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What Now, Genentech Investors?

And by partially spinning off Genentech's drug-discovery and early-stage drug-development operations into a separate, publicly traded company, Roche could reward Genentech scientists who stay with the favored currency of Silicon Valley. I'm talking, of course, about mini-Genentech stock options.

"What I like best about the mini-Genentech spinoff idea is that the company will be seeded with a pipeline that's truly vetted. It wouldn't be like most of these new biotech companies where all you get are some unknown compounds tested in mice," says Les Funtleyder, health care strategist at Miller Tabak and Co. who doesn't mind taking some wild stabs at prognostication.

Clearly, investors who made money with the old Genentech would surely flock to invest in the ground floor of a mini-Genentech. It's hard to imagine Roche having a hard time selling that deal to Wall Street.

Investing on a Genentech-less Wall Street

Anyway, it's just an idea. Returning to reality, what does happen to the $44 billion (or more, if Roche ups the Genentech bid) that will flow to Genentech's existing shareholders?

David Chan, portfolio manager of the $1 billion Jennison Health Sciences Fund and current owner of 12.8 million Genentech shares, says a portion of that money will be re-allocated into other health care and biotech stocks as growth fund managers look for new opportunities.

"If large, growth-oriented investors seek other biotech opportunities, it will be big-cap stocks like Celgene and Gilead Sciences that will most likely be the beneficiaries," he says.

Adds Miller Tabak's Funtleyder, "Health care and MedTech [medical technology] are good places to look for growth these days."

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