Biotech Values

[DewDiligence]

Re: Roche’s colossal success (as a ‘merchant bank’)

It's interesting that Roche's successes are those of a merchant bank's - buying a majority of DNA when it was down on its luck, for example. They do not have a single scientist in their top mgt echelons and zero star scientists on the premises - the bosses are finance and legal guys.

This is IMO a consequence of Roche’s voting shares being controlled by the founder’s descendants. I would submit that, from a shareholder point of view, Roche’s four main achievements in the past 20 years were:

1. Buying an option to acquire DNA in the early 1990’s when, as you noted above, DNA was down and out.

2. Exercising the option, thereby making DNA a wholly-owned subsidiary.

3. Spinning a small portion of DNA back out to the public to exploit the bubble in biotech stocks in 1999, thereby establishing a market price for DNA.

4. Further exploiting the biotech bubble in 2000 via a large secondary offering that reduced Roche’s equity stake in DNA to its current level of 56%.