Roche’s Controlling Family Rules Out Mega-Merger for Drugmaker

This content was published on September 10, 2021 - 13:36

(Bloomberg) -- Roche Holding AG’s controlling family shareholders ruled out a big merger, saying the drugmaker will get more mileage from pushing forward with research than from a large acquisition. 

“Undoubtedly the age of the mega-merger is finished,” Andre Hoffmann, vice chairman of the supervisory board, said in an interview. “I see mergers in the past as a sign of weakness: you merge with somebody else because you have a pipeline that you cannot fill, if you talk about pharmaceuticals in particular.”

Roche is in a moment of flux. The Swiss drugs and diagnostics company has relied on the unexpected boost of revenue from Covid-19 tests to cushion the loss of patents for a trio of cancer drugs that fueled its growth for more than a decade. Long-term growth will probably depend on success from new innovative medicines. 

Family members Hoffmann, 63, and Joerg Duschmale, a 37-year-old member of the fifth generation, held a rare press conference in Basel on Friday to commemorate the drugmaker’s 125th anniversary. They said they see more transformation ahead and that the families remain committed to keeping their stake and planning for long-term growth. 

The shareholders’ hesitancy toward large M&A contrasts with the strategy of rivals such as AstraZeneca Plc, which bought Alexion Pharmaceuticals for $39 billion earlier this year. The deal was the largest for the drugmaker since it was formed in 1999 through the combination of British and Swedish firms. The top deals in the industry in recent years also include Bristol-Myers Squibb buying Celgene Corp. and Takeda Pharmaceutical Co. buying Shire.

Roche has a dual-class shareholding structure, with voting and non-voting shares. The founding Oeri-Hoffmann families own 50.07% of the voting shares, while cross-town rival Novartis AG holds one-third. The voting shares trade 13% higher than the non-voting stock, the biggest gap since April 2011. 

The biggest risk for the company is if it doesn’t manage to keep innovating, said Duschmale, who joined Roche’s supervisory board last year. 

“I am convinced that we’ll also have to reinvent ourselves in the future and use the opportunities that present themselves at the forefront of science,” he said. A trained chemist, Duschmale worked for three years as a post-doc in Roche’s Basel labs, an experience he compared to a soccer player being able to play in the Champions League. 

Roche is working with BioNTech SE, Pfizer Inc.’s Covid vaccine partner, on messenger RNA vaccine therapies for cancer, a technology Duschmale said is promising. He also noted the push toward using data-based drug discovery and development to speed new medicines to patients. That effort helped entice SoftBank Group Corp. to build a stake in the company, people familiar with the purchase said last month.

Duschmale said he was pleased to read the news about the SoftBank holding. The tech conglomerate hasn’t been in touch with family members, Hoffmann said.  

The vice-chairman also said growing through research is more sustainable than engaging in big M&A.

“You get a broader base by developing more research rather than by adding all different therapeutic areas,” Hoffman said.

Roche has been dabbling in smaller acquisitions, having bought Covid test maker GenMark Diagnostics Inc. for about $1.8 billion earlier this year.

©2021 Bloomberg L.P.

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