Roche-Genentech deal could spark worker defections

LOS ANGELES (Reuters) - Roche Holding AG's (ROG.VX) plan to buy Genentech Inc DNA.N runs the risk of triggering an exodus of employees hesitant to work for a big pharmaceutical company, industry sources said on Tuesday.

"It's easy for people in the (San Francisco) Bay area to find financing ... You could see entire groups just leaving if they have the guts to do it," said Martin Babler, chief executive at drug delivery company Talima Therapeutics and a former senior executive at Genentech, which is based in South San Francisco, California.

Switzerland-based Roche stunned investors with its offer on Monday to pay $43.7 billion, or $89 a share, for the 44 percent of Genentech it does not already own.

Genentech has said its independent directors are reviewing the proposal. Chief Executive Arthur Levinson was due to meet with Roche officials on Tuesday evening in San Francisco, Roche said.

"One of the potential outcomes of this could in fact be a spike of really interesting people coming out of there," said Bill Greene, managing director at venture capital firm MPM Capital and another former Genentech employee. "That could, at least temporarily, be quite good for the industry."

The two companies have worked together since 1990. Under their current agreement, in place since 1999, Roche owns 56 percent of the No. 2 U.S. biotechnology company and holds rights to market Genentech's drugs outside North America and Japan.

"Roche has a different culture, a different business model than Genentech," said Babler. "Within Genentech there is a perception that Roche operates as a big pharma company. With the way they did the deal, they haven't managed that perception."

The maker of top-selling cancer drugs including Avastin, Herceptin, and Rituxan, Genentech is one of the most successful biotechnology companies of all time and has acted as something of a proving ground for industry talent.

Its former employees include Nuvelo Inc's NUVO.O chief executive, Ted Love; Onyx Pharmaceuticals Inc (ONXX.O) Chief Medical Officer Henry Fuchs; and Genomic Health Inc (GHDX.O) Chief Operating Officer Kim Popovits and Chief Medical Officer Steve Shak.

Roche Chief Executive Severin Schwan said during a conference call on Monday that Roche intended to work to retain management and employees at Genentech and to keep the biotech company focused on innovation.

"Whenever you have changes in a company that are drastic there is always a shake-up. I would expect that there will be people who want to leave," said Matthew Decesare, an account executive at Healthcare Recruiters International.

Other recent acquisitions of biotech companies show that it is not always easy for big drugmakers to retain top managers.

David Mott, head of AstraZeneca Plc's (AZN.L) MedImmune unit, said last month he would leave the group at the end of July, one year after selling his biotech business to the Anglo-Swedish drugmaker.

AstraZeneca acquired U.S.-based MedImmune, led by Mott as its president and chief executive, last June for $15.6 billion in a bid to build its presence in the fast-growing field of biotech medicine and vaccines.

Mott agreed to stay on after the takeover but he was made a rich man in that deal, since he was entitled to more than $145 million, mostly from the vesting of stock options.

AstraZeneca had offered bonuses to MedImmune staff if they stayed on for a minimum of a year.

Greene said Roche "is not so naive as to expect 100 percent" of Genentech employees to stay, but is likely to do its best to retain key people.

(Editing by Toni Reinhold, Gary Hill)