Newspaper article THE JOURNAL RECORD

Biotechnology Investing: Taking a Different Kind of Risk

Newspaper article THE JOURNAL RECORD

Biotechnology Investing: Taking a Different Kind of Risk

Article excerpt

Investing in medical biotechnology usually entails a large risk: the chance that the promising new therapy the company is developing will not work. Investors in Genentech lose little sleep over that kind of risk, as the company has been remarkably consistent in turning novel molecules into breakthrough drugs.

But Genentech shareholders face a very different sort of risk.Two- thirds of the company is owned by Roche Holdings of Switzerland, which has until June 30 to exercise an option to buy the balance. Should Roche exercise its option by March 31, it can do so at $80 a share; after that, it must pay $82.50.

Genentech shares closed on Friday at $80.75 and have been as high as $84.75 in recent weeks. Since few people buy a stock for $84.75 to sell it for $82.50, much less $80, some investors are clearly betting that Roche will leave Genentech alone. The prospects of two other pioneering biotechnology companies -- Chiron and Immunex -- are also complicated by relationships with pharmaceutical giants: Novartis of Switzerland owns slightly less than half of Chiron, while American Home Products owns 54 percent of Immunex. For Chiron, a so-called standstill agreement with Novartis expires on Dec. 31; after that, Novartis may raise its stake to 55 percent. A similar standstill agreement between Immunex and American Home expired last year and the latter has not increased its position. For now, Genentech is where the action is. Last year, the company received approval for Herceptin, the first biological therapy for metastatic breast cancer; the year before it received approval for a similar drug, Rituxan, for non-Hodgkins lymphoma. These drugs form the basis of a new oncology franchise for Genentech. Together with Activase for heart attack and stroke, Pulmozyme for cystic fibrosis, and the Protropin growth hormone therapy, they helped propel 1998 earnings to $181. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.