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Roche Rallies And Genentech Gains

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How can investors on both sides of the pond be reading this right?

The morning after Genentech's big investor meeting shares of the Swiss drugmaker Roche rebounded in overseas trading and the American Despository Receipts (ADR) that trade over-the-counter here in the States are following suit. Meantime, shares of DNA, which got caught in the market downdraft yesterday, are bouncing back a little in early action.

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CNBC.com

A Bloomberg story says Roche investors are breathing a sigh of relief that Genentech's presentation supposedly didn't make an overwhelmingly compelling case that Roche will have to pay through the nose. But at the same time, Genentech investors are apparently responding to mostly bullish analyst commentary that Roche is gonna have to pony up.

Geoffrey Porges at Bernstein writes in a research note to clients, "...(value) drivers, and their potential, reinforce our conviction that investors will force Roche to pay significantly more...." A part of Bernstein owns at least one percent of DNA shares.

Dr. Christopher James at Rodman & Renshaw says, "DNA systematically and convincingly made the argument that Roche's tender offer of $86.50 (per share) is grossly inadequate." R&R would like to bank DNA.

Geoffrey Meacham at JPMorgan writes, "The company opened the hood much more than it has historically done, and we thought the evidence...was quite compelling, and highlights the need for a higher bid." JPM makes a market in the DNA options market and has done and wants to do more investment banking for the company.

So, who's right?

Did Roche dodge a bullet or is it all riding on the results of the big study coming out next month on whether Genentech's Avastin works well on earlier stage colon cancer? It's a clinical trial that the company and many analysts believe—if it's successful—could have far-reaching implications for Avastin's use in the earlier stages of other cancers and add billions of dollars to the drug's annual revenue. Some accuse Roche of trying to pick up Genentech on the cheap before that study reports out.

On the other hand, if the drug doesn't do the trick then Roche might be able to lower its bid or, at least, buy DNA shares for a lot less.

Questions? Comments? Pharma@cnbc.com