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Genentech chiefs consider acquisitions
By Paul Abrahams in San Francisco
Published: July 7 2002 21:55 | Last Updated: July 7 2002 21:55
Top managers at Genentech, the world's second-largest
biotechnology group, believe valuations in the industry
have fallen so far that they are for the first time considering
acquisitions.
"In the past two years valuations have come down so far
that companies that we would never have considered two
years ago at last look interesting," said Art Levinson,
chairman, president and chief executive.
The move would be a radical step for the $15bn group - the first biotechnology
group, founded 26 years ago - which has about $2bn cash on its balance sheet.
The company has so far expanded through organic growth.
If Genentech were to begin making acquisitions, it would provide support for
valuations in the troubled industry. The Amex biotechnology index has fallen 48
per cent in the past year.
The industry has been battered by a series of disappointing clinical trials and the
recent scandal at ImClone, whose former chief executive, Sam Waksal, has
been arrested on charges of securities fraud and conspiracy for allegedly tipping
family members to sell their stock. Martha Stewart, the celebrity cook, is also
facing allegations of insider trading in ImClone.
"A number of companies' valuations have fallen below the cash on their balance
sheet. Some have dropped for good reason but others have good products," said
Lou Lavigne, chief financial officer, in a separate interview.
Mr Levinson denied that any acquisitions would be in response to the recent
$16bn acquisition of Immunex by Amgen, the world's biggest biotechnology
group. "It did not give us pause for thought. We are very comfortable with our
scale," he said.
The executives indicated that the primary aim of any deal would be to add to the
group's pipeline of products, rather than buying in drugs that were already being
marketed.
The company would probably be looking at targets in the US that were
developing drugs in its core therapeutic areas, mainly oncology and auto-immune
diseases.
Mr Levinson said that Roche, the Swiss pharmaceuticals company that owns 58
per cent of Genentech, would support acquisitions that could be paid for in cash
or stock. Genentech's shares last week touched a three-year low of $26.45. On
Friday, they closed at $29.70.
"There is a strong alignment of interests. Roche is strongly supportive of possible
acquisitions even if that means a possible dilution of their stake," he said.
Genentech has traditionally acquired products by licensing them in. "Licensing
has huge advantages over outright acquisitions," said Mr Lavigne. But, in some
circumstances, when the drug in question is a whole company, you have to
acquire the group to get access to the molecule." |
