On July 20th, 2008, Geoff Teeter, now vice president of Genentech corporate relations, received a call from a Wall Street Journal reporter asking for comment on a story that the Swiss-based Roche Group was buying the company for cash. Teeter was caught off-guard. While there had been plenty of buy-outs in the pharmaceutical industry recently, he didn’t know of any plans for Roche to acquire Genentech. After checking with the CEO and CFO, he told the reporter that the company didn’t comment on rumors or speculation. Still, he says, “It worried me that the reporter seemed to have a lot of details.”
Turns out it wasn’t speculation. At 6:45 that evening, Art Levinson, then CEO, received the offer. Roche had made significant investments in Genentech since its founding–including partnering on the development of several medicines and, in 1990, purchasing a controlling interest in the company. In 1999, Roche bought the rest of the company, but turned around to sell off enough shares to maintain Genentech’s independently traded status. Throughout, Roche had always had a hands-off approach to Genentech’s business. But now, nearly a decade later, Roche wanted to buy the company outright again, offering to purchase the remaining shares at $89 each–a total of $43.7 billion.
Levinson hadn’t expected the offer, either. In a letter to employees, he wrote, “Roche's announcement was unexpected and so any feelings of surprise you have are entirely understandable.”
Surprise wasn’t the only reaction Genentech employees had. Many worried that the global pharma company would swoop in–as with other recent pharmaceutical acquisitions–and gut the company, laying off staff and plundering the pipeline. They were dismayed that Genentech, which had birthed the biotechnology industry and nurtured a unique culture of casual intensity, would disappear. Others wondered why the Swiss company would risk spoiling a partnership that had worked so well for nearly 20 years.
For a few months, many at Genentech were on edge as the leadership convened a special committee of the board of directors to negotiate with Roche. They rejected the initial offer as too low, and countered with strong resistance and a higher price, all in the midst of the 2008 financial crisis. Then, after months of back and forth, Roche increased the bid to $95 a share, Genentech accepted, and the deal was finally done for $46.8 billion.
That day, March 26, 2009, Levinson wrote a memo to employees announcing the sale. “Today is not business as usual,” he opened, adding that it was an “historic day for an extraordinary company.” He acknowledged that the company had come a long way since the early “clone or die” years, where its fate rested on a few scientists and their ability to make biotechnology breakthroughs, but he assured employees “the mentality and spirit of ‘clone or die’ is still with us.” After meeting with Roche executives, he was convinced they had no intention of dismantling the unique company they had bought; in part, they were buying a productive culture of innovation that they wanted to preserve. “I offer my personal conviction that the words of Roche’s leaders are sincere,” Levinson continued. “They want us to not only succeed, but to thrive. And they want to listen to, and learn from, our voices and our ways, not to command.”
Today is not business as usual
Part of the arrangement following the deal was that Genentech would keep its name, a CEO and board, and its identity and scientific operations. The agreement spelled out that Genentech’s research and early development would operate as an independent center, “retaining its talent and approach to discovering and progressing new molecules,” and that the South San Francisco site would become headquarters of the combined U.S. operations. Most important to employees, Roche promised: “Genentech’s unique culture to be maintained.”
When Roche’s Pascal Soriot succeeded Levinson as CEO, he told BusinessWeek that Roche didn’t want to impose on the way of doing business at Genentech. “The first question I asked Art was, ‘How do we keep the Genentech spirit alive forever?’” he said. Roche CEO Severin Schwan also didn’t want to mess with a proven formula for success. “Most companies think the first thing you have to do after an acquisition is streamline everything. I have to tell you, this kills innovation,” he told the newsweekly.
Still, the merger wasn’t easy. Many influential and highly admired Genentech employees departed, while others were still angry or fearful the company would lose its focus and distinct ways. It seemed easy early on in the integration to blame Roche for a wide range of issues, from leadership changes to long lines in the cafeteria.
As time passed, leaders traveled back and forth between South San Francisco and Basel, Switzerland, and employees collaborated on projects and began to realize there was actually a lot to respect about each other, both scientifically and culturally. Scientifically, Roche had recognized early on the strength of the Genentech name to scientists, doctors and patients, rebranding its own medicines “Genentech” in the U.S. In addition, Genentech had top scientists, a streamlined decision-making process, state-of-the-art research facilities, and a robust pipeline filled with new molecules that had already yielded eight FDA-approved medicines.
Roche also appreciated Genentech’s culture, recognizing that its “casual intensity” atmosphere fostered innovation, and even adopted some of its practices. While early meetings between the groups were a study in contrasts between buttoned-up suits and jeans, Roche leaders and employees started dressing more casually. Genentech employees, meanwhile, started arriving to meetings on Swiss time, instead of California’s casual 10 minutes late.
Genentech also saw the value in their new global connections, which expanded the reach of their research and medicines to 160 countries, and offered new career development opportunities. They also recognized that they could benefit from Roche’s long history of scientific prowess. Since 1896, Roche had pioneered some of the first successful pain medicines, Vitamin C, antidepressants, antimicrobials, cancer therapies and antivirals. Some of Genentech’s medicines wouldn’t have advanced beyond initial roadblocks to clinical success and FDA approval if Roche hadn’t believed in the science, and been willing to invest substantial resources into further research. Roche has also been on the forefront of diagnostics, which made for an ideal partnership with Genentech in a shared future of developing personalized medicines. Furthermore, their environmental policies were very strong, and influenced Genentech to go even greener.
Over the years, Roche has stayed true to its commitment to Genentech’s unique culture, brand and identity. And despite their perceived differences, the cultures and companies of Roche and Genentech have a great deal in common. “Underneath it all, Roche employees and Genentech employees are very similar,” says Teeter, “in our passion, our integrity, our focus on science and our desire to do what’s best for patients.”