44% of biotechnology company Genentech (South San Francisco, California) that it doesn't already own, ending a hostile takeover bid by Roche that has stretched out for months.
Genentech's board rejected Roche's initial friendly bid of $89 per share in July. Roche then surprised the company with a lowered $86.50-per-share bid last month, aimed directly at shareholders.
Roche then increased that bid to $93 per share last Friday. Roche recently said it raised $36 billion in financing and can obtain the rest through debt or with available cash.
The deal values Genentech as a whole at $100.1 billion when including the portion of the company already owned by Roche. Roche said it expects to save $750 million to $850 million per year by eliminating duplication but has not yet given a figure for potential job cuts.
Hanging over the negotiations have been study data expected to be released in April on the effectiveness of Genentech's Avastin in treating early-stage colon cancer. The drug, Genentech's best-selling product, already is approved for various types of breast, lung and colon cancers. Some analysts said a positive study could increase the value of Genentech shares.
Avastin is one of the best-selling biotechnology drugs in the world. Like other biotech drugs, it is made using living cells instead of chemical compounds, which is the process for traditional pharmaceuticals. The process, however, is more complicated and often more costly, which makes biotech drugs more expensive than traditional chemical treatments. Avastin, for example, can cost about $50,000 per patient per year.
Roche said 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 revenue with a payroll of around 17,500 employees in the U.S. pharmaceuticals business alone.
"We believe this is a fair offer for Genentech shareholders, and the committee is pleased to come to a successful conclusion of this process," said Charles Sanders, chairman of the special committee of Genentech's board.
Franz Humer, chairman of Roche, said in a company statement that he was pleased that the two sides could agree.
"Working together, we aim to close the transaction quickly, thus removing uncertainty for employees and allowing us to focus even more intently on innovation and long-term projects."
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, which will become headquarters of the combined company's U.S. commercial operations in pharmaceuticals and operate under the Genentech name.
It said this would take advantage of "the strong brand value of Genentech in the U.S. market."
Research and early development will operate as an independent center within Roche from Genentech's campus in South San Francisco, it said.
Genentech, founded in 1976, has worked closely with Roche for two decades.
Roche acquired a 60% 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.
Greenhill & Co. is acting as financial advisor to Roche and Davis Polk & Wardwell is acting as legal counsel. The Special Committee is represented by Goldman, Sachs & Co. and Latham & Watkins LLP. Genentech is represented by Wilson Sonsini Goodrich & Rosati.
In other dealmaking news:
• Roche (Basel, Switzerland) reported that it has signed a definite agreement to acquire privately held Innovatis (Bielefeld, Germany), a provider of automated cell analysis solutions, especially focusing on cell counting, viability testing, and cell function analysis in research, as well as bioproduction.
The purchase price is €15 million ($19.5 million).
"This acquisition is a further step in our strategy to strengthen our position as a complete solution provider in the cell analysis research market," said Dr. J rgen Schwiezer, CEO of Roche Diagnostics "Innovatis' technology will complement the existing Roche cell analysis portfolio and is synergistic to the xCELLigence technology launched in 2008."
"Roche has been one of our key customers for many years, in particular since the successful development of our cell analysis technology over 10 years ago," said Michael Grohmann, CEO of innovatis. "The Innovatis technology is very well-placed for future growth as part of Roche Applied Science."
Innovatis will become a fully-integrated part of Roche Applied Science, a global business area of the Diagnostic division of Roche. The company will continue to develop and market products for cell analysis through Roche Applied Science's extensive worldwide network.
The transaction is expected to be completed within the next few weeks, subject to shareholder approval and regulatory clearance.
• Mediscience Technology (Cherry Hill, New Jersey), a company developing minimally-invasive auto-fluorescent based technology for early detection of cancer, reported a major expansion of its technology platform with the completion of the previously disclosed acquisition of SensiVida Medical Systems (Rochester, New York), a bio-medical diagnostic company. SensiVida filed a Form 8-K with the SEC on March 9, 2009 to announce the merger as effective. The merged entity is to be called Sensivida Medical Technologies.
SensiVida is a minimally-invasive diagnostic device company. Its proprietary, Microsystems-based technology is designed to automate bio-sensing and data acquisition while minimizing patient discomfort. SensiVida's platform technology addresses a number of disease-state diagnostics: allergy testing, pain-free automated glucose monitoring without bio-fouling, blood coagulation testing, TB testing, and cholesterol monitoring.