Genentech: "Don't Lowball Us"

Hostile takeover fine - but the price ain't right

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    NEWSLETTERS

    TK
    "We do not believe the offer adequately reflects the value and future potential of Genentech's business," Chief Executive Arthur D. Levinson said.

    Genentech Inc. on Monday touted its culture of innovative research and offered detailed long-term sales projections as it made its case to Wall Street on what it considers a low buyout bid from drugmaker Roche.

    In its annual meeting with analysts, the company tried to expand on its point the latest $86.50 per share, or $42 billion, hostile bid is too low. The South San Francisco, Calif.-based biotechnology company said as much last week in a regulatory filing when it revealed it believes it could fetch as much as $112 per share.

    Switzerland-based Roche's initial $89-per-share bid was rejected in July. It then surprised Genentech and Wall Street with the lower $86.50-per-share bid Jan. 30. The hostile tender offer is scheduled to expire March 12.

    "We do not believe the offer adequately reflects the value and future potential of Genentech's business," Chief Executive Arthur D. Levinson said.

    Roche owns 56 percent of Genentech, but needs support from a majority of the other shareholders to complete any deal. In trying to reinforce its argument for a more valuable offer, Genentech said it expects profit of $12.86 per share by 2018 on revenue of $26.9 billion, a marked increase from 2008's profit of $3.21 per share on revenue of $13.42 billion.

    It plans on making that long stride on a mix of sales of cancer treatment Avastin and eventual new products reaching the market. U.S. sales of Avastin, which reached $2.69 billion in 2008, could exceed $10 billion by 2015, Genentech said. The drug already is approved for lung, colon, and breast cancer, with the possibility for 15 indications by 2014, including prostate and ovarian cancer.

    Meanwhile, sales of the drug Lucentis, which treats the eye condition macular degeneration, could reach a peak in U.S. sales of $2.1 billion by 2018 with additional approvals, Genentech said.

    Aside from the revenue boost, Genentech estimates that annual pretax savings could range from $750 million to $2 billion if a Roche deal occurred, along with lower tax expenses, while Roche gets the added commercialization rights to key cancer drugs beyond 2015. The current commercialization deal, which gives Roche sales outside the U.S., is set to expire after 2015.

    More near term, the company expects profit of $3.85 per share on revenue of $14.12 billion in 2009. Analysts polled by Thomson Reuters expect profit of $3.79 per share on revenue of $14.11 billion.

    In his address Levinson also stressed the role scientific culture and a commitment to research play in the company's viewpoint of its future.

    "We are obsessed about the long term," he said. "We recognize we can't ignore the short term, but we will always, always make a commitment to the long term."

    Genentech shares lost $2.35, or 2.7 percent, to $83.20 in afternoon trading as the broader market declined.