US gene sequencing company Illumina is struggling to maintain its value after its shares plummeted 5.8% yesterday over fears Roche would abandon its takeover bid.
The drop has seen Illumina’s share price fall below Roche’s bid of $51 a share to $49.51 a share.
The news could shake-up the negotiating environment for Roche, who has twice had bids rejected by the San Diego-based gene sequencing company despite upping its offer to $51 a share from $44.50 at the end of March. Illumina, backed by a bevy of advisors, claims this is not sufficient compensation for the potential long-term opportunities for its shareholders.
As such the companies are at an impasse with Roche chief executive Severin Schwan stating the current offer is “more than adequate to serve as a basis” to begin negotiations and will not raise the bid without starting talks. However, Schwan has said he is willing to improve the offer on consideration of any information that demonstrates the current bid undervalues Illumina. As yet this information is not forthcoming.
However, there are now fears Roche has had enough and will walk. Illumina is due to have a board meeting next week on 18 April and Schwan has been reported saying the Swiss drugmaker would have to consider “all its options” if there is further rejection after the board meeting.
The share price drop also comes after Roche sent a letter to Illumina describing the firm’s future as an independent company as “far from certain”, also disputing an earlier comparison Illumina made between itself and iPhone maker Apple Inc.
“Apple’s revolutionary products were huge and instantaneous commercial successes, appealing to a seemingly endless consumer base around the world,” Schwan said in the letter. “Illumina’s products on the other hand, although revered by genomics researchers around the world, serve a much smaller and highly regulated market.”
Schwan emphasised that Roche could be a lifeline for Illumina. “Roche is willing to assume this risk because we believe that a combination with Roche will position Illumina for greater long-term success as part of a larger, more global organisation,” the letter said.
At time of press, Illumina had not responded.
Meanwhile, first quarter sales at Roche dropped 1% to 11 billion Swiss francs ($12 billion) as a result of pricing pressures in Europe and the strength of the Swiss franc. However sales of both cancer drugs Rituxan and Avastin were up.
