Commenting on the proposal,
Combined company structured to foster innovation
Genentech will operate as an independent research and early development
center within Roche from its existing campus in
The structure of the combined company will allow for a diversity of approaches in research and early development, while also strengthening cross fertilization between the companies, leading to enhanced overall innovation within the Group. Roche's recently adopted Disease Biology Area approach, which allows five diverse groups to manage their innovative portfolios, will be maintained and strengthened. This, together with recent moves into RNAi (Ribonucleic Acid interference) and delivery technologies, as well as licensing activities, continues to provide a stimulating environment for the creation of medically differentiated medicines.
Roche's Pharma commercial operations in the U.S. will be moved from
Genentech's Late Stage Development and Manufacturing operations will be
combined with the global operations of Roche, achieving substantial scale
benefits, operational synergies and cost avoidance. Roche's manufacturing in
Enhanced ability to innovate
The transaction will over time significantly enhance cooperation and cross
fertilization among all research hubs inside and outside of the combined
company. Sharing of technologies (e.g. RNAi, novel protein architectures),
assets (e.g. chemical libraries), intellectual property (e.g. antibody
production), unique capabilities (e.g. exploratory development, modeling and
simulation) and know-how of the combined research organization will strengthen
the Group's ability to innovate. Genentech and Roche have many complementary
strengths and assets and joining their respective experience and knowledge
will be mutually beneficial. The separate research and early development unit
in
Greater operational efficiency
By reducing complexity and eliminating duplicative functions in areas like
development, manufacturing, corporate administration and support functions,
the combination will result in well-aligned structures and lean processes.
Bringing these functions into the Roche global structures will reduce
complexity at Genentech's
Stronger competitive position and scale in the U.S.
The combined entity will be the seventh largest U.S. pharmaceuticals
company in terms of market share. It will generate more than
Strong financial benefits for both Genentech and Roche shareholders
The transaction will create significant value for shareholders of both
Genentech and Roche. The offer represents a one day premium of 8.8% to
Genentech's closing price of
Roche expects the combination to generate annual pre-tax cost synergies of
approximately
The transaction is expected to be accretive to Roche's earnings per share in the first year after closing. The combined company will generate substantial free cash flow that will enable it to reduce acquisition-related debt rapidly, invest in further product launches and retain strategic flexibility.
No impact on guidance for 2008 and dividend policy
The transaction will have no impact on Roche's sales and Core EPS targets for 2008, as communicated earlier in the year. Roche also remains committed to increasing its dividend pay-out ratio for the next three years as previously announced.
Next steps
Roche expects that the Genentech Board of Directors will establish a committee consisting solely of independent directors to evaluate Roche's proposal with the assistance of independent outside financial and legal advisors. Genentech Board members who are employees of Roche will not participate in the evaluation of the proposal. Roche currently contemplates that the transaction would be implemented through a cash merger between Genentech and a Roche subsidiary, pursuant to which all currently outstanding shares and options of Genentech other than shares owned by Roche would be converted into cash. The precise terms of the transaction, as well as the conditions to its consummation, will be determined through negotiations with the independent directors. It is anticipated that, in addition to customary conditions, the merger would be subject to the approval of holders of a majority of the Genentech outstanding shares not held by Roche. Roche expects to complete the transaction as soon as possible following negotiation of a definitive merger agreement.
Roche has advised Genentech that its sole interest is in acquiring the remaining shares of Genentech held by the minority shareholders and that it has no interest in a disposition of its controlling equity stake in Genentech.
Greenhill & Co. is acting as financial advisor to Roche and
Following is the text of the letter Roche sent on
Dear Ms. Reed, Dr. Boyer and Dr. Sanders:
The healthcare industry, particularly with regard to pharmaceuticals, remains under significant pressure to improve innovation and to deliver more and better care and products of high value to society. A combination of these external pressures, our desire to achieve the best possible results for patients, and the necessary delivery of acceptable returns for our shareholders has caused Roche continually to seek ways to enhance innovation and improve our efficiency of operation and overall performance.
Over the course of the nearly 20 years that Roche has owned a majority of the stock of Genentech, the two companies have worked together with great success, to the benefit of all of our shareholders. During those 20 years Genentech has made great innovative contributions to patient care. Roche, over the same period, has progressed from a more diversified healthcare group to one with a sharper focus on innovation-driven activities within therapeutics and diagnostics, and importantly on the interplay between the two in developing personalized solutions and treatment for patients. While continuing its extraordinary research efforts Genentech has also, through its success and resulting growth, gradually come to resemble a major pharmaceutical company, both in terms of overall revenues and functional split of employees. As a result, there is today an opportunity to realize significant synergies by combining the two companies and integrating their operations while continuing the Genentech research engine and early development activities as an independent center under the Genentech name and leadership.
Accordingly, after considerable thought, we have reached the conclusion
that combining Genentech and Roche will maximize the potential performance of
the two companies and is in the best interests of Roche's shareholders. In
order to compensate Genentech's public shareholders appropriately, we are
proposing a cash merger between Genentech and a Roche subsidiary pursuant to
which all currently outstanding shares and options of Genentech other than
shares owned by Roche would be converted into cash at
The price we are offering represents a one day premium of 8.8% to
Genentech's closing price of
The merger would be subject to the negotiation of mutually acceptable documentation and the approval of a majority of the non-Roche shareholders of Genentech. We anticipate consummating the transaction promptly after Genentech shareholder approval has been obtained.
We understand your role as independent directors and your responsibility
and intention to act in the best interests of the Genentech shareholders in
reviewing and making a decision with respect to our offer. Accordingly, we
expect and encourage you to retain counsel and financial advisors who are
experienced in these matters and independent of Roche and Genentech. After you
have had a chance to consider our offer with your advisors, we would welcome
the opportunity to discuss our proposal with you and your advisors. Roche's
investment banking advisor is Greenhill & Co., and our attorneys are
Because we wish to be sure that all Genentech and Roche shareholders are
fully informed about the proposal we are making, we have decided to release
this letter to the public. (Attached is a copy of the press release that is
being issued on
I look forward to speaking to you soon and to working together expeditiously to bring this transaction to a prompt and successful conclusion.
Very truly yours, Franz B. Humer cc: Arthur Levinson, Ph.D.
About Genentech
Genentech is a leading biotechnology company that develops, manufactures
and commercializes pharmaceutical products for a variety of medical
conditions. Based in
About Roche
Headquartered in
All mentioned trademarks are legally protected.
Media Conference
Roche will host a media conference at its headquarters in
Video Interview with
An interview with
Investor and Analyst Call
There will be a webcast for the investment community on
Roche also will host an investor meeting on
Contacts: Roche Group Media Relations Phone: +41 61 688 8888 / e-mail: basel.mediaoffice@roche.com Daniel Piller (Head) Alexander Klauser Brunswick Group (for U.S. media) Jennifer Lowney Phone: +1 212 333 3810 Erin Becker Phone: +1 415 293 8461
Forward Looking Statements
This document contains certain forward-looking statements. These forward- looking statements may be identified by words such as "believes", "expects", "anticipates", "projects", "intends", "should", "seeks", "estimates", "future" or similar expressions or by discussion of, among other things, strategy, goals, plans or intentions. Various factors may cause actual results to differ materially in the future from those reflected in forward-looking statements contained in this document, including among others: (1) pricing and product initiatives of competitors; (2) legislative and regulatory developments and economic conditions; (3) delay or inability in obtaining regulatory approvals or bringing products to market; (4) developments in financial market conditions, including the market for acquisition financing and other capital markets and fluctuations in currency exchange rates; (5) uncertainties in the discovery, development or marketing of new products or new uses of existing products, including without limitation negative results of clinical trials or research projects and unexpected side-effects of pipeline or marketed products; (6) increased government pricing pressures or changes in third party reimbursement rates; (7) interruptions in production; (8) loss of or inability to obtain adequate protection for intellectual property rights; (9) litigation; (10) the inherent uncertainties involved in negotiations with the special committee of Genentech and that there can be no assurances that a negotiated transaction will ultimately be agreed to or consummated; (11) potential difficulties in integrating the businesses of Genentech and Roche, and that some or all of the anticipated benefits of the proposed transaction may not be realized on the schedule contemplated or at all; (12) that future dividends are subject to the discretion of the board of directors of Roche and a number of other factors, some of which are beyond the control of Roche; (13) the ability of Roche to generate cash flow to, among other things, repay acquisition-related debt as currently contemplated; (14) loss of key executives or other employees; and (15) adverse publicity and news coverage.
The directors of Genentech who are also employees of Roche will not take part in the consideration of the proposed transaction by the Genentech board and accordingly are not permitted to comment or respond to questions regarding the transaction as representatives of Genentech.
For marketed products discussed in this presentation, please see full prescribing information on our website - www.roche.com.
SOURCE Roche