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Biotech / Medical : Genentech (NYSE:DNA) formerly known as (NYSE:GNE)

DNA 8.550

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12:01 PM EST

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From: tom pope	2/10/2009 9:17:25 AM
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WSJ It’s a long way from the $89 a share Roche initially offered to pay for Genentech to the $112 a share Genentech said it was worth. The tender offer document Roche put out late yesterday tells the story of months of standoffish negotiations, and gives a bit of useful background on how each side came up with its numbers. In particular, Roche suggests that Genentech used more optimistic assumptions when it crunched its numbers in November, after the Roche offer was on the table, as compared with earlier projections: The November Financial Model differs from the December 2007 long-range plan (and the summary of such plan provided to Roche in June 2008) in a number of key areas. It assumes greater price increases, greater pipeline productivity, higher probabilities of technical success for Avastin (bevacizumab) adjuvant indications and higher projected revenues for Lucentis (ranibizumab), Herceptin (trastuzumab) and Raptiva (efalizumab), while at the same time projecting significantly lower capital expenditures and effective corporate tax rates. Genentech argued the earlier long-range plan “was principally designed for budgeting and operational purposes and had an inherently conservative bias, often excluding or undervaluing upsides,” the Roche document said. The “November Financial Model was created to reflect these items.” Roche cut its bid on Jan. 30 to $86.50 a share under a tender offer that expires on March 12. Genentech’s stock closed at $82.70 yesterday, suggesting that the market thinks shareholders aren’t going to accept Roche’s offer. Genentech yesterday recommended that shareholders take no action at the moment, and said its board’s special committee would take a formal position on the offer within 10 business days. For more on the deal, read the story in this morning’s WSJ.

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