12:00 AM
 | 
Oct 20, 2008
 |  BioCentury  |  Finance

Ebb & Flow

One mega biotech merger edged closer to completion last week, while the other remained opaque. Still, both ImClone (NASDAQ:IMCL) and Genentech (NYSE:DNA) continued to trade at a discount to their respective offer prices of $70 and $89, reflecting a high level of investor skepticism in the current environment.

ImClone finished the week up $2.66 to $67.66, while Genentech gained $10.53 (14%) to $83.53.

Eli Lilly(NYSE:LLY) began its $6.5 billion tender offer for ImClone last Tuesday via the pharma's Alaska Acquisition Corp. subsidiary. The offer expires at midnight on Thursday, Nov. 20 (see BioCentury, Oct. 13).

On its 3Q earnings call last week, Genentech declined to comment on the acquisition bid by Roche (SWX:ROG) beyond a reminder from Chairman and CEO Arthur Levinson that the biotech's special committee had concluded that the offer "substantially undervalues the company."

Genentech posted 3Q08 non-GAAP diluted EPS of $0.81, up 11% from $0.73 in 3Q07 but missing the Street's estimate by $0.07.

3Q08 revenues of $3.41 billion topped the Street's estimate of $3.36 billion and were up 17% from $2.9 billion in the prior year's quarter. Non-GAAP R&D expenses for the quarter increased by 28% to $738 million compared to $578 million in 3Q07.

The company narrowed its FY08 non-GAAP EPS estimate to $3.40-$3.45 from $3.40-$3.50, which it attributed primarily to the employee retention programs put in place after the Roche bid.

The retention program cost $0.03

a share in 3Q. EVP and CFO David

Ebersman said he anticipates the EPS impact of the retention bonus program will be $0.08 in 2008, $0.12 in 2009 and $0.02 in 2010. But he warned that these costs could accelerate with the consummation of a Roche deal.

According to Levinson, Genentech has seen no increase in employee turnover in the 12 weeks since the Roche aired its proposal.

In regulatory news, FDA approved an updated label, including a boxed warning, for the company's Raptiva efalizumab psoriasis treatment to highlight the risk of bacterial sepsis, viral meningitis, invasive...

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