Roche Bids for Rest of Genentech (Update)

Updated from 8:31 a.m. EDT

Swiss drug company Roche made an offer Monday to take over the stake it doesn't already own in biotech behemoth Genentech (DNA Quote) for $89 a share, or $43.7 billion.

Many observers on Wall Street expect Genentech investors to view the bid as low, but some also see it has a preliminary approach. As evidence, shares of South San Francisco, Calif.-based Genentech, which closed Friday at $81.82, were surging past the Roche price in trading Monday, lately rising 13% to $92.50.

Wall Street speculators point out that Genentech's upcoming interim data on cancer drug Avastin in the adjuvant setting, if positive, could be worth $20 a share on its own. "This is a multi-billion dollar opportunity as nearly every treated newly diagnosed colorectal patient will be an Avastin candidate," explains Summer Street Research's Tony Caserta.

Consider that Genentech guides to 25% EPS growth through 2009 -- "25X the street estimate of $3.88 in 2009 gets you $97 a share, without the adjuvant results," wrote Caserta.

Roche said Monday that it has already incorporated the positive data into the $89-a-share price. The Swiss company urged Wall Street to consider its action of taking Genentech private differently than other big biotech deals.

"I firmly invite you to respect that we already own Genentech in the sense that we already have control ... it's not an acquisition where you have to pay a high premium for change of control," said Roche CEO Severin Schwan.