Genentech drops after investor confab

Genentech fans may have cheered CEO Art Levinson's (photo) rebellion against Roche yesterday, but investors and analysts were less than impressed. The company's shares dropped by nearly $4 as the market absorbed Genentech's long-term projections, however rosy. That left the stock at almost $5 below Roche's offering price, the Wall Street Journal Health Blog notes, though it had regained some ground this morning.

Some traders even speculated that the market's precipitous drop in recent days could press Roche to lower its bid even further. The offer terms allow the Swiss drugmaker to pull out completely or amend its bid if at least one of four major indices drops more than 15 percent off Feb. 9 levels. The S&P 500 has plummeted by 19 percent, the Financial Times says, but Roche won't make a move now, an unnamed source told the paper. Instead, Roche will play its cards close to the vest until just before the March 12 deadline, the source said, then cryptically hinted that the market's slide could severely undercut Genentech's play for a higher offer.

Still, Genentech's illustration of Roche's dependence on its drug candidates and revenues was, well, graphic. As the New York Times observes, a chart of Roche's clinical trials seemed well-stocked until Genentech CFO David Ebersman stripped out the Genentech-developed candidates. Then, the chart looked "as if a forest had been denuded." Roche revenues dropped significantly without Genentech's contributions, too.

And at least some analysts think the presentation may have had the desired effect: persuading investors not to tender their shares. Steven Harr, a biotech analyst at Morgan Stanley, told the NYT that the meeting "reinforced his view that few investors would tender." We'll have to wait and see who's right.

- see the Health Blog post
- check out the story in the FT
- read the NYT article