Roche Eying Takeover of Illumina

Swiss pharma major Roche Holding AG will be depending upon new products in 2012 to reverse a decline in earnings in 2011 by almost 4 percent. The company is also confident that its $5.7 billion hostile bid for U.S. gene sequencing company Illumina (NASDAQ:ILMN) will ultimately prevail.

Chief Executive Severin Schwan told reporters, “We are very confident that this transaction will go through because it is a very attractive offer.” Roche is offering $44.50 per share and has lined up its own board of directors that it expects will take control at Illumina. If the bid succeeds, it will be Roche’s largest after its massive $47 billion purchase of additional stock in biotech group Genentech. “Roche will continue to try to convince (Illumina) … there can be a friendly outcome to this acquisition if they want,” said Vontobel analyst Andrew Weiss. “As seen in the past with Genentech and Ventana, sweetening the terms works wonders.”

Why is Illumina so attractive to Roche? In simplest terms, it’s because the company owns gene sequencing technology that enables researchers to make more accurate predictions about the response of patients to a drug, and thereby is key to medicine’s future.

On Roche’s own results for 2011, earnings per share were down 4 percent to 12.30 Swiss francs against a forecast of 12.40 francs. Revenues for the full year were up 2% to 42.5 billion francs, as expected. Better results are expected in 2012 owing to key drugs such as the breast cancer therapy T-DM1 and a rebound in sales of Roche’s best-selling drug Avastin.

Here’s how Illumina shares are trading now:

Illumina Inc. (NASDAQ:ILMN): ILMN shares recently traded at $51.89, up $0.03, or 0.06%. They have traded in a 52-week range of $25.57 to $79.40. Volume today was 481,449 shares versus a 3-month average volume of 3,459,900 shares. The company’s trailing P/E is 66.53, while trailing earnings are $0.78 per share.

To contact the reporter on this story: Jonathan Morris at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com