Roche’s current business arrangements with Genentech give Roche all non-US marketing and development rights to Genentech’s product line through 2015. While that may seem a long way off to some people, Genentech apparently has as many as 100 products in it’s current development pipeline, and as these products move into clinical trials, the ability to project and capitalize on their revenue potential will be crucial to Genentech and to Roche.
The question you have to ask if you are Genentech is: “Why not market these products internationally ourselves?” And if you are Roche, the question therefore becomes: “What do we lose if we don’t manage to retain first rights to international marketing of these products?”
Since Roche acquired its controlling stake in Genentech nearly 20 years ago, the two companies have had a relationship that has provided a plethora of benefits for patients, for clinicians, for shareholders, and for the science of new drug development. Have there been some mis-steps? Sure there have. But they have been relatively few and far between. As of Sunday, however, when Roche chairman Franz Humer called Genentech CEO Arthur Levinson to “break the news,” this relationship has been placed in question. The Wall Street Journal today says that Dr. Levinson, “expressed surprise” at the offer. That has to be one of the understatements of the month!
Health + Vision suspects that, at the end of the day, Roche will prevail, at a price still to be agreed, and probably significantly higher than the 9 percent premium initially offered for the outstanding 41 percent of Genentech stock. The greater question, however, is whether Roche can effectively manage to retain critical Genentech talent in integrating such an acquisition. Every major pharmaceutical company in the world (not to mention many start-up biotechs and university departments) will see this as an opportunity to entice away key Genentech personnel, and for some of those personnel, because of their stock options, the Roche acquisition will remove any serious need for them to go on working for Roche (or anyone else) if they don’t feel like it.
While Roche may have felt they had little option about their business strategy based on global revenue needs and projections, the successful pull-through of this strategy will require enormous skill in convincing Genentech that it is in the best interests of many of their key employees.
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