Roche “not prepared to continue the existing relationship” with Genentech

By Nick Taylor

- Last updated on GMT

Related tags Roche U.s. securities and exchange commission

A filing with the SEC says that Roche is not prepared to continue in a relationship with Genentech in which it owns a majority of the biotech’s equity but has limited involvement in its governance.

The information is contained in Roche’s US Securities and Exchange Commission (SEC) filing for its hostile offer, which details meetings that have taken place between Roche and Genentech.

In the filing it is said that Franz Humer, Roche’s chairman, met with his Genentech CEO Art Levinson and said that although Roche would be patient, it is unwilling to continue with the present arrangement.

It appears that Roche is determined to have a greater say in the running of Genentech and the filing mentions that this is a topic that has been discussed for some time at the Swiss company.

Currently Roche owns 56 per cent of Genentech but only has three people on the biotech’s board. However, under Genentech bylaws enacted in 1999 the Swiss giant does have the right to proportional representation on the board.

At the current level of ownership if Roche would claim a majority stake on the board if it chose to exercise its right to proportional representation. Roche has said it will do this if it acquires Genentech but the SEC filing does not rule out doing it even if it does not acquire the biotech.

Morale talk in New York

The discussion between Humer and Levinson took place at a meeting in New York, US in September where the two discussed the impact Roche’s offer was having on employee retention and morale.

In the meeting Levinson expressed his belief that the broad-based employee retention programme Genentech had implemented was proving effective and that morale was high.

This view was supported by the company’s ability to recruit a highly-regarded scientist after Roche had launched its initial bid.

However, both Levinson and Humer agreed that the longer the takeover process went on the more likely that the uncertainty would have a negative effect on Genentech.

Despite this Humer indicated that Roche was willing to be patient, a view reinforced by the length of time the deal has dragged on, but was not prepared to continue the existing relationship indefinitely.

The complete filing can be found here​.

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