LyrArc Article Gist
Among the reasons given for Roche's bid are the need to bring the creative energies of Genentech inside Roche's own pharmaceutical division. This at a time when pharmaceutical companies are having a difficult time coming up with new drugs, without as Bill Burns the head of Roche pharmaceutical put it, a "Chinese wall" between Genentech scientists and Roche scientists. Other reasons are the opportunity for the Basel based company to capture all the profits from Genentech and achieve cost savings of $850 million annually by combining the 2 companies' clinical research teams and sales, manufacturing and administrative departments in the USA. Another reason is that the agreement with Genentech for Roche to market its drugs outside the USA expires in 2015. With Genentech's share price at a low Roche's bid at a 9% premium also appears as an attempt to get the remaining 44% of the company that Roche does not own for a low bid. It risks however the 18 year relationship betweeen Roche and Genentech, in which Genentech operated within its own scientific culture in the San Francisco area, almost like a separate company. Roche CEO Schwan, still wants to keep some of this arrangement and have Genentech drug researchers operate as a separate group, but its not clear how the cost savings and the interaction with Roche scientists would occur under the new arrangement. Genentech was founded in 1976 after a meeting between venture capitalist Robert Swan and bichemist Herbert Boyer at a bar near the University of California, San Francisco campus. It has come up with a number of successful cancer drugs such as Avastin, Herceptin, and Tarceva, and total sales are $11.7 billion, a significant part of Roche's overall sales.