Roche to Acquire Genentech for $43.7 Billion

Basel (July 21)-Roche plans to acquire the biopharmaceutical company Genentech (South San Francisco, CA) for $43.7 billion. Roche currently holds a 55.9% stake in Genentech, and it plans to acquire the remaining publicly held minority interest that it does not own for $89 per share.

The combined company will be the seventh largest US pharmaceutical company in terms of market share with annual revenues of more than $15 billion, according to Roche. Roche expects to generate pretax annual cost synergies of $750–850 million.

“The transaction will create an unique opportunity to evolve Roche’s hub-and-spoke model into a structure that allows us to strengthen the focus on innovation and accelerate the search for new solutions for unmet medical needs,” said Franz Humer, Roche chairman, in a press release.

Following completion of the merger, Genentech will operate as an independent research and early-development center from its existing site in South San Franciso. Roche’s virology research and development (R&D) activities will move from Palo Alto to South San Francisco, and its Palo Alto inflammation group will become part of Roche’s R&D organization in Nutley, New Jersey. Two global biology areas (oncology and inflammation) and functions in metabolism will remain important parts of Roche’s global and US organizations. Roche recently adopted a “disease biology area” approach in five disease areas: oncology, metabolism, central nervous system, inflammation, and viral.

Genentech’s late-stage development and manufacturing operations will be combined with the global operations of Roche. Roche’s manufacturing operations in Nutley will be closed, and support functions such as informatics and finance will be consolidated.

Roche’s pharmaceutical commercial operations in the US will move from Nutley to South San Francisco. The combined company’s US commercial operations in pharmaceuticals will reflect the Genentech name. The existing US sales organizations of both companies will be maintained.

Roche expects that Genentech’s board of directors will establish a committee to evaluate its proposal. Roche expects to complete the transaction as soon as possible following negotiation of a definitive merger agreement. The merger would be subject to approval of holders of the minority interest in Genentech currently not held by Roche.

Bolt-on acquisitions

Roche also announced this week two bolt-on acquisitions. It agreed to acquire Arius Research (Toronto), a developer of a proprietary antibody platform, “FunctionFIRST,” for C$191 million (US $189 million). The transaction is expected to close in the third quarter of 2008.

Roche also agreed to acquire Mirus Bio Corporation (Madison, WI), a developer of nucleic acid-based technologies, which includes a proprietary ribonucleic acid interference (RNAi) delivery platform. Roche will acquire the company for $125 million and will maintain an RNAi research site in Madison. Mirus’s transfection reagents business will be divested into a standalone business to be known as Mirus Bio LLC. Roche expects the transaction to be completed in the second half of 2008.