Markets

Roche Q1: How Genentech Might Hurt Roche's Sales and Management Productivity

By Jim Edwards

Updated on: April 21, 2009 / 12:18 PM EDT / MoneyWatch

Roche saw a healthy uptick in sales, recording a 7 percent increase to $11.6 billion in Q1 2009. The news brings us one quarter closer to the point where Genentech disappears completely inside Roche, and pharma-watchers on the outside of both companies will see Genentech's detailed disclosure of its financials disappear behind the veil of European financial rules, which require much less information to be disclosed on a quarterly basis.

One counter-intutive question here is whether Roche's acquisition of Genentech will hurt Roche more than it hurts Genentech.

Thus far, the script in this deal has largely been that Genentech is the awesome science-based research powerhouse where everything is pure and you can come to work in a coconut bra and grass skirt; and Roche is the corporate Death Star, come to snuff out the fun and mismanage the products.

But a comparison of the financials of Roche and Genentech show that it is Roche that makes more productive use of its investments in sales and management than Genetech does.

For every dollar invested in sales, marketing and admin, Genentech earned back $3.79 and $3.95 in 2007 and 2008, respectively.

In those same years, Roche got $3.92 and $3.97. So it is Roche that has the most productive sales force and marketing management, not Genentech.

Unfortunately, we won't know whether Genentech will render Roche less efficient after the merger is complete because European companies only put out full income statements every six months, and those statements are cumulative, not broken out by quarter. Between quarters, all the information about Roche's sales, general and administrative expenses -- the bureaucracy and the sales machine that can either make or break a company -- gets hidden.

All this might explain why Roche's Pascal Soriot has been appointed as CEO of Genentech, and not a Genentech insider, to run that company. Ironically, Ian Clark, former head of commercial operations at Genentech, will become head of global marketing and chief marketing officer for Roche.

The latter might want to ask the former how Roche's sales productivity was generally so much better than Genentech's.