Roche's M&A budget opens up as it pays off Genentech deal debt

Roche's outgoing Chairman Franz Humer--FiercePharma File Photo

Roche's ($RHHBY) debt from its 2009 buyout of Genentech is winding down--and less money to pay means more money to play with, outgoing chairman Franz Humer says.

According to The Wall Street Journal, the Swiss pharma giant will be better equipped to make some deals as it pays off the bulk of the debt from that $47 billion buyout. Analysts expect Roche to have a cache of cash in 2015 after generating 16.4 billion Swiss francs ($18.6 billion) in free cash flow last year. What to do with it? External investment opportunities are an option, Humer told the newspaper.

"I think the accumulation of cash adds to the strategic flexibility that Roche is gaining--strategic and financial flexibility," he said Tuesday.

But that doesn't mean the company will be going after just anybody. As the Journal notes, Roche folded on a proposed $7 billion pickup of gene-sequencing group Illumina ($ILMN) in 2012 to avoid overpaying. And back in September, amid swirling rumors of an Alexion ($ALXN) buyout, pharma chief Daniel O'Day told Reuters that ultrarare diseases--Alexion's specialty--just didn't fit the company's business model.

"Any acquisition needs to make scientific sense, it needs to make strategic sense and it needs to make financial sense," Humer told the WSJ. "We don't need to spend that cash."

That doesn't mean rare-disease deals are excluded. Analysts speculated in September that Roche had its eye on Novato, California-based biotech BioMarin ($BMRN), whose Vimizim recently became the FDA-approved treatment for a Morquio A syndrome.

"We go where the science takes us, wherever it is, independent from the size of the patient population," Roche CEO Severin Schwan told reporters last October.

- see the WSJ story (sub. req.)

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