Avastin’s Placebo Effect

DEPRESSION-DRUGS/Roche shareholders must feel as though they got some bad stuff when they handed over $46.8 billion to buy Genentech in March. In a major study, Avastin, Genentech’s colon cancer drug, failed to prevent the recurrence of colon cancer in patients who had undergone surgery. Roche shares promptly tumbled.

Roche investors were thinking Avastin sales would double from $4.4 billion, and Roche still sounds confident that the drug will do about that well treating colon cancer in its earlier stages, as it was designed to do. Roche said a positive result on the study was not a foregone conclusion, calling its success a “coin toss.” But this is unlikely to placate its stockholders because it implies Roche didn’t adequately account for the risk.

In fact, it looks increasingly like Roche was high on Avastin’s prospects when it raised its offer for Genentech, apparently trying to get in before a would-be positive result from the study drove Genentech’s stock any higher.

Deals of the day:

* News Corp’s stake in German pay-TV broadcaster Premiere will grow to 30.5 percent as the media conglomerate agreed to take up almost a third of new shares issued in Premiere’s second capital hike.

* British telecoms and retail group Carphone Warehouse beat fourth-quarter customer growth forecasts and raised cash flow guidance for 2009-10, boosting its shares as it confirmed plans to split in two.

Hard ball from Basel

schwanExpect a bruising fight.

In the battle for control of the world’s most valuable biotech company, Roche CEO Severin Schwan is playing hard ball. The reason is simple: he needs to clinch a deal that clearly enhances earnings.

The Swiss drugmaker has been the most highly rated Big Pharma company for years but financial results last week suggest it may be losing its mojo. Certainly, its premium rating is slipping.

Genentech had wanted $112 a share but Roche’s tender offer for the 44 percent of Genentech it doesn’t already own actually cuts the price to $86.50, or about $42 billion, from the $89 proposed last July.