When Roche Holding AG (RO) of Basel, Switzerland, announced last month that it had an agreement to buy Genentech Inc. (DNA) of South San Francisco, California, it was big news. Roche had pursued the innovative drug maker since July with the primary goal of gaining access to the drugs in Genentech’s pipeline.
On March 11, Roche got the support of Genentech’s board to pay $95 per share to buy the 44% of the company it doesn’t already own. One intriguing reason why Genentech was so attractive to Roche is that the California company has a line of products and biomarkers that fit almost seamlessly with what Roche already offers, including Herceptin, HER2/neu assays, and biomarkers useful for both companies.
Alert readers of Dark Daily recall that, early in 2008, the acquisitive Roche paid $3.4 billion for Ventana Medical Systems, Inc., a price that was 72% higher than Ventana’s share price when Roche made its initial offer in 2007. Recognizing that personalized medicine and molecular diagnostics will be fast-growth areas in the coming years, Roche paid a premium price. It wanted the biomarkers and diagnostic assays that Ventana was developing, because these would make effective companion diagnostic tests for a number of Roche’s anticancer drugs that are currently in clinical trials.
In 2007, the FDA approved Ventana’s Pathway HER2/neu diagnostic kit for assessing breast cancer patients. This laboratory test can be a companion diagnostic test for determining whether a breast cancer patient would benefit from treatment by Herceptin, a drug developed at Genentech and distributed in a number of countries by Roche.
Roche’s acquisition of Genentech is also an example of how consolidation is changing the pharmaceutical industry. Just as has happened in the clinical lab industry and the in vitro diagnostics (IVD) industry, larger corporations are buying up competitors as a way to access economies of scale, to acquire products, patents, and intellectual property, and to eliminate competitors.
For the pathology profession and the clinical laboratory industry, the Roche/Genentech deal raises another question: Will pharma’s need to control the biomarkers used in companion diagnostics tests cause Big Pharma to acquire IVD companies and clinical laboratories? If that was to happen, the huge dollars Big Pharma has available for acquisitions could greatly reshape laboratory medicine as we know it today.