Roche Company Limited, which has it’s headquarter in Basel in Switzerland has been among the leading research based health facilities. Roche dealt in pharmaceuticals and diagnostic sales in more than 150 countries. Roche objective is to improve quality of healthy and life through innovations in its services and products. Its products range from early finding, preventive, diagnostics and treatment of diseases. Before acquiring Genentech, Roche group aimed at treating autoimmune and central nervous system diseases and the metabolic and inflammatory disorders.
The Genentech and Roche partnership started in 1980, the year when Roche got approval of the knowhow and patent for Roferon-A from Genentech. After 6 years, Roferon-A received approval from FDA for treatment of the cancer of blood and bone marrow. In the year 1990, Roche Company bought 60 percent of the Genentech Company shares worth $2.1 billion. Then the two companies became partners; Genentech was to market its products locally, and Roche to market Genentech’s products globally.
In July the year 2008, Roche gave Genentech a proposal for the acquisition of the entire remaining shares of Genentech, after Roche had offered the other 61 million shares publicly at the New York Stock Exchange.
In March of 2009, Genentech and Roche stated that they signed an agreement for merger in which Roche owned the remaining public shares of Genentech for $ 95.00 a share, cash payment (a total of around $ 46.8 billion Genentech’s equity).
Therefore, Genentech was fully owned by Roche Company after it acquired it, Genentech Company retain name and management independently. We are told that things became different because Roche now possessed the outright previously belonging to Genentech, which was well-invested partner company.
Roche’s Resources
A company’s resources are the properties that can be utilized by the company for competitive advantage. Roche’s resources included the following, which some of them was acquired from Genentech Company:
The Founders Research Center facility, with an area of 275,000-square-foot, was founded in the year 1992 merely for the biotechnology research in respect of the two founders of the company, Boyer and Swanson. The facility was expanded by 280,000 square feet in 2001 to celebrate the 25th anniversary of Genentech Company. The objective goal for initiating the research Centre was to optimize the equilibrium between the fundamental biomedical and translational researches whose objective was to design therapies for undiscovered medical needs.
The southern campus 230,000-square-foot extension was opened in 2007.This facility provided the scientist of Genentech Company a motivating and attractive environment with a lot of state-of-the-science equipment and tailored laboratories.
Finance- Genentech budgeted more than $ 2.8 billion for the research and development purposes in 2008, which were almost 21 in percentage of Genentech’s operating revenues.
Human Resources and Human Resources Management-During the transition process of the acquisition of Genentech Company by Roche Company, leadership change were considerated.The chairman and CEO of Arthur Levinson and the chief of product development Susan Desmond-Hellmann stop daily operations duties for advisory roles.
The personnel, formally responsible for commercial operations, Pascal Soriot, Roche’s pharma division, got to be the new CEO of Genentech. The executive vice president of Genentech research and early development job was retained by Richard Scheller, and he reported to Severin Schwan, the Roche Group CEO.
Also through the retaintions, promotions and rotations of the employees, from both Roche and Genentech Companies, with out hiring of new external ones in the leadership positions, could help to motivate the employees and retain the biotechnology’s experience, skills and the knowhow in the Company, hencing achieving competitive advantage through the employee.
Information- Genentech functioned to combine U.S. commercial operations and informatic and finance support.The merger enabled Roche to access the most selling drugs of Genentech which included MabTherA, blockbusters Avastis and Herceptin, of which all were selling more than Roche’s drugs.
The establishment of the recombinant DNA tchnology offered the scientist with a simple and powerful means for isolating and enlarging any DNA or gene section. This anabled to analyse the structure of a gene and function in modest and complex organisms, hence providing information that a scientist could use to produce proteins, like the human insulin.
Scientific Intellectual property-The philosophy of serious commitment to succeed in scientific innovations made Genentech achieve its competitive advantage. Scheller doubted if the Roche leadership in pharmaceutical team could adjust to their Science based and individualistic norm.
Capabilities
A company’s capability refers to the capacity and ability of a company in term of assets, human resourses (qualifications, skills and experience), financial resources (money and credit), databases and Information and the intellectual properties, that enable it beat the competitors.
Human Capital Capabilities-Scheller was aware that there were a lot of activities to be performed in order to diversify Genentech’s portfolio of products. These included recruiting more employees with capabilities in other field
Asset Capability-we are told that Scheller had never before encountered a lot of complications which pertaining the division of the company’s resources to Research and Development Center. This required the company’s ability to allocate assets resources in order to compete effectively.
Leadership Capability- During the transition process of the acquisition of Genentech Company by Roche Company, leadership where retain in order to create competent leadership with the knowhow on how to propel the company forward, hencing achieving competitive advantage through the leadership.
Scheller’s forecasting skills/Capability-Scheller could predict a number of challenges in the future which included the needed for conducting research in comparative effectiveness, growing competition and the biogenetics’ threat.
Knowledge-generation and knowledge-application capability-Scheller and his colleagues at Roche Company were informed that research based companies have to balance both knowledge-generation and knowledge-application practices for them to achieve excellent performance.
Patent-The scientist of Genentech had almost 7,400 present patents and 6,250 others pending applications globally.
Core Competencies
A core competency refers to what distinguishes a company from its competition—they create a company's competitive advantage in the marketplace. They are a company's set of skills or experience in some activity, rather than physical or financial assets Businesses can develop the competencies by identifying the main internal strengths and investing in the capabilities valued by their customers. Examples are: innovation, quality, customer service and flexibility in the company’s operations.
Flexibility- In order to increase diversification of products, Scheller thought of prioritizing dealing in the infectious and neuroscience diseases products whenever choosing project to implement and in issues pertaining sourcing and alliances.
Product Effectiveness and safety: Roche Company saw Genentech’s acquisition as a means of accomplishing its strategy of tailoring it products to its client’s specifications, hence production of medicines that are safer and more effective.
Quality and less costly-The stimulus package bill approved by the U.S. Congress in the year 2009 involved us $ 1.1 billion for conducting CER, with an objective to measure how a wide range of drugs and procedures in comparison with others in terms of cost and effectiveness. Those who supported the bill believed that implementing CER improve the quality of medicine industry and reduce associated costs.
Innovation and Research-The strong Genentech’s research implementation was the driving force behind what had made its products competitive in the market all those years. Genentech Company budgeted more than $ 2.8 billion for the research and development purposes in 2008, which were almost 21 in percentage of Genentech’s operating revenues.
The aim of Genentech was to control the new rDNA innovation to create a fashion of therapeutics. The mission was to discover, to develop, to manufacture and to market bio therapeutics by the use of cutting-edge technologies and genetic engineering, with an emphasis on critical medical conditions in areas like immunology, oncology, and tissue growth and repair.
Scientific Culture-Scheller believed that the philosophy of strong commitment to excel in science had made Genentech a competitive company. He feared whether after the merge, the Roche’s pharmaceutical senior managers could adjust to the scientific based culture and individualistic culture.
Business Processes-Before the acquisition of Genentech Company by the Roche Company, Genentech used to have exemplary business operations processes. Scheller wondered if Roche Company would maintain the same standard.
BUSINESS STRATEGIES
Merger and Acquisition-Before Roche’s acquisition of Genentech, Roche company dealt in healing of metabolic and inflammatory disorders, the disease of the central nervous system and autoimmune diseases.
The Roche-Genentech relationship started in the year 1980. Approximately 20 years later on 12th March, 2009, Genentech and Roche companies published a final merger agreement. Roche would acquire remaining Genentech’s shares. This make it possible for Roche to be granted the rights to MabThera, Herceptin and the blockbusters Avastin, which were the most selling Genentech’s drugs; outselling any of the Roche’s drug.
Roche saw the acquisition of Genentech as important for its strategy of manufacturing tailored medicine.
Product Differentiation Strategy- Through the research and development department (Genentech), Roche Company was able to differentiate its products. There was knowledge-generation and the knowledge-application which helped to produce superior products.
Expansion and Diversification- Through this strategy, Roche Company could diversify their risks in investment.
Genentech needed to begin concentrating on other therapeutic products. Scheller was delighted that the company expanded into infectious and neuroscience diseases. He also knew that there were more that could be carried out to improve the level of product diversification in Genentech. In March the year 2007, Genentech declared a goal or modifying 30 new molecular particles in the clinical development by the elapse of 2010.In 2008, Genentech began the early development of two fresh therapeutic types-infectious and neuroscience diseases. This was the initial stage to achieving more products diversification.
Research and Innovation- Dr. Scheller believed in the commitment of Genentech to research was the driving force behind the company’s competitive advantage for a long time. Hasn’t it been for the Genentech’s post-stage development, its products could not have grown to reached maturity stage and finally reach their clients.
Sheller’s main aim for setting up strategy for the research Centre was to discover medicines for the new medical requirements.
Genentech invested a lot of money in the research and development department in the year 2008. This was around 21 percent of the entire Genentech’s operational revenue, and considerably more than pharmaceutical’s investment.
Finding of Facts
Management
After the acquisition Genentech remained as a whole as a subsidiary of Roche Company.
Genentech continued to operate independently as a research and early-development department under the large Roche group.
The Roche global operations were merged with the late-stage development and manufacturing operations department of Genentech in order to benefit from operational synergies and significant scale benefits.
During the acquisition of Genentech Company by Roche Company, leadership change was deliberated on. The chairman and CEO of Arthur Levinson and the chief of product development Susan Desmond-Hellmann stopped the daily operations duties for advisory roles. The personnel, formally responsible for commercial operations, Pascal Soriot, Roche’s pharma division, got to be the new CEO of Genentech. The executive vice president of Genentech research and early development job was retained by Richard Scheller, and he reported to Severin Schwan, the Roche Group CEO.
Marketing
In the year 2009, Genentech was undergoing a lot of competition from the other established companies in the industry. The GlaxoSmithKline sells Bexxar, a product which competed with Tykerb and Rituxan. Avastin competed with Erbitux by ImClone.
There was internal competition of Genentech products. Lucentis and Avastin competed. Some doctocts believed that Lucentis and Avastin have the same effectiveness. But Avastin was cheaper ten times the price of Lucentis. cannibalization
The Congressional Budget Office study showed that the federal government could save around $ 6.6 billion in 10 years period in case biologics were allowed 12 years of market exclusivity.
Generic companies Competition-Generic companies would seek market authorizations for their counterfeit products, soon as the period of patent exclusivity elapsed. The generic companies didn’t necessarily have to carry out clinical testings.This resulted in drastic reduction of their production cost hence charging of lower prices, making the generic companies gaining more competitive advantage.
In the year 2003, generic medical products made 54 percent of the market share in the pharmaceutical industry. This escalated to 72 percent of the pharmaceutical sales in 2008.
IMS Health predicted that by 2010, the sale of generic would be more than $68 billion.
Discoveries in biotechnology were especially in research institutions and universities.
These learning institutions had no resources and the knowhow needed to market their innovations. Therefore, they partnered with private equity markets and venture capital to provide the finance and knowledge to market their innovations.
Before the acquisition by Roche Company in 2009, Genentech had achieved the best products range in the biotech industry. It had also been the best in the sales of oncology in the U.S since 2006.
Finance or Accounting
After the merger, Roche became the 7th largest pharmaceutical company in U.S based on the market share with a prediction of $ 17 billion in terms of revenue yearly.
Budgeting for Research- In the year 2008, Genentech additionally invested more than $ 2.8 billion in research and development, which was around 21 percent of the operating revenues.
The Congressional Budget Office report showed that the federal government could save nearby $ 6.6 billion in 10 years in case biologics were permitted 12 years of market exclusivity.
Genentech had revenue of $13.4 billion in 2008; which was more than twice the amount in 2005, and $3.4 billion as a net income. The total net product sales were $9.2 billion, which was an 11 percent rise from that of 2007. The sales of product accounted for 78 percent of the entire revenues, with the remaining being contracts and royalties
Business Ethics
Genentech Company respected the contributions of any of its employee. We are told that the company saw individual initiative and innovation as the basis of many scientific successes. There were around 1,100 scientist, researchers and post-docs at the company, regularly publishing quality research papers in the top review scientific journal.
Genentech honors its founders; the Founder Research Centre was launched in 1992 merely for the biotechnology research in honor of the two founders of the company, Boyer and Swanson.
Justification and Recommendation for each finding of facts
It is justified that Roche will remain competitive for long because it inherited a team of strong leadership after acquiring from Genentech, and by retaining and promoting some.
It is recommendable to retain leadership of both companies during the acquisition period because they have the knowhow and experience in order to retain the good nature of operations in a company.
Marketing
It is justified Roche still continued to face a lot of competition even after acquiring Genentech. In 2009, Genentech experienced a lot of competitions from other established companies in the industry, which included GlaxoSmithKline and ImClone. It also competed with generic companies.
It is recommendable for Roche to continue applying technologies such as biotechnology and genetic engineering, research and the scientific culture in order to differentiate its products in the market, hence sustaining the competition.
Finance or Accounting
It is justified that after Roche acquiring Genentech, Roche rose in term of the market share and became the seventh largest pharmaceutical company in U.S.
It is recommendable to partner with a research or scientific based company because this will enhance your company’s status especially in terms of market share.
Business Ethics
Genentech respected the views and opinions of its stakeholders, including its founder. This is justified by the fact that the Founder Research Centre was launched in 1992 merely for the biotechnology research in honor of the two founders of the company, Boyer and Swanson.
It is recommended that business ethics should be practiced in any business setting that needs to be competitive in the market. Business ethics distinguishes a company from others in terms of attracting more customers. Business ethics promotes good customer service in a company.
Reference
Frank, T. (2012). Genentech: After the acquisition (Case Study No. 1259420477). Switzerland: Mc Graw Hi Education.
