Rivals see no need to match Roche's big gene bet
DAVOS, Switzerland (Reuters) - Roche Holding AG's rivals Sanofi SA and Novartis AG see no need to match the Swiss drug maker in buying a gene-decoding business like Illumina Inc and reckon they can do partnerships instead.
The relaxed attitude in the face of Roche's $5.7 billion hostile bid for Illumina suggests the chance of a counterbid from big drug makers is slim, although diagnostics and IT companies may yet show interest.
"Everybody is thinking about diagnostics but you can get access to this technology without necessarily having to acquire the company," Novartis Chief Executive Joe Jimenez told Reuters at the World Economic Forum in Davos.
U.S.-based Illumina is a major player in the emerging field of gene sequencing, which allows scientists to better predict those patients that are likely to respond to a particular drug.
The San Diego company makes machines that decode a person's entire genome, going far beyond simple genetic tests that are already used in diseases such as cancer to test for a handful of gene variations.
Genetic profiling is getting increased attention from the global pharmaceuticals industry as companies move towards a new era of "personalized" medicine, designed to tailor treatment to particular patients.
That plays to the strengths of Roche, which is a major supplier of diagnostics tests as well as the world's largest maker of cancer drugs.
The hope is that wider use by doctors will expand as the cost of sequencing drops and drug makers adopt more medicines that target specific genes.
But the full potential of whole-genome sequencing is unclear. At the moment, Illumina's systems are used mainly in research laboratories. Their widespread application in clinical practice, potentially tied to certain drugs, remains a "blue sky" opportunity, according to Deutsche Bank analysts.
Furthermore, the drug industry's record of capitalizing on new technologies has been mixed and Chris Viehbacher, CEO of Sanofi, said he had a "deep aversion" to buying technology platforms.
"It's just not the risk profile we're looking for. It could pay off well or there's a big downside," he said. "You need to be part of new technologies but I think partnership is the way to go."
And he's not too concerned that Roche's control of a dominant player in gene decoding might lock out his company. "You can't imagine Illumina only developing diagnostics for Roche products -- that's not much of a business model," he said.
Viehbacher pointed out that acquisitions did not have to disrupt ongoing partnerships, as evidenced by two deals on Thursday -- Amgen Inc's agreement to buy Micromet Inc and Celgene Corp buying Avila Therapeutics. Sanofi has alliances with both target companies.
Amgen's decision to fork out $1.16 billion on cancer drug developer Micromet has quelled speculation it might challenge Roche on Illumina. [ID:nL2E8CQ27X]
Pharma industry bankers and analysts say Siemens, General Electric, Thermo Fisher Scientific, Danaher, Agilent Technologies and Johnson & Johnson are other potential interlopers, although it is not clear any will want to make a competing bid.
In the meantime, Roche has a battle on its hands after Illumina adopted a "poison pill" defense strategy that would trigger a rights agreement if any party buys 15 percent of its stock.
Viehbacher told Reuters he was continuing to look at bolt-on acquisitions and reiterated he expected annual deals of between 1 billion and 2 billion euros (1.3-2.6 billion) -- similar to previous years -- in areas such as emerging markets, consumer healthcare and animal health.
Finding good buys, however, is not easy.
"When you look at all the deals going on in our sector the values are looking pretty racy. I think the only way you create value is trying to buy ahead of the cycle, so where we're going to be is not necessarily where our competitors are," he said.
(Reporting by Ben Hirschler. Editing by Jane Merriman)
- Target stores' customers hit by major credit card attack
- UPDATE 3-Saab wins Brazil jet deal after NSA spying sours Boeing bid
- As Modi storms into India's election, a quiet alternative emerges
- Facebook, Zuckerberg, banks must face IPO lawsuit: judge
- U.S. prosecutor defends treatment of Indian diplomat |
During Soviet times, Sochi gained a reputation for tolerance but the city's once vibrant gay scene has been shrinking as Russia prepares to host the 2014 Winter Games. Slideshow