Roche Will Slash Stake in Genentech

Is it a case of Swiss timing?

Roche Holding plans to sell 17.3 million shares of Genentech Inc. to raise about $3 billion and take advantage of a fourfold increase in the biotechnology company’s stock price since July.

Genentech, the world’s second-biggest biotech company, filed Thursday with the Securities and Exchange Commission to register shares owned by a Wilmington, Del.-based unit of Switzerland’s Roche.

The prospect of more shares on the market sent Genentech’s stock (ticker symbol: DNA) down $22.25, or 11%, on the New York Stock Exchange to $187.50.

The sale by one of Europe’s leading drug makers would be the latest in a series of transactions taking advantage of increases in Genentech’s share price as investors have poured money into biotech stocks. In January, Roche sold $1 billion in bonds exchangeable into Genentech shares.

Even after Thursday’s drop, Genentech shares are up 287% from their initial public offering price of last July and 39% this year. The Amex biotech index, which slid 4.3% on Thursday, is up 77% year-to-date.

“There has been a possibly irrational exuberance surrounding biotech stocks, and Roche is going to cash in,” said Stewart Adkins, an analyst at Lehman Bros. “Why not? They can reinvest the cash in other things.”

The stock sale would lower Roche’s stake in Genentech to 58.9% from 65.6%.

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Genentech Jolted

Genentech shares slid 11% on Thursday after Roche said it would reduce its stake, but the stock is up 287% from July’s debut. Weekly closes and latest on the NYSE:

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Thursday: $187.50, down $22.25

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Source: Bloomberg News