Roche-Genentech Deal Conspicuous By Its Absence

(MoneyWatch)  Roche's acquisition of Genentech is becoming a conspicuous non-event as the ground on which the deal needs to be made seems to be shifting faster than Roche can cope with it. BNET readers will remember that Roche announced its intention to buy the 60 percent of shares in Genentech that it does not own back in July -- four long months ago. Genentech rejected the deal as too cheap and since then ... mostly nothing has happened.

Consider how much has changed around the two companies between the deal announcement and now; and how little progress Roche seems to have made toward finishing the deal. The economy is in a shambles. The stock market has tanked. Liquidity -- meaning the credit Roche needs to make the deal -- has dried up. And (perhaps most bizarrely of all), the dollar managed to get stronger, thus making the deal much more expensive for Roche.

The last time Roche made any statement on the deal was October 21, when it briefly reaffirmed its intent to acquire.

Look how slow Roche's progress has been overall. By mid-September Roche still did not have a financing plan in place.

It was the same situation in early October when Reuters reported progress on that issue was "slow" and the currency issue was making life more expensive for Roche.

Despite Roche's "intent," Genentech's stock price has fallen from the mid $90s to the low $80s. That may have been in part because Roche lowered its guidance, meaning that it is about to hit a rough patch just as it most needs the money.

Interestingly, the deal isn't even a topic of conversation any more over among the Roche gossips; and at Genentech the staff clearly have no clue whether this thing is going through or not. Some think it won't be until mid-2009. (Genentech management even had to bribe senior staffers not to leave if the deal went through, as many executives' stock options vest in the event of a deal). Compare this to the pace of the Eli Lilly-ImClone deal, which seemed to get done at lightning speed.

Also complicating the deal: the joint venture on Tarceva seems to be turning out well and Genentech acquired from Roche a Rituxan-like cancer drug. Is that really the direction property ought to be flowing in if Roche is about to take over Genentech? Perhaps the silence is merely the calm before the storm.