Roche Holding’s Acquisition of Genentech

Abstract

On March 12, 2009, Roche announced a $46.8 billion deal to buy South San Francisco-based Genentech. Genentech over the years were transformed from a startup to an entrepreneurial company which had developed Roche’s best-selling drugs like Avastin, Herceptin, and Rituxan. Roche wanted to absorb the biotech firm’s DNA into its corporate culture. Many of the late-stage clinical trials conducted by Roche involved Genentech products. It was expected that Roche’s main growth could come from expanded uses of Avastin. Unlike Pfizer and Merck, Roche had no interest in generic drugs or consumer products. Roche have become a leader in diagnostics. The acquisition was aimed to improve coordination on product development. With the deal, Roche obtained access to Genentech’s product pipeline beyond the year 2015 and gained access to Genentech’s cash pool of approximately $10 billion. The cumulative return for Roche during the entire acquisition period (initial hostile bid announcement to deal completion) was approximately −9.59%.