Biotech Values

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DNA ROCHE

Jan. 30 (Bloomberg) -- The cost of protecting Roche Holding AG’s debt from default rose to a record on concern the drugmaker will have to increase its $42.5 billion hostile bid for Genentech Inc. by as much as 20 percent.

Credit-default swaps on the Basel, Switzerland-based company jumped 66 basis points to 251, according to CMA Datavision prices at 1:45 p.m. in London. A basis point on a contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.

The contracts soared as banks sought to hedge the risk of financing Roche’s cash offer for San Francisco-based Genentech, replacing an original $89-a-share proposal in July, according to Rocco Schilling, a credit analyst at UniCredit SpA. The approach comes on the heels of Pfizer Inc.’s $68 billion planned takeover of Wyeth announced on Jan. 26, which was raised by 31 percent.

“To make this offer successful, Roche has to raise the share price they want to pay to at least $100 a share,” Munich- based Schilling said. “The current widening of credit-default swap levels is mainly driven by hedging activities from lending banks.”