Genentech, Roche Find New Balance Three Years Post-Merger

Xconomy San Francisco — 

In late 2009, I wrote a feature story for BusinessWeek that was given the clever and rather blunt headline “Can Roche Leave Genentech Alone?” It was a pressing question at the time. Roche had just laid out $47 billion to acquire the 44 percent of Genentech that it didn’t already own. For years leading up to that, the Basel, Switzerland-based drug giant held a majority stake of the South San Francisco-based biotech, but was famously hands-off in how it managed the investment. That strategy worked: Genentech spent much of the late ‘90s and 2000s churning out a string of oncology blockbusters, including trastuzumab (Herceptin) for breast cancer and bevacizumab (Avastin), now approved to treat tumors of the colon, lungs, kidneys, and brain.

Three years post-merger, Xconomy wondered, how has Roche gone about leaving Genentech alone, while at the same time integrating it into the larger organization in a way that benefits both organizations? And how has life changed for employees of the company’s two major U.S. sites, Genentech’s South San Francisco headquarters and Roche’s Nutley, NJ-based research center?

To get the answers, I interviewed a half-dozen top executives of the integrated company, including Ian Clark, Genentech’s CEO. What emerged is a portrait of a company that is going through a top-to-bottom redesign in a process that’s complex, yet at the same time organized and meticulously thought-out. It’s too early to definitively declare the integration a success, but Clark says the early signs are positive. “From a structural and process point of view, the proof is in the pudding. Are we discovering anything?” he says. “We have entered into a rich vein of new molecules.”

It’s hard to argue with Clark when you take a look at Genentech’s plans for the upcoming conference of the American Society of Clinical Oncology (ASCO)—the most important cancer confab of the year. At the event, which begins in Chicago on June 1, Genentech is planning 30 oral presentations on its drug portfolio, including details from a pivotal trial of T-DM1, a turbocharged version of trastuzumab that’s part of an emerging drug class called antibody drug conjugates. These drugs are antibodies linked to toxins, which travel straight to cancer cells and destroy them, while leaving healthy tissue intact. Early positive results from trials of the drug, which Genentech is preparing to file to the FDA, have made it one of the most highly anticipated cancer products of the year. The company expects to get a verdict from the FDA on another new breast cancer drug, pertuzumab, shortly.

That kind of progress could have easily been stalled or derailed by too much merger disruption or employee angst. Not long after completing its big purchase of Genentech, Roche felt the pressure, like many of its large pharma peers, to slash its overhead expenses and become more efficient. And it did make cuts, right around the time when many talented Genentech employees were trying to figure out if they wanted to stick around.

In November 2010, Roche said it planned to eliminate 4,800 jobs worldwide, and get out of certain lines of research altogether, like RNA interference. While a few of the jobs were slashed … Next Page »

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