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After plan to acquire Illumina is scuttled, speculations begin on Roche next steps
04-24-2012
by Jeffrey Bouley  |  Email the author

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BASEL, Switzerland—Mid-April saw Illumina's shareholders overwhelmingly stand with their board of directors and company executives to reject Roche's hostile takeover bid, and shortly thereafter, Roche announced it would not extend its tender offer again, essentially setting the stage to withdraw its bid for Illumina.  
 
But according to at least one media source, Roche may not have exited the market itself when it walked away from Illumina, and it may be looking at other companies or younger technologies as a way to bolster its own position and become a competitor to Illumina.  
 
Certainly, some market-watchers have rejected the notion that Roche would pursue a smaller company or take on less-established technology. Dr. Jerry Isaacson, head of healthcare industry dynamics at business intelligence firm GlobalData, for example, wrote: "After losing their bid to buy Illumina, Roche is not likely to go after a smaller sequencing company. If they had been after disruptive technology, there are other, much cheaper companies they could have acquired, such as Oxford Nanopore, Helicos or Pacific Biosciences. The larger goal of this acquisition has always been apparent—to integrate sequencing into the development of drugs and, in turn, use the technology to diagnose disease."  
 
"While Roche would continue to gain revenue by selling the sequencing technology, the ultimate goal was to drive pharmaceutical sales," Isaacson continued. "As we have written previously, it did not appear that Roche would look for the standard cost-cutting measures and expansion of markets to pay for the Illumina deal. The only way the acquisition made sense was for Roche to springboard to stronger pharmaceutical sales."
 
Isaacson maintained that in the end, though, Roche may be better off without such an ambitious in-house program, saying: "While it may seem attractive to be able to offer researchers, doctors and hospitals an all-in-one platform to assist with the diagnosis and treatment of disease, this approach has drawbacks. Roche could have found itself trying to sell proprietary sequencing technology while other companies were relying on generic, plug-and-play diagnostics."  
 
Roche hasn't made an announcement one way or the other as to future acquisition plans around sequencing technologies, but according to the Swiss newspaper Der Sonntag, which cited unnamed sources, Roche is looking for alternatives after the failed $6.8 billion bid for Illumina. Specifically, the newspaper reports that Roche is talking to research centers at three large universities about buying their gene-sequencing technology.  
 
This would make some sense. As Reuters recently noted in its coverage of the failed deal and the rumors coming from Der Sonntag, Roche has been developing targeted therapies, particularly for cancer, and Illumina's technology or something like it would help the company to progress further in the field because Roche could identify which patients benefit from a given drug. As Reuters also noted, after dropping the tender offer for Illumina, Roche CEO Severin Schwan said Roche would look for other ways to expand its leadership in the diagnostics business.  
 
This doesn't necessarily mean a new corporate acquisition target or even an internal gene-sequencing program from the ground up—though either is possible, as is a combination of the two—as Der Sonntag quoted Roche Chairman Franz Humer as saying that Roche is already working on two of its own gene-sequencing projects, one of them with the help of IBM, and Hummer also noted that Roche has a "good relationship" with privately-held Oxford Nanopore, which is one of Illumina's competitors. 

 
Code: E04251202

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