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Roche Gets Genentech, But At What Price?

The overwhelming majority of people who have voted in the “Pharma’s Market” pollabout the future of Genentech’s execs and top scientists thinks most of them will eventually bolt.

And in a research note to clients today, Geoffrey Porges at Sanford C. Bernstein agrees. He writes, “Retention packages and broadened responsibilities may keep some engaged for a period of time but the unique culture, structure and style of Genentech is likely to be eroded over time. As a consequence we expect many of the key scientific, clinical and commercial staff to ultimately leave the merged company.” A part of Bernstein owns at least one percent of DNA shares. Or at least it used to own them.

Roche Chairman Franz Humertold me in an exclusive interview last week that Genentech gets to keep its name, its culture and the DNA research and development arm will be a separate silo within Roche. Genentech has had a rich employee stock options program and a lot of folks will be coming into a lot of cash. But Humer also said he’d be sitting down soon with DNA management to come up with something other than stock options to offer as perks.

At Genentech’s recent investor meeting an analyst asked Chairman and CEO Art Levinson what management would do if Roche bought the company. Levinson refused to answer the question, but said if or when the time came, each exec would have to make that decision on his/her own.

Porges says if those folks take the money and run that future success could be at stake. “Longer term we question whether the key contributors to the company’s impressive history of innovation will stay with the merged entity,” he writes. You don’t see or hear those words used to describe many biopharma companies these days. Usually analysts are talking about the lack of innovation at most of the big companies I cover.

Many investors and analysts are applauding the $95/share deal Genentech finally got from Roche. And while some have suggested all this noise about Roche putting Genentech’s special culture at risk is a bunch of hooey, many are still mourning what they fear might be the beginning of the end of the DNA glory days.

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