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Late Thursday, after 8 months of difficult and often acrimonious negotiations, Genentech’s board finally caved and agreed to allow Roche to purchase the remaining 44% of the outstanding Genentech shares that it doesn’t already own. The price: $95 per share—less than the $112 per share that Genentech’s board and management team wanted —but better than the $86.50 per share that was tendered last fall.

While Roche contends that it will continue to run Genentech as an autonomously operating business unit, many Genentech employees are dubious. I suspect that many DNA (Genentech’s stock symbol) employees will embrace a “wait and see” attitude before any decisions are made about whether or not to stay at the “new company.” Roche’s greatest challenge will be integrating the two companies without ruining Genentech’s innovative culture and immediately sending its best scientists and management team out the door. Pharma and biotech corporate cultures are very different from one another and many biotech employees find it difficult to adapt to big pharma’s slow-moving and anachronistic approach to drug development. As previously reported, US business operations of both companies will be based at Genentech’s headquarters in South San Francisco, CA rather than in Nutley, NJ, where Roche’s American business is currently based. This is not good news for many of Roche’s Nutley employees. Roche has been trying unsuccessfully for years to jettison the Nutley site and it seems likely now. Don’t be surprised if you see a mass exodus at the Nutley site. All of Roche’s US products will be sold under the Genentech brand.

Roche’s purchase of Genentech, America’s oldest biotechnology company (started in 1976) and considered by many to be the crown jewel of the industry, truly signals the end of an era. Let’s hope that another “Genentech” (and others like it) emerge as the US biotechnology industry continues to evolve in the 21^st century.

Until next time...

Good Luck and Good Job Hunting!!!!!

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I believe in free enterprise and that publicly-traded companies ought to be able to buy one another if a deal makes sense. In any other financial market, Pfizer’s impending acquisition of Wyeth would be a noteworthy event but not extraordinary. However, we are living in unprecedented and uncertain financial times and Pfizer’s possible purchase of Wyeth has serious implications for American taxpayers.

As you may recall, the US government has pumped hundreds of billions of dollars into American banks so that they remain “solvent.” This was done to unfreeze credit markets and to purportedly provide relief, albeit indirectly, to American taxpayers many of whom are in financial trouble. However, the government’s infusion of TARP money didn’t unfreeze the credit markets and banks are still reluctant to lend to one another or to small business owners and consumers who need financing to keep their business and homes.

The Pfizer-Wyeth deal began about a year ago when Pfizer’s CEO floated the idea of a merger or acquisition. Negotiations between the two companies were on and off over the past year mostly because Pfizer and Wyeth couldn’t agree on an acceptable purchase price. The financial meltdown of last October changed all that and it became economically feasible for Pfizer to purchase Wyeth at a sharply discounted price.  However, one of the missing variables in the equation (that might kill the deal) was the availability of credit to complete the transaction. Because US banks are currently flush with TARP cash (because they stopped lending) and the Pfizer-Wyeth deal represents a safe deal with a substantial financial upside, it was not surprising that four of the largest US banks were willing to finance the deal.

According to the NY Times, “Pfizer’s bid is being financed by four banks that received bailout money: Goldman Sachs, JP Morgan Chase, Citigroup and Bank of America.” Ironically, last week the US government agreed to give Citigroup and Bank of America an additional TARP infusion to prevent them from “failing.” Amazingly, these very same banks (that have been teetering on the brink of insolvency for the past several months) can find the cash (taxpayer money) to finance Pfizer’s purchase of Wyeth. And, what can the American taxpayers expect to receive in return for investing in the deal—massive job layoffs— if Pfizer’s past purchases of Warner Lambert and Pharmacia are used as harbingers of things to come.

In better financial times, these layoffs would be noteworthy but not insurmountable jobs—there were always jobs at rival pharmaceutical companies and smaller biotechnology companies. However, over the past three years, the pharmaceutical industry has shed over 160,000 jobs and the biotechnology industry, the usual refuge for former pharma employees, has also layed off tens of thousands employees. Put simply, there is no longer a place for these highly skilled and experienced pharmaceutical employees to go to seek employment.

Wyeth shareholders and the banks will undoubtedly benefit financially from the impending deal. On the other hand, while Pfizer may garner some short term benefits from the Wyeth purchase, I think the ROI from the deal will be nominal over the long haul. Ironically, the people who stand to lose the most from the deal are the very same people who made the deal possible—the American taxpayers!  Imagine how you might feel if a deal made on your behalf using your hard-earned money resulted in your eventual unemployment!

Until next time…

Good Luck and Good Job Hunting!!!!!

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