This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

What Now, Genentech Investors?

(Editor's note: Come see Adam Feuerstein at the Money Show in San Francisco. Adam will be speaking to attendees on Friday, Aug. 8, at 2:15 p.m. ("Biotech Investing for Individuals: How to Turn Geeky Science Into Fat Profits"); on a lunch panel on Saturday, Aug. 9, at 12:35 p.m. ("Tech and Biotech: Picks and Pans for 2008 and Beyond"); and on Sunday, Aug. 10, at 8 a.m. ("Biotech Investing for Individuals: How to Turn Geeky Science Into Fat Profits").

When Roche eventually completes the job of gobbling up Genentech (DNA), minority investors in the biotech sector's No. 1 company will have roughly $44 billion to re-invest somewhere else.

Where will all that money go?

The most obvious answer is right back into the other large-cap biotech firms like Celgene (CELG - Get Report), Gilead Sciences (GILD - Get Report) and Biogen Idec (BIIB - Get Report), which, in turn, bodes well for the sector as a whole. More on that in a second, but first, here's an intriguing, if not a fantastical, proposal: How about into a new, mini-Genentech?

A Mini-Genentech Spinoff?

Yes, it's probably too early to think about Roche spinning off a piece of the "old" Genentech into a new, publicly traded company, but the idea isn't totally far fetched. Moreover, it might solve the thorniest issue facing the Swiss drug giant outside of defending its $89-a-share takeover price: How to retain Genentech's best and brightest scientists so that they keep on discovering new blockbuster drugs for Roche and not for someone else.

Think about it, Roche is making its move now because it wants to control 100% of Genentech's commercial operations, namely the blockbuster products Avastin, Rituxan and Herceptin, before it has to renegotiate a new marketing agreement in 2015. The weakness in the U.S. dollar works to Roche's advantage today, and the company acknowledges that the environment for Big Pharma is changing, growing more competitive.

Genentech also has one of the deepest R&D pipelines in the industry, which should help Roche grow into the future, but if the company were interested in unlocking more of the value from that pipeline -- and could get investors to share the risk and reward of early-stage drug development -- a mini-Genentech spinoff (with Roche still controlling a majority stake, of course) makes a lot of sense.
1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AMGN $158.30 0.00%
BIIB $274.99 0.00%
CELG $103.41 0.00%
GILD $88.21 0.00%
AAPL $93.74 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs