Roche Holding AG, Switzerland’s largest drugmaker, offered to buy the rest of Genentech Inc for US$43.7 billion to gain the largest US maker of cancer medicines.
Investors in South San Francisco, California-based Genentech would get US$89 a share in cash, 8.8 percent more than its closing price on Friday, Roche said in an e-mailed statement yesterday. The Basel, Switzerland-based company already owns 56 percent of Genentech and markets many of its treatments.
Roche yesterday reported a decline in first-half profit as sales of Tamiflu fell after governments and companies built up sufficient stockpiles of the medicine — one of only two drugs available to treat pandemic influenza.
Genentech, the world’s second-biggest biotechnology company, has provided Roche with its best-selling Rituxan, Avastin and Herceptin cancer therapies. The US company raised its full-year forecast last week as Avastin gained from the new use in breast cancer.
“Strategically it doesn’t change the big picture very much since Roche is already a majority shareholder,” Romain Pasche, a fund manager at Vontobel Asset Management in Zurich, said before the announcement. “The risk is that Genentech loses its independence and becomes less productive on the research and development front.”
First-half net income fell to 5.73 billion Swiss francs (US$5.58 billion) from SF5.86 billion a year earlier, Roche said in a separate statement yesterday. Analysts surveyed by Bloomberg had a median net income estimate of SF5.55 billion. Roche doesn’t report quarterly earnings. Group sales decreased 3.6 percent in the first half to SF22 billion. Revenue from Tamiflu declined 71 percent to SF327 million.
Roche confirmed its outlook for an increase of almost 10 percent for group sales, with above-market rate growth in both its pharmaceuticals and diagnostics divisions. The forecast excludes sales of Tamiflu to governments and corporations. Roche said it expected core earnings per share (EPS) to remain at least in line with the record level achieved last year.
The Genentech purchase would result in pretax savings of US$750 million to US$850 million a year and would add to EPS in the first year after closing, Roche said.
The Genentech board of directors is likely to establish an independent committee to review the offer, Roche said. Genentech board members who are employees of Roche won’t participate in the evaluation of the proposal.
Roche rose 1.6 percent to SF179.60 Swiss francs on Friday in Zurich trading. The stock has declined 8.2 percent this year, outperforming the Bloomberg Europe Pharmaceutical Index of 19 companies, which has dropped 12 percent.
Genentech company raised its full-year forecast last week as Avastin gained from the new use in breast cancer.
On July 14, Genentech said second-quarter profit rose 4.7 percent and revenue increased 8 percent to US$3.2 billion, led by US sales of Avastin. The medicine, first approved in 2004 for colon cancer and for lung malignancies two years later, is being studied against 20 tumor types worldwide.
Avastin sales in the US rose 15 percent to US$650 million, about US$7 million more than analysts had projected.
Rituxan, a treatment for non-Hodgkin’s lymphoma and rheumatoid arthritis that Genentech markets with Cambridge, Massachusetts-based Biogen Idec Inc, generated US$651 million, a 12 percent increase.
Sales of Tarceva, used to treat lung and pancreatic cancers, gained 17 percent to US$119 million.
Genentech forecast that earnings this year, excluding certain costs, would be US$3.40 to $3.50 a share, up from a prior forecast of US$3.35 to US$3.45. The company is the world’s second-biggest biotechnology company in sales after Amgen Inc, which is based in Thousand Oaks, California.
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