Roche completed the acquisition of Genentech in 2009 for a total of $46.8 Billion dollars. Genentech was initially concerned about funding for early drug discovery with the acquisition taking place. Genentech was previously able to spend money on research and development for new drug discovery and now that Roche is fully in the picture, they were concerned that Roche may want to reduce funding for early drug discovery (Rothaermel, Pg. C415, 2012). Roche and Genentech were both concerned about the acquisition also because of the different cultures of the two firms even though they had been working together over the last twenty years.
Genentech was a more relaxed company, allowing the employees to come to work dressed in jeans, while Roche had a more professional and traditional working environment. Genentech reached most of its successes within oncology, creating the best cancer drugs available on the market, by giving their scientists the time and money they needed to innovate. The scientists that research and develop these products are considered the key players for Genentech and Roche needs to make sure to find a way and keep these scientists since they create the products that generate the most revenue for the company. Summary
The acquisition by Roche appears to be a success because “the merger allowed Roche access to Genentech’s top-selling drugs, including the block-busters Avastin, MabThera, and Herceptin, all of which were outselling Roche’s own drugs” (Rothaermel,Pg. C431, 2012). “ In essence, the merger of Roche and Genentech was about Genentech going global” said Andew Weiss, analyst at Swiss private bank Vontobel (Copley, 2012). Because of the success that Genentech has achieved with their approach to research, “Roche is also now starting to adopt the Genentech approach by trying to understand the chain of events that cause disease” (Copley, 2012). The PESTEL analysis below discusses the impact of external forces the companies face in the biologic-pharmacuetical environment. Political
“President Obama signed the Biologics Price Competition and Innovation (BCPI) Act into law on March 23, 2010, as a part of his health care reform legislation” (Rothaermel, Pg. C437, 2012). By writing this Act into law, it allows for generic biologic drugs to have quicker approval through the FDA. Generic biologic companies would not have to spend the high costs that the original biologic companies had invested when conducting research and development. Allowing generic biologics on the market in a reduced timeframe would allow them to reap the benefits by charging lower prices, while not having to endure the pain and costs that came with creating the initial drug. Lower prices are great for insurance companies and the consumer but could be a major problem for the biologic pharmacuetical company that originally created and patented their product. The original company would need time to recoup the costs that it took to research and develop their products.
U.S. Congress passed the Comparative Effectiveness Research (CER) bill in 2009 that could also impact Genentech/Roche because it aims at lowering costs (Rothaermel, Pg. C435, 2012). The trials performed by CER could cause Genentech products to lower their prices and potentially lose their coverage through insurance and government coverage plans. This is also a problem for the same reason as listed above with Genentech/Roche needing to recover the high costs asscoaited with creating and producing their products. The Government now has greater involvement in the healthcare sector and that could interfere with, or even stop companies, from spending large amounts of time and money on potential new biologic pharmacuetical drugs. Economic
A lot of research and development breakthroughs were at Universities and other research institutions. This caused many researchers to partner with venture capitalists or private firms in order to fund their products and bring them to the commercial market place. “The number of biotech start-ups exploded, reaching over 1,400” however, only a handful of companies “achieved commercial success” due to the long and costly process associated with research and development of biologics (Rothaermel, Pg. C417, 2012). Expenditures tripled and revenues increased five-fold between 1994-2006, a period a little longer than a decade (Rothaermel, Pg. C417, 2012). Many companies and jobs have been created which also affect and have helped the economy. Social
Genentech brought a whole new platform of medicines to to the healthcare industry than what traditional medicine offers. “These so-called biologics differ from traditional, chemsitry-based medicines (new chemical entities) in that they are derived from living cells and therefore have more complex structures” (Rothaermel, Pg. C416, 2012). Genentech is seen as having the first mover advantage since they are the first company to discover and bring biologic medicine to people. They created a new way to treat cancer and other diseases. Many people using biologics are amazed at how effective they are compared to some of the options that are available with traditional medicine. Biologics bring an addictional level of comfort to many people suffering with diseases.
Recombinant DNA (rDNA) was discovered and brought to the market by the scienitsts working for Genentech which is what revolutionized how scientists approached creating new healthcare prescription drugs. “The birth of biotechnology led to the emergence of a powerful new business model for the commercializtion of scientific intellectual property” (Rothaermel, Pg. C417, 2012). Genentech scientists had 6,250 pending patents and 7,400 current patents worldwide (Rothaermel, Pg. C424, 2012). The pharmaceutical industry changed with this new way of creating biologic drugs because it helped produce protiens, such as human insulin, in a monitered environment. Ecological
As far as ecological concerns, new vaccinations are being created to prevent diseases from spreading to other people, not only in our own communities, but across the globe to people in different countries. There are also many man made cancers, such as lung cancer with the use of tobacco or working in a mining facility, that increasing numbers of people need and the biotechnology and biomedical industry is creating drugs to help get rid of these diseases. With globalization and industrialization, there lies potential for rise in diseases, not only with additional people potentially traveling abroad, but with more people working in a closer environment and in factories. Having biolgoics available is important when considering ecological factors. Legal
When it comes to patent protection, Genentech and Roche have to protect themselves from generic biologic drug makers. “Lobbyists for the generics industry proposed allowing biologics the same three- to five-year patent exclusivity as conventional drugs, biotechnology leaders argued that at least 14 years of protection were needed for them to recoup the high costs of development” (Rothaermel, Pg. C437, 2012). As mentioned above, the BCPI Act allows for a shorter approval period for the generic “biosimiliars” which could also potentially effect the length of the patent exclusivity. It’s clear that biologics take a siginificant amount of time and money to develop, which is why having a patent that lasts for 14 years will give the company time to reap the costs and rewards for their hard work. Porters Five Forces Model
This paper covers the PESTEL and Porters Five Forces Model. The acquisition of Genentech by Roche appears to be a win-win for both of the companies since it allowed Genentech to expand globally, and Roche doesn’t seem to currently have any major new products in their pipeline so Genentech is carrying them along during this difficult time for them. By Roche allowing Genentech to keep their own way of running research and development, they have found how beneficial it is and how much freedom it gives the scientists to experiment and come up with potential new products, keeping the company successful. Roche should consider this same approach regarding how Genentech operates because it may allow their scientists to be more creative and potentially come up with new products as well. By Roche not changing the work cutlure of Genentech, it’s a way to keep their scientists happy, and also not take the chance of possibly losing their top talent with them potentially leaving the company.
Copley, C. (2012, July 3). Analysis – After Roche Merger, biotech tail wags big pharma dog. Retrieved May 31, 2014, from Reuters.co.uk: http://uk.reuters.com/article/2012/07/03/uk-roche-genentech-idUKBRE8620FZ20120703 GEN News Highlights. (2012, July 3). Retrieved June 1, 2014, from Genetic Engineering & Biotechnology News: http://www.genengnews.com/gen-news-highlights/three-years-after-merger-genentech-r-d-outshines-that-of-roche-s/81246997/ Rothaermel, F. T. (2012). Strategic Management . McGraw-Hill Irwin.