By Mary Welch

A secondary offering of 20 million shares of Genentech Inc. common stock by Roche Holdings Inc. was priced at $143.50 per share and raised $2.87 billion.

The underwriters have an option on an additional 2 million shares to cover overallotments that, if exercised, would add $287 million to the offering. Roche, following its June acquisition of Genentech, raised about $2.1 billion in July through the sale of 22 million Genentech shares (including overallotments) at $97 per share in what was considered an initial public offering.

Genentech's stock was trading at $172.80 per share when Roche proposed the secondary offering two weeks ago. The stock fell $14.312 the first trading day after the Oct. 8 disclosure, and has since fallen further, reducing the gross proceeds to Roche.

Genentech's stock (NYSE:DNA) closed Thursday at $145, up $1.187.

"We're excited the price has been set and the offering is out there now," Genentech spokeswoman Marie Kennedy said. "We are pleased to have more liquidity available to stockholders. We don't talk about the stock price's fluctuations."

Roche, the controlling shareholder of F. Hoffmann-La Roche Ltd., of Basel, Switzerland, is reducing its stake in Genentech from about 83 percent to about 65 percent. Genentech, based in South San Francisco, will not receive any of the net proceeds. The transaction's closing is expected on Oct. 26. (See BioWorld Today, Oct. 12, 1999, p. 1.)

"I was really excited about the stock earlier in the week [when it was lower in price] but it still is a fair price," said Carol Werther, an analyst with Adams Harkness and Hill Inc. in Boston. "None of my calls about Genentech are about the management, the product, the quality of the company. It's all about the price. Genentech is the only diversified player in the whole biotechnology universe. It has the ability to deliver quite a lot of earnings."

During its "road show," Genentech officials mentioned they were looking to invest in new technology, she said. "So they're telling us they may acquire a company. But, even if they don't, they have a scientific staff that could move a lot of products forward."

Greg Miliotes, an associate analyst with BancBoston Robertson Stephens Inc. in New York, also sees bright skies for Genentech.

"We're talking about the premiere company in biotechnology," he said. "They have five products on the market, two that could be approved next year and another that will be filed [for marketing approval with the FDA] in the first half of 2000. They have a whole second wave of products coming."

Genentech not only grows its top line 20 percent to 30 percent annually, Miliotes said, but its operating margins as well. "Their operating margins increased 23 percent in 1998; we expect it'll be 27 percent this year and a return of about 36 percent in 2001. We give it a valuation of $190 per share."

To Werther, the only risk in Genentech is "market risk, not company risk." She said the company could reach $174 to $200 per share by the end of the year.

In addition to Roche's offering, Genentech approved a 2-for-1 stock split effective in the form of a stock dividend. The record and distribution dates for the split have not been determined.

The secondary offering and the stock split will nearly quadruple the number of publicly traded shares of Genentech stock.

J.P. Morgan & Co., of New York is the lead manager for the offering. Goldman, Sachs & Co., Merrill Lynch & Co., Warburg Dillon Read LLC and BancBoston Robertson Stephens Inc., all of New York, are co-managers.

Roche in 1990 acquired much of Genentech through a $492 million investment at $36 per share. In early June it exercised its call option on the remaining 33 percent of Genentech it didn't already own at $82 per share. Roche in July then sold 22 percent of the Genentech shares in a public offering at $97 per share.