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SoftBank Builds a $5 Billion Stake in Pharma Giant Roche

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·3 min read
SoftBank Builds a $5 Billion Stake in Pharma Giant Roche
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(Bloomberg) -- SoftBank Group Corp. has quietly built a $5 billion stake in Roche Holding AG, placing a bet on the pharmaceutical company’s strategy of using data to develop drugs, according to people familiar with the matter.

The Japanese conglomerate is now one of Roche’s largest investors, according to data compiled by Bloomberg.

Roche’s sales have recently been boosted by its Covid-19 testing business. The company’s diagnostics unit reacted swiftly to the coronavirus pandemic, but the pharmaceuticals division, where aging cancer medicines face increasing competition, has had a more difficult time.

Shares of the Basel, Switzerland-based company have risen 8.8% in the last 12 months, compared with a 14.7% gain in the MSCI World Pharma Biotech & Life Sciences index over the same period.

Roche’s voting shares climbed as much as 1.6% in early trading on Wednesday to their highest ever, while the non-voting shares climbed as much as 1%.

The drugmaker has a dual-class share structure with separate voting and non-voting shares. The founding families own 50.1% of the voting class, while cross-town rival Novartis AG holds one-third. It’s unclear which types of shares SoftBank holds.

SoftBank believes Roche’s Genentech division, which focuses on data-based drug discovery and development, is highly undervalued, one of the people said, all of whom asked not to be identified because the information is private. Roche last year hired Aviv Regev, a computational and systems biologist who was a core member of the Harvard University-affiliated Broad Institute, to lead the Genetech research unit.

Regev’s work shows how technology has transformed the way drugs are developed. As a computational and systems biologist, she pioneered methods for deciphering sequences of RNA, the chemical negative of DNA, in single cells. At the same time, she helped develop machine learning algorithms to aid scientists in understanding the avalanche of data found in the sequences. The move to Roche means being able to put her research into practice to develop better medicines, Regev said in a podcast earlier this year.

Roche is developing a new pill for Covid-19 and an Alzheimer’s disease treatment. In June, the U.S. approved Biogen Inc.’s Alzheimer’s drug Aduhelm, which was seen as a positive sign for the Roche medicine.

SoftBank has been increasingly focused on biotech and health care. It invested in Pacific Biosciences of California Inc., AbCellera Biologics and Sana Biotechnology. In February, Bloomberg News reported that SoftBank was planning to spend billions investing in public biotech companies, via its asset management arm SB Northstar.

SB Northstar was launched in 2020 by SoftBank’s founder Masayoshi Son as a way to put the company’s massive cash pile to use. The billionaire personally holds a one-third stake.

Son initially pushed a controversial program of trading options, but has since been winding down its options strategy amid a backlash from investors.

SoftBank held a total of $19.9 billion of “highly liquid” securities as of the end of the latest quarter, including a $6.2 billion investment in Amazon.com Inc., $3.2 billion in Facebook Inc. and $1 billion in Microsoft Corp. SB Northstar has also invested in companies including Lucid Motors and The Hut Group.

(Updated with shares, additional context.)

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