Genentech Takes Case To Holders In Fighting Roche Offer
March 02 2009 - 10:09AM
Dow Jones News
Genentech Inc. (DNA) is making its case directly to investors in
fighting off an $86.50-a-share tender offer from majority
shareholder Roche Holding AG (RHHBY)
At a meeting in New York, the South San Francisco, Calif.-based
biotech giant contends its current operating plan will actually
provide more value to shareholders than the Roche offer, which
expires March 12. Though stressing shareholders will need to make
their own decision, Genentech detailed its financial projections,
pipeline strength and culture of innovative research.
"We believe we have the the potential to create significantly
more value for shareholders due to the strength of our products,
our pipeline, our people and our track record," said Arthur
Levinson, chairman and chief executive of Genentech.
The meeting, which was recently moved up from March 20 in order
to address investors before to the tender expiration, comes as Wall
Street largely expects Roche's offer to fail to win shareholder
support.
Not surprisingly, a committee of Genentech independent directors
rejected that tender offer last week after turning down an earlier
offer of $89 a share from Roche in July as "substantially"
undervaluing the company. Since the summer, the two parties reached
an impasse and disagreed on where to even begin negotiating - Roche
stood by its initial offer, and Genentech's independent board
proposed beginning at $112 a share.
Genentech shares recently fell 2% to $83.87.
As an overview, Levinson stressed that the company is on track
to meet or exceed its long-term development goals, called "Horizon
2010", which include being the top seller of cancer drugs in the
U.S., 25% annual growth in non-GAAP earnings per share, and getting
15 major new products or indications approved.
For the five years after that, Genentech expects 16% annual
growth in non-GAAP earnings per share and exceeding $9 a share for
2015.
Levinson said that the company stands by those financial
projections, in a reference to Roche's criticism of Genentech's
financial models as overly optimistic.
"We welcome a debate on this anytime, anywhere and with
anybody," he said.
He stressed Genentech's past performance, with revenue steadily
growing from more than $1 billion in 1998 to more than $13 billion
in 2008, along with 11 consecutive years of double-digit growth in
non-GAAP earnings per share.
Other than financial metrics, Levinson stressed the
science-based culture of Genentech and its ability to innovate,
highlighting that the company had more biotech patents issued in
2007 than the next two organizations combined - the University of
California and the U.S. government.
Despite the turmoil in the economy and the Roche tender offer,
Levinson assured the audience that recruitment of top scientists
remains strong.
In highlighting its development pipeline, Genentech stressed its
planned move into infectious disease and neuroscience, presenting a
recently published paper in Nature that provided a new theory about
the cause of Alzheimer's disease.
The research provides new targets in treating the degenerative
condition and Genentech disclosed its efforts to develop a "best in
class" antibody to fight the disease.
-Thomas Gryta; Dow Jones Newswires; 201-938-2053;
thomas.gryta@dowjones.com