Bio Saga Headlines

Bio Saga

Wednesday, March 4, 2009

Genentech to Roche: We’re equipped for hard times

Genentech believes a far-sighted approach to patent expiration, unique and life saving drugs and an unrivalled scientific culture will protect it from recession and ensure greater growth than Roche envisions.

The comments were made by several Genentech executives at its annual investors meeting, at which the biotech sought to justify its financial model and its belief that Roche’s offer is inadequate.

Genentech’s analysis of threats it faces in coming years, and their impact upon the business, included two issues that appeared in President Obama’s budget, namely follow-on biologics and Medicaid reform. Obama backing generic biologics.

Ian Clark, executive vice president, commercial, explained that the damage caused by follow-on biologics had been mitigated through planning since 2004. The financial hit that Genentech will take is incorporated into its November financial model but Clark feels that the company is well prepared to face its patent expiration period, which spans 2016 to 2019.

By then Genentech believes its portfolio, comprised of new products, line extensions and increases in the market share of existing therapeutics, will be sufficient to maintain growth through the patent expiration period. Genentech also claimed that Medicaid reform will have a limited effect on business, as the health programme accounts for three per cent of sales. In addition, Genentech said that demand will continue to grow for its products because “unique, life saving drugs” will be needed even in a recession.

Corporate culture good for long term growth

Several Genentech executives emphasised the cultural differences between the biotech and big pharma, with Art Levinson, CEO of Genentech, explaining how he sought to recruit curious, irreverent people who want to help patients. Levinson believes big pharma has different criteria for recruiting and, although he stressed there was nothing wrong with their model, feels Genentech’s policy ensures long term growth.

There have been concerns that a Roche takeover would destroy Genentech’s corporate culture and speakers at the investors meeting seemed keen to emphasise the benefits of the biotech’s model. Richard Scheller, chief scientific officer, quoted Max Ferdinand Perutz, in what could be perceived as a thinly veiled contrast between Genentech’s culture and that of some of big pharma.

Perutz, who shared the 1962 Nobel Prize for Chemistry, said: “Creativity in science as in the arts, cannot be organised. It arises spontaneously from individual talent. “Well-run laboratories can foster it, but hierarchical organisation, inflexible, bureaucratic rules, and mountains of futile paperwork can kill it. Discoveries cannot be planned; they pop up, like Puck, in unexpected corners.”

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