Roche: Forget mega-mergers, focus on a new round of blockbuster bolt-ons
By John Carroll
Roche CEO Severin Schwan
No, Roche is not going to merge with Novartis. Or at least, it's not on CEO Severin Schwan's to-do list. Instead, Schwan carefully repeated the pharma giant's strategy on buyout deals: $1 billion bolt-ons are in style, with a limited appetite for deals in the $3 billion to $4 billion range.
Mega-mergers, which earned a bad reputation after seeing others try and fail, are not on the table, he declared. And that evidently extends to fellow Basel resident Novartis ($NVS).
Over the last few weeks Roche ($RHHBY) has been a frequent visitor in the rumor column. The business wires hummed with chatter from their sources about Roche raising funds to acquire the booming rare-disease player Alexion (it never happened, and some top Roche execs like John Reed wound up laughing that one off). Then BioMarin ($BMRN) was reportedly the target, until Roche poured cold water on the market buzz. Novartis came up as a possible merger partner after Novartis board member Pierre Landolt enthused over the possibility publicly.
"When it comes to acquisitions you know we are not into mega mergers," Severin Schwan told analysts today, according to Reuters. "We are firmly committed to bolt-on acquisitions where we build our existing core franchises in pharma and in diagnostics and that can be product deals and technology deals."
Mega-mergers such as the one between Merck ($MRK) and Schering-Plough or Pfizer ($PFE) and Wyeth left a bad smell with investors, who saw a considerable level of wreckage as two big research operations were crushed together as little in the way of major new products emerged. Roche's buyout of Genentech, however, worked like a charm, in part because the pharma parent left the innovators in place to do their work. It was Roche's pRED unit that had to restructure, not gRED.
well, maybe the $3-4BB sounds like IMGN, it's already in the $1.5 range and a buyer would have to pay much more than the current price to reach an agreement. Also, SGEN is already in that $4BB range and is another likely target. Roche should buy them both, they can afford it with the potential for cost savings. They would own quite a pipeline and some great technology if they buy both.