Biotech Values

[DewDiligence]

DNA to Acquire TNOX for $20/share ($919M)

[The cash buyout is an approximately 50% premium to TNOX’s market price, making this the third biotech buyout in a very short time at a premium of 50%+. (The others were RNAI and KOSP.) This deal is interesting in the sense that these companies have sued one another on various occasions regarding the development of Xolair, the antibody for asthma and peanut allergy. For DNA, this deal is more financial than strategic; i.e. it’s a way for DNA to put some cash to use in a way that provides a nice ROI by virtue of lowering the Xolair royalties DNA currently pays to TNOX and capturing the Xolair royalties that TNOX collects from NVS. CC Friday at 8:30 am ET.]

http://www.gene.com/gene/news/press-releases/display.do?method=detail&id=10167

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Thursday, Nov 9, 2006

South San Francisco, Calif. and Houston -- November 9, 2006 -- Genentech, Inc. (NYSE: DNA) and Tanox, Inc. (Nasdaq: TNOX ) today announced plans for Genentech to acquire Tanox, a biotechnology company specializing in the discovery and development of biotherapeutics based on monoclonal antibody technology, for $20 per share for a total cash value of approximately $919 million.

Genentech and Tanox have been working together in collaboration with Novartis since 1996 to develop and commercialize Xolair®, an anti-IgE monoclonal antibody approved by the FDA in 2003 as a treatment for patients with moderate-to-severe allergic asthma. Upon the closing of the acquisition, Genentech will improve its financial results for Xolair by eliminating the royalty it currently pays to Tanox and by obtaining Novartis' profit share and royalty payments to Tanox. Genentech will also acquire Tanox's product pipeline.

"IgE inhibition is an important way to treat patients with moderate-to-severe asthma and we look forward to growing our asthma business by increasing the number of patients treated and by introducing new indications, formulations, and next generation products. This acquisition will help us improve our profitability from Xolair," said Arthur Levinson, Ph.D., chief executive officer of Genentech. "We are also excited by molecules in the Tanox pipeline being developed to potentially treat diseases including asthma, HIV, and age-related macular degeneration," Levinson added.

"Joining with one of the world's leading biotech companies allows us to fully realize the potential of our drug development programs and the strong scientific platform developed by our researchers," said Tanox Co-founder and Chairman Nancy Chang, Ph.D. "We believe Genentech's offer reflects the value we have created and achieves a significant return for our shareholders."

Genentech and Tanox will be reviewing current operations and possible opportunities at Genentech for Tanox's employees in the coming months.

Transaction Terms

The terms of the agreement have been unanimously approved by the Boards of Directors of both companies. The acquisition is subject to approval of Tanox's shareholders and customary closing conditions, including clearance under the Hart-Scott-Rodino Act. The transaction is expected to be completed by the end of the first quarter of 2007. Funds will be provided from Genentech's cash on hand at the time of closing.

Conference Call and Webcast Information

Genentech will host a live webcast on Friday, November 10, 2006 at 5:30 a.m. Pacific Time (PT) to discuss the transaction. The webcast may be accessed on Genentech's website at http://www.gene.com. This webcast will be available via the website until 5:00 p.m. PT on November 17, 2006. A telephonic audio replay of the webcast will be available beginning at 8:00 a.m. PT on November 10, 2006 through 5:00 p.m. PT on November 17, 2006. Access numbers for this replay are: 1-800-642-1687 (U.S./Canada) and 1-708-645-9291 (International); conference ID number is 1401206.

About Genentech

Founded 30 years ago, Genentech is a leading biotechnology company that discovers, develops, manufactures and commercializes biotherapeutics for significant unmet medical needs. A considerable number of the currently approved biotechnology products originated from or are based on Genentech's science. Genentech manufactures and commercializes multiple biotechnology products and licenses several additional products to other companies. The company has headquarters in South San Francisco, California and is listed on the New York Stock Exchange under the symbol DNA. For additional information about the company, please visit http://www.gene.com.

About Tanox

Tanox is a biotechnology company specializing in the development of monoclonal antibodies. The company develops innovative biotherapeutics for the treatment of immune-mediated diseases, inflammation, infectious disease and cancer. Tanox's lead investigational therapy, TNX-355, is a viral-entry inhibitor antibody to treat HIV/AIDS. TNX-355 has shown significant antiviral activity in Phase 2 clinical testing. Tanox's first-approved drug, Xolair® (omalizumab), is the first antibody approved to treat moderate-to-severe confirmed, allergic asthma. Xolair was developed in collaboration with Genentech, Inc. and Novartis Pharma AG and is approved for marketing in the United States, Canada and major European countries. Tanox is based in Houston and has a manufacturing facility in San Diego. Additional corporate information is available at http://www.tanox.com.
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