When the relentlessly efficient market casts a vote, it's usually right. And if it's wrong, it's usually not wrong by much. However, investors' belief that Roche would not exercise its option to acquire the rest of Genentech showed that the market isn't infallible.

GNE's valuation using the $82.50 call price is $10.6 billion. However, by bidding the stock up $4 dollars over the call to $86.50, the market had valued the biotech company at $11.1 billion, a $510 million difference.

Roche's decision sent GNE back to $82, a $4.50 retreat on 6.4 million shares on Thursday, and on the week the stock was off $5.563. Although it's impossible to determine how many investors purchased GNE over the call price, average daily volume for the stock had been increasing even after crossing the $82.50 threshold (see link above).

GNE initially passed the $82.50 call price in late January. The stock retreated in February, but pushed past $82.50 in the second week of March and hadn't looked back before Roche pulled the trigger last week. It's worth noting that GNE was trading as high as $90 in May.

On the other hand . . .

This isn't the first time the market has misread a pharma company's intentions, except the last time the market guessed wrong in the opposite direction. In 1996, investors were asleep at the wheel when American Home Products decided to buy the rest