Agenda
Background Information
Roche & Co. Genentech
Responsibilities towards minority shareholder Range of Equity value for Genetech as a Standalone company Analysis of comparable companies What Franz Humur do?
Background Information
Companies acquired:
Nicolas, a non-prescription drug company (1991) Syntex, a bioscience company (1998) Boehringer Mannheim, a diagnostics leader (1998)
Humer, CEO (1998-2001), became Chairman of the board in 2001 Financial stress in 2001 and 2002 ($2.9 bn loss) Innovation & Strong sales of diverse portfolio of drugs Revenues = $43.2 bn, Net Earnings = $10.3 bn (2008)
Genentech
Found in 1976 by venture capitalist Robert Swanson and scientist Herbert Boyer Combined scientific excellence with business acumen and patent their discoveries Raised $35 million in 1980, first biotech company to go public Share price went from $35 to $88 within the first hour of trading Between 1998 and 2008, operating revenue increased to $13.4 billion Vertically integrated researching, producing and selling its products
Reasons
Genentech was increasingly coming into direct competition in U.S. markets Genentech established R&D activities outside the U.S. Genentech begun to encroach on Roches traditional territory by developing small molecular products Merger of two companies would create new opportunities Strategic analysis of Synergies - $750 mn to $850 mn annual savings
Risks
Lawsuits from minority shareholders Loss of human resources in critical areas such as R&D Availability of funds for bridge loans Paying higher premium than real value of synergies Bad test results
Recommendation
Loss of investors confidence in Genentech is not good for Roche in long term (post-merger) Negotiate with the Special Committee for the price between $80.7- $96.07 before the results of the second round of trials are out Inconclusive results of the first trials and uncertainty about the results of second trials can be leveraged Both parties will share the risk of either price going up or down according to the trial test result
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