Well, M & A is alive, it seems - and kicking!
Fierce Pharma reports that Roche is considering a sweetened bid of around 44 Billion USD for Genentech (http://www.fiercepharma.com/story/roche-readies-sweetened-genentech-bid/2009-01-12)
FT reports that Roche has access to funding from a JP Morgan / HSBC-led consortium. It also has the option of foregoing this years dividend (but that would run contrary to Roche's assertion last year that it would increase dividends for the next 3 years - i.e. through 2010) and a line of revolving credit.
So money's not the issue here - the valuation is more significant, given Genentech's leadership position in cancer treatment drugs led by Avastin, Rituxan and Herceptin. Cancer is the number two cause of mortality in developed countries and accounts for a hefty chunk of public health expenditure - so Genentech's market is growing, and its revenues remained pretty solid last quarter - even in the current economic climate.
Genentech management, according to the Wall Street Journal's Health Blog have consistently maintained that their company is worth at least 90 USD per share - which Roche are now apparently prepared to pay with the new bid, which values Genentech shares at 95 USD per share.
Watch this space, but this is definitely one of the big deals by size for 2009.
- oRiOn
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