Pink Sheet is part of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC’s registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

This copy is for your personal, non-commercial use. For high-quality copies or electronic reprints for distribution to colleagues or customers, please call +44 (0) 20 3377 3183

Printed By



Executive Summary

Genentech will have the exclusive U.S. rights to Protropin (human growth hormone), gamma interferon and Activase (tissue plasminogen activator) after its planned buyout of the two R&D partnership which own the drugs. The stock transaction is worth at least $400 mil. based on an $80 a share market value for Genentech common stock. "Genentech believes these transactions will have a positive impact on the company for the following reasons," the company explained in an Oct. 27 press release. "First, product rights and all profits from future sales will belong solely to Genentech. Second, if Genentech were to wait for the partnerships to complete their R&D programs, it would be buying the completely developed products that would have to be capitalized and amortized. Third, Genentech will deduct the purchase price of the buyouts for tax purposes and therefore reduce future taxes." Under the plan, Genentech will offer 3.3 mil. shares of its common stock, or 3,000 shares for each $50,000 partnership unit of Genentech Clinical Partners (GCP). In addition, the company will offer to buy the assets of Genentech Clinical Partners II (GCP II) for roughly 1.7 mil. shares of common stock, or 2,500 shares for every $50,000 unit purchased. Genentech's announcement coincided with the declaration of a two-for-one stock split, and Wall Street's immediate reaction to the two news items was favorable. Genentech stock closed at 92-1/2 on Oct. 28, up 12-3/4, putting a quick $62.5 mil. premium on the proposed deal. After some investor profit taking, the stock closed the week at 90-3/4. Established in 1982, GCP covers the development of Protropin and gamma interferon. GCP II, which covers Activase, followed in 1983. Funds raised by the partnerships, $55 mil. for GCP and $34 mil. for GCP II, were reported as revenues by Genentech over a period of several years. Both partnerships were to be fully paid in during 1986, Genentech said. Under the original agreements, the company could have begun the GCP buyout in 1988, but the buyout of GCP II could not take place until two years after the approval of Activase. Buyouts Require Partnership Approvals; Proxies To Be Mailed In Mid-December To distribute product revenues, a joint venture was also established between the company and the partnerships, taking effect when the first product reached the market. That happened in the last quarter of 1985, when Protropin was approved by FDA. The joint venture agreement calls for Genentech to manufacture and market the products and receive 78% of revenues, with 22% going to the partnerships. Genentech said that the joint venture will cease once the buyout takes place. To date, Protropin is the only one of the three products to reach the market. The company filed an NDA for Activase in April and gamma interferon is still undergoing clinical evaluation. Genentech's timing for the partnership buyout gives the firm a period to prepare for the approval of Activase, which the firm believes may be cleared by FDA soon. Approval by the holders of a majority of the partnership units of each partnership will be required to effect the transactions, according to the company, and proxies will be mailed in December. According to the release, accounting rules require that the company reflect the acquisition of the in-process R&D in its fourth quarter results as a one-time, non-cash expense of approximately $300 mil., based upon a stock price of $80 per share. Genentech said its R&D partnership for tumor necrosis factor is unaffected.

You may also be interested in...

Part D Discount Liability Coming Into Focus: CMS Releases Drug Cost Data

Newly released Medicare Part D data sheds light on the sales hit that branded pharmaceutical manufacturers will face when the coverage gap discount program gets under way in 2011

FDA Skin Infections Guidance Spurs Debate On Endpoint Relevance

FDA appears headed for a showdown with clinicians and the pharmaceutical industry over the proposed new clinical trial endpoints for acute bacterial skin and skin structure infections, the guidance's approach for justifying a non-inferiority margin and proposed changes in the types of patients that should be enrolled in trials

Shire Hopes To Sow Future Deals With $50M Venture Fund

Specialty drug maker Shire has quietly begun scouting deals with a brand-new $50 million venture fund, the latest of several in-house investment arms to launch with their parent company's pipelines, not profits, as the measure of their worth




Ask The Analyst

Please Note: You can also Click below Link for Ask the Analyst
Ask The Analyst

Your question has been successfully sent to the email address below and we will get back as soon as possible. my@email.address.

All fields are required.

Please make sure all fields are completed.

Please make sure you have filled out all fields

Please make sure you have filled out all fields

Please enter a valid e-mail address

Please enter a valid Phone Number

Ask your question to our analysts