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August 18, 2008
Genentech and Roche, Act Two
So Genentech has told Roche to get lost – well, to a first approximation, anyway. I think what they’ve actually told them is to go open their Swiss wallets wider. What it comes down to now is how highly Genentech values itself versus how much Roche is willing to pay – the balance between those two will determine how things go. And then there are the large shareholders in Genentech to consider – if their idea of a good price clashes with the figure that Genentech’s board has in mind, then things could get more complicated. (And if the US dollar continues to climb against the Euro, that could complicated everyone's calculations, too - at the very least, it's speeding things up).
Personally, I think that Genentech is better off being left alone. But that’s no surprise – I think that in a lot of the M&A deals I’ve seen in the industry, particularly between large companies, I’ve thought that the participants should have stayed home and spent their money elsewhere. A personality defect, to be sure, and clear evidence that I’d never make it at an investment bank.
The reasons I think that Genentech is better off unmolested are probably the same ones that its own employees have. The company seems to have a good research culture going – they’ve been productive and willing to take risks, which is all you can ask of a drug discovery organization. Roche, for its part, isn’t exactly an Evil Empire, but they’re not Genentech. And that, I think, is what gets me about most of these deals. I think that there is no one best way to do drug discovery, since the problems we face are so varied. And that means that the more different approaches there are being tried, the better. We need a healthy ecology in this industry, and the closer we get to a monoculture, the worse off I think we’ll be. I think that Genentech has something to offer all its own, and that it’s in danger of being lost if Roche buys (and Roche-ifies) the place.
Some people out there are worried more than others. Roche doesn’t have as much experience in biologics, so they’ll want to retain the protein groups. (The question is whether they'll want to work for Roche!) But Genentech has also made a push into small molecules in recent years, and medicinal chemistry might be an area that Roche feels it has enough of already – they’re not buying Genentech for small molecules, after all. We’ll see over the next month if they’re buying Genentech at all. . .
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