Roche: Why No News About Genentech from Earnings Call?

Genentech (DNA) investors who were hoping Roche (RHHBY.PK) would shed a little more light on the status of its proposed acquisition of the biotech giant might have hung up from the Swiss drugmaker's conference call a little disappointed.

But apparently Roche, which trades on the Swiss stock exchange and only over-the-counter in the U.S., said just enough to generate some enthusiasm.

DNA shares rallied, but they're still staying well below the $89 mark that Roche has already offered and that Genentech has said was too little. In their earnings press release and on their conference call yesterday morning, Roche officials refused to give any specifics. They'd only say they remain "totally committed" to the Genentech offer and wouldn't make any comments or answer any questions about a "negotiated agreement" or its ability to finance the deal. Unlike the Genentech earnings conference call where at least a couple analysts tried to pry a nugget out of DNA officials, the analysts on the Roche call completely avoided the topic after the new CEO said at the outset that he and his colleagues wouldn't have anything more to say.

So many analysts, investors and reporters dialed into the Roche call yesterday morning after it had started that one company official later repeated for the benefit of the latecomers that it wasn't going to show its hand. Some analysts and investors were banking on a new treatment to force Roche to come back with a much higher offer, but it didn't pan out Sunday night when Genentech announced the test of Avastin as an add-on drug for colon cancer will continue through the end. At least a couple of analysts were speculating the clinical trial might be stopped after a sneak peek at the data they thought might show the drug is working so well that there'd be no need to keep going. That didn't happen. Some believe if or when Avastin is approved for that use that it could add hundreds of millions of dollars in additional annual revenue.

Despite the higher cost of borrowing, the decline in the value of the Swiss franc and the increase in the value of the dollar that have occurred since Roche first came forward, the company apparently still has the wherewithal and the good credit to do the more expensive deal. What do you think?

Comments

[CLH:]

Hard to understand why Roche wants to own it outright when they already have over 50%. They obviously want it on the cheap.

If they try to run DNA they will destroy it. DNA is a research organiztion while Roche is not.

2008 Oct 22 11:10 PM