| BUSINESSWEEK ONLINE : JUNE 14, 1999 ISSUE | ||||||||
| ||||||||
 | ||||||||
| BUSINESSWEEK INVESTOR -- INSIDE WALL STREET
Genentech May Soon Breathe Easier Here's a novel twist: Some investors have been accumulating shares of Genentech(GNE), trading at about 87, because they are betting that Roche Holding(ROHHY) won't exercise its option to buy--at 82 1/2 a share--the 35% of Genentech that it does not already own. For this reason, one might think the stock would fall. Quite the opposite will happen, argues Lissa Morgenthaler, portfolio manager at Murphy New World Biotechnology Fund, which has been buying Genentech. Morgenthaler thinks that if Roche allows the option to expire on July 1, the Genentech stock price will quickly shoot up to 100--and then keep on going. The options outstanding are part of a 1995 pact that gave Roche Holding the right to acquire all of Genentech, a biotech giant that makes protein-based drugs, such as Herceptin for breast cancer. If Roche Holding were to acquire all of Genentech, according to Morgenthaler's argument, the biotech company's management and a lot of its key people ''will walk away.'' Morgenthaler thinks that Chief Executive Officer Art Levinson and Chief Financial Officer Louis Lavigne wish Genentech to remain an independent company. They would be ''very uncomfortable'' if Roche Holding took over, Morgenthaler says. If Roche leaves things alone, she adds, investors will feel reassured. ''Levinson and Lavigne have exciting ideas and are very innovative,'' says Morgenthaler. One reason Roche will choose to pass up the option: It already captures two-third of Genentech's profits with its 65% stake. Genentech declined comment. BY GENE G. MARCIAL _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
|  |
 | |
INTERACT E-Mail to Business Week Online | |||
