Cancer Drug Combination Halting Lung Cancer Progression (DNA, OSIP)
Genentech (NYSE: DNA) and Roche may still be in what is becoming a bitter merger, but it seems that Genentech’s Avastin continues to show promise in new cancer targets. The company released a study on Monday after the close along with OSI Pharmacuticals (NASDAQ: OSIP) showing that cancer drugs Avastin and Tarceva mixed together halted the progress of non-small cell lung cancer. This showed a significant improvement than taking Avastin alone.
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Genentech's No-Win Merger Situation (DNA)
Genentech (NYSE: DNA) was delivered the worst, or at least the second worst, bit of news it could have received. Late this week Roche delivered a crushing blow by lowering the offered acquisition price. This puts Genentech in a nearly untenable situation.
Roche already owns 55.8% of the Genentech outstanding shares and intends to commence a cash tender offer for all outstanding publicly-held shares to commence within approximately two weeks. Roche also intends to make the tender conditional upon a non-waivable condition that holders of at least a majority of the outstanding publicly-held Genentech shares tender their shares in the offer, that Roche can obtained sufficient financing, and other issues.
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Avastin's Next Target: Colon Cancer (DNA)
Genentech Inc. (NYSE: DNA) has released some new data in an SEC Filing showing that it is still on the path to getting colon cancer indications for treatments. The company said that it may find out the final results of the Avastin adjuvant colon cancer trial as soon as mid-April (2009). It received updated data to the timelines for the colon cancer trial from the National Surgical Adjuvant Breast and Bowel Project (also called the NSABP). It is hard to know the intricacies here since the timing and availability of data depends on the timing of disease progression events.
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Forget Earnings, Genentech Is Still All About Merger Status
We ran a full earnings preview for today’s earnings out of Genentech (NYSE: DNA) over at 24/7 Wall Wall St. Here you can see all the details and can compare today’s individual drug sales to the prior quarter for some inference. But we still feel that today is mostly going to boil down to whether or not that merger with Roche is deemed as on or off and whether or not the credit markets are posing an issue to the merger for the rest of the stake Roche doesn’t already own. Here was the full data we addressed recently covering the merger and the current credit environment.
Jon C. Ogg
October 14, 2008
Bear Market and Credit Risks For Genentech & Roche Merger?
The new bear market and lack of credit and capital globally may have yet a new victim: Genentech (NYSE: DNA). Even if the $89.00 per shares cash deal from Roche is not at risk, you would never know it by the reaction we have seen in Genentech’s stock. Shares are down 5% at $75.00 in early morning trading.
Genetech’s stock was trading at $80.00 just on Wednesday, and shares were north of $90.00 at the end of September. Here is why you have to wonder about the risks to the buyout above and beyond the recent trading action in the stock: This deal to acquire the minority stake at $89.00 per share in cash is a $43.7 billion sum of cash.
Roche shares also look like they are trading at fresh year lows in Switzerland. At the half-year report for June-2008, Roche listed its net cash at 10.115 billion Swiss Francs and its equity was listed as 49.176 billion Swiss Francs. 1 US Dollar today buys right at 1.12 Swiss Francs. The dollar has strengthened, so this merger is going to cost Roche more on a Swiss Franc currency conversion. Earlier this month, Citigroup’s analyst covering this sector said that the deal was now 8% more expensive due to the rise in the Dollar. While that means Roche would make more as Genentech’s revenues are in US Dollars, it still requires coughing up more cash upfront.
If you have been watching this global credit crisis unfold, you already know that banks do not want to lend to each other. They sure as hell don’t want to lend funds for mergers right now. IBM (NYSE: IBM) just paid 8% for a 30-year bond issuance (was a 3-part maturity totaling $4 billion). Recently General Electric (NYSE: GE) and Goldman Sachs (NYSE: GS) just had to pay rates which you could argue were running at 10% for financing from Warren Buffett.
To make matters worse, Genentech wants more money. Roche doesn’t want to pay more money. Shareholders want more money. And now there is a small issue that there just might not be enough money to go around to allow this to close.
Roche already holds the majority stake in Genentech. This global financial crisis might be creating a scenario where holding the majority stake will just have to be good enough.
Jon Ogg
October 10, 2008
It Will Take Much More to Buy Genentech (DNA)
The Board of Directors of Genentech, Inc. (NYSE: DNA) had already appointed a special committee to review the $89.00 cash buyout for the rest of the company that Roche did not already own. The committee responded today with a “NO, WE WANT MORE!” response to Roche.
In the press release, it announced that it has unanimously concluded that Roche’s proposal to acquire Genentech for $89.00 per share substantially undervalues the company and the special committee does not support the current proposal.
If you read the release, you can see they are demanding more cash to take the stock out.
- “However, the special committee would consider a proposal that recognizes the value of the company and reflects the significant benefits that would accrue to Roche as a result of full ownership.”
If you’d like our prediction, we are happy to give it. We think that the company is willing to be acquired, but a price of $99 to $106 is what the buyout will take to complete. But if Genentech says that it will not play at those levels then roche may threaten to unload a larger portion of the stock.
Jon C. Ogg
August 13, 2008
Roche's AIDS (Retinitis) & Organ Transplant Drug Going Generic?
Roche Holdings Ltd. appears to have lost some protection on Valganciclovir HCl. The FDA has granted Ranbaxy Laboratories Ltd. “tentative approval” to manufacture and market Valganciclovir Hydrochloride Tablets (450 mg).
Valganciclovir HCl Tablets are indicated for the treatment of cytomegalovirus (CMV) retinitis in patients with AIDS. Valganciclovir HCl is also indicated for the prevention of cytomegalovirus (CMV) disease in kidney, heart and kidney-pancreas transplant patients at high risk.
The estimated total annual sales for Valganciclovir HCl Tablets were $239 million Ranbaxy also noted that it believes it has “First-to-File” status on on the generic AIDS drug tablets, which would give it a potential of 180-days of marketing exclusivity.
Roche Holdings Ltd. trades in the US on the Pink Sheets under the “RHHBY” ticker, so it isn’t exactly the easiest stock to play for most investors.
Jon Ogg
June 25, 2008
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