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12:00 AM
Mar 30, 2009
 |  BioCentury  |  Finance

Ebb & Flow

With Genentech's takeout now complete, industry watchers will be looking for when the biotech's executives will head for the exits. Based on the structure of the bonus payouts in the employee retention plan, a number of the company's senior managers have at least seven-figure reasons to stay around another 12 months when the other half of their retention bonus comes due.

The retention clock began ticking last Thursday when Roche (SIX:ROG) consummated its tender offer for the rest of Genentech it did not already own.

The bonus money to be paid under company's employee retention plan was laid out in an 8-K filing made by Genentech last August.According to Roche's tender offer dated Feb. 9, if the merger completed on or before June 30, the payout of the retention bonuses was tied to treatment of Genentech's employee options.

If vesting was not accelerated, the entire retention bonus was to be paid out when the merger completed. But if vesting were accelerated, then the two-step retention payout would apply.

Last week, Genentech spokesperson Geoffrey Teeter said the the vesting had been accelerated.

Thus, based on the $95 deal price, executives such as CEO Arthur Levinson and President of Product Development Susan Desmond-Hellmann are in line to receive total retention bonuses of $8.7 million and $4.6 million, respectively, if they stick around until March 26, 2010 (see "Pay to Stay").

Fit to partner

While Merck Serono concluded it didn't have the wherewithal to compete in diabetes, Genfit (Euronext:ALGFT) is betting it can prosper in the space using an outlicensing strategy for its growing portfolio of drug candidates.

Genfit was up €0.20 to €6.20 last week after receiving exclusive worldwide rights to Merck Serono's MKG02 program to treat Type II diabetes and obesity.

Chairman Jean-Francois Mouney said the biotech plans to develop MKG02 through Phase II, at which point it will look for a partner.

Genfit's other diabetes compounds include AVE0897, a selective peroxisome proliferator-activated receptor (PPAR) modulator partnered with sanofi-aventis (Euronext:SAN; NYSE:SNY). It is in Phase I development.

SLV341, a therapeutic targeting an undisclosed nuclear receptor, is in Phase I and partnered with Solvay (Euronext:SOLB). SAVX1, a preclinical selective PPAR-delta modulator, also is partnered with sanofi.

The company also has three undisclosed molecules in discovery. PFX1 is partnered with Pierre Fabre; SERX1 is partnered with Servier; and TGFTX2 is unpartnered.

Genfit had €20.3 million ($27.8 million) in cash at March 23, which it said should last two years.

Last week's deal marked the final step in Merck Serono's exit from R&D in diabetes. The company announced its plans to exit the space in October 2007, citing insufficient resources to compete.

In February 2008, Merck Serono returned rights to melogliptin to Glenmark (NSE:GLENMARK; BSE:532296). The dipeptidyl peptidase-4 (DPP-4) inhibitor is in Phase II development for Type II diabetes.

In 4Q08, the company discontinued development of EMD 387008, an oral diabetes therapeutic that had completed Phase I testing for Type II diabetes.

Merck Serono's parent, Merck KGaA (Xetra:MRK), retains rights for all other indications in the discovery-stage MKG02 program, which targets an undisclosed orphan nuclear receptor.

Merck also will continue to market Glucophage oral metformin, which is approved to treat Type II diabetes, but otherwise Merck Serono will focus on cancer, neurodegenerative and autoimmune diseases.

Immersion strategy

On another front, Merck KGaA (Xetra:MRK) has launched Merck Serono Ventures to plug the gap between its in-house research and external assets that have reached the partnering stage. The fund will invest in startups and early stage biotechs that are working on technologies or developing assets that are not yet mature enough to be bought or licensed (see Online Links, AX).

"We've been seeing a lot of novel...

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