Roche Genetech Case

1005 Words5 Pages
1. Why is Roche seeking to acquire 44% of Genentech it does not own? From Roche’s point of view, what are the advantages of owing 100% of Genentech? What are the risks? Reasons & Advantages  The existing structure was increasing competition between Roche and Genentech as the product of the two companies were coming in direct competition with each other in multiple markets especially in US  The existing ownership and operating model gave Roche little opportunities to address the increasing the overlap and duplication between these two firms (for example R&D work)  The product licensing agreement between Roche and Genentech was set to expire in 2015. With the expiry of this agreement Roche will lose the right to develop and commercialize products of Roche which were major source of revenue for Roche  After the expiry of the licensing agreement of product licensing agreement between Roche and Genentech a new arm’s length agreement would have to be negotiated where the product pipeline could be sold to the highest bidder  Due to existing shareholding structure, in order to protect the rights of minority shareholders, Roche could not get access to intellectual property of Genentech  High growth of biotechnology sector  Not much innovation in Pharma sector which was leading to acquisition by larger companies leading to consolidation of industry  Acquisition of Genentech will help Roche generate cost synergies of 60% of $750-850 Million by cutting costs and streamlining  Genentech had large chunk of Cash ($ 9.5 Billion) which Roche could not access to ownership structure. The acquisition will provide a Roche access to this cash. Risks  Possibility of Genentech’s scientists leaving the company due to the fear of loss of independence and entrepreneurial spirit of Genentech after acquisition by Roche  Threat of potential intellectual property going out
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