Replies to post #72796 on Biotech Values

[jbog]

Roche, just like Merck Kgaaand Novartis are really still family owned business's.

[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%.

[quantumdot]

I am intrigued by the tendency to label Roche as a merchant bank, particularly when the term is clearly intended to be pejorative. Honestly, how does J&J really differ in this regard now?

Roche indeed made some shrewd moves re their investments but I think one has to get over their history and see who they are now. DNA is Roche and Roche is DNA. No doubt DNA's oncology drugs are driving their pharma revenues but they have a broader and pretty impressive pipeline beyond oncology all the same.

http://www.roche.com/research_and_development/pipeline/roche_pharma_pipeline.htm

They also have the forgotten sister in the Diagnostics group. They are a world leader in IVD and molecular diagnostics and you have to remember that their portfolio on that side is even more impressive even though it plays second-fiddle to the pharma group in absolute contribution.

They are one of the few Healthcare behemoths that truly believe in personalized medicine and have been willing to put their money where their mouth is. I think those who right them off as swiss bankers with no scientific credibility do so at the risk of missing an attractive investment opportunity.