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Roche Holding is as independent as ever and determined to stay that way -- regardless of major rival Novartis (NVS
) owning almost one-third of its stock. That's the message Roche CEO Franz Humer emphasized in a BusinessWeek interview in New York on Jan. 29. "Novartis has no ability to hinder any strategic move that Roche would want to make," says Humer. "Their influence is zero."
Merger speculation surfaces regularly around the two Swiss pharmaceutical companies, which target many of the same markets. But Novartis gave some heft to that talk when it reported on Jan. 23 that it had spent more than $2 billion to raise its stake in Roche from 21.3% to 32.7%. So far, though, the increased stake has given Novartis little sway over its rival. Humer, in New York for long-planned company meetings, says Novartis has no ability to gain a seat on the board -- nor has it asked for one -- and the members of Roche's founding families said over the weekend that they're completely behind management.
The families' support is more important than the size of any stake Novartis acquires. Under Roche's two-tier share structure, the descendants of Fritz Hoffman and his wife, Adele La Roche, who founded the company in 1896, own 50% of the voting shares. That gives them control of Roche, even though they only own 9.3% of the overall shares. That share structure will stay in place until 2009, effectively shutting off any takeover attempts.
BRAIN TRUST. It's not just Novartis that Roche is spurning, says Humer. "The family members are unanimous in their decision to remain independent. It wouldn't matter who approached us." Humer believes the company, which is the world's leader in oncology drugs and the medical-diagnostics market, already has ample size and resources to pursue market opportunities.
He also has no hesitation in drawing smaller companies into the Roche sphere, though rarely through outright acquisitions. Roche holds majority stakes in Genentech Corp. (DNA
), a leading biotech company, and Chugai, a Japanese drugmaker. Roche feels no need to control these companies, he says, as that might hurt its own ability to innovate.
However, Humer doesn't see Roche's role as merely being a banker behind innovative drugs such as Herceptin, Genentech's treatment for breast cancer. While he acknowledges that "Genentech would not have survived if we hadn't financed them for the past 10 years," Roche has also shared knowledge from its own scientists. "I regard their drugs as Roche drugs, sold under different labels," says Humer.
Roche itself will continue to spend some $3 billion a year on in-house research and development, according to Humer. "When you look at what drives the success of pharmaceutical companies, it's clearly driven by the ability to innovate and the capacity to create new products," he says -- and Roche already has that ability. Concludes Humer: A megamerger could only cause harm.
Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.
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