Roche’s proposal to acquire the remaining shares in the biopharmaceutical company Genentech for $43.7 billion is a strong statement on Big Pharma’s strategy to adjust its pipelines and product portfolios to biopharmaceuticals.
Genentech is considered one of the true success stories of the biotech industry. The company was founded in 1976, went public in 1980, and in 1982, was behind the first recombinant DNA drug marketed: human insulin, which was licensed to Eli and Lilly. In 1985, Genentech received FDA approval to market its first product, “Protropin” (somatrem for injection) growth hormone for children and followed in 1987 with FDA approval to market “Activase” (alteplase, recombinant). Roche paid $21.1 billion for a stake in Genentech in 1990 and now owns a 55.9% stake in the company. Its $43.7-billion bid would give the Swiss drug maker ownership of the remaining shares in the company. The Roche/Genentech partnership has been a good one. The companies hold 20.6% of the global biotech market, which was valued at $75 billion in 2007, good enough for second place behind Amgen, which holds a 21.3% share, according to IMS Health. The companies have three of the top 10 biotech products: “Rituxan/Mabthera” (rituximab), “Herceptin” (trastuzumab), and “Avastin” (bevacizumab). But do past successes portend of future successes?
There is always the concern that the innovation and entrepreneurship that led to the success of a smaller company can be lost when absorbed by a larger company. The companies have had a successful relationship to date, and Roche hopes to continue that relationship by allowing Genentech to operate as an independent research and early-development center within Roche, seeking cross-fertilization of technologies and expertise between the two companies as a vehicle for innovation. “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,” said Roche in a prepared statement. If the deal goes through, it will also be interesting to see whether Roche/Genentech, successful in developing targeted therapies such as Herceptin, can advance the targeted drug model even further or perhaps eventually to the realm of personalized medicine.
Genentech’s expertise in biotechnology and Roche’s strong position in diagnostics, bolstered by its approximately $3.4-billion acquisition of Ventana Medical Systems earlier this year, creates a dream team for a new drug-development paradigm.
Ventana develops, manufactures, and markets instrument/reagent systems that automate tissue preparation and slide staining in clinical histology and drug-discovery. Last year, Genentech formed a pact with Ventana to codevelop and commercialize tissue-based diagnostics for designated Genentech drug candidates.
Genentech was able to usher in the new era of biotechnology 30 years ago. Let’s see with the deep pockets of Roche, if it can usher in the next.