Monday, September 14, 2009

Buyout Rumors: Roche Buying PDL BioPharma?

I was reading this article to figure out why Dendreon was up 15% today and decided to investigate some of the rumors:

Roche has its eye on PDL BioPharma(PDLI Quote).

So I decided to look into it and I can see the Roche buying that company out now that they completed the Genentech buyout. PDL BioPharma is a royalties generating company that collects fees for the use of their humanized antibodies technology. Currently they hold patent licenses for the following drugs:
You notice that 5 of Genentech's top drugs are on that list. A buyout of this company by Roche would result in them saving quite a bit of money longterm by not having to pay out royalty payments on their top drugs. It would also allow them to bring in some revenue from other blockbuster biotech drugs from their competitors. It seems like an easy buyout but I ran across this quote from Roche's CFO Erich Hunziker:

On dealmaking, don't expect Roche to make any big buys anytime soon. When the deal was completed in March, CFO Erich Hunziker -- who retained his position -- said in a conference call the firm wouldn't make acquisitions valued at more than $60 million over the next two or three years. A few days after that statement, Roche acquired Innovatis AG of Bielefeld, Germany, for €15 million ($19.6 million).

PDL BioPharma has a market cap of $1.09 billion so it is way out of Roche's price range for two or three years. I mean they did just pay $70 billion for Genentech so they might wait a while before they reduce their costs with a buyout of PDL BioPharma. I can see it happening in a few years just so Roche doesn't have to pay out several million in royalties for the next several years.
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