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Roche Says $51/shr Offer For Illumina More Than Adequate For Talks

4/12/2012 2:49 AM ET

Roche Holding AG (RHHBY.PK) said its offer price of $51 per share for U.S. rival Illumina, Inc. (ILMN: Quote) is 'full, fair and extremely attractive' and is more than adequate to form a basis for the much anticipated negotiation with Illumina. The Swiss drugmaker also confirmed Thursday its fiscal-year 2012 growth forecast, after reporting a slightly lower sales for the first quarter.

In an open letter sent to Illumina shareholders on Wednesday, Roche has indicated a possibility of offering more. The company asked the shareholders to choose between its all-cash offer plus any future increase and an uncertain future for Illumina, amid headwinds and the broader sequencing sector.

Roche's CEO Severin Schwan pointed out that Illumina is yet to provide any quantitative support for their aggressive growth assumptions - a reason for rejecting its sweetened offer - and again called to enter into talks. According to him, Illumina's long-term growth expectations are unrealistic and ignore the inherent and significant market and technology risks.

"However, because Illumina has refused to enter into negotiations with us, our current analysis ….. does not justify a price in excess of $51 per share," he said.

Providing an update on its trading, Roche said its first-quarter group sales dropped 1 percent to 11.03 billion Swiss francs from last year's 11.12 billion francs. However, sales edged up 1 percent in US dollar terms.

Sales excluding influenza drug Tamiflu remained relatively flat at 10.84 billion francs.

The sales results reflected a negative exchange-rate impact of 3 percentage points due to the appreciation of the franc against major currencies. At constant exchange rate, quarterly sales increased 2 percent.

In the pharmaceuticals segment, hepatitis C drug Pegasys and cancer medicines MabThera/Rituxan, Herceptin and Xeloda generated higher sales, while anemia drug NeoRecormon/Epogin declined due to competitive pressure. Also, the company experienced lower sales in osteoporosis drug Bonviva/Boniva, Tamiflu and CellCept for transplantation. Sales of Avastin advanced moderately, with continued growth expected following the approval of the ovarian cancer indication in Europe at the end of 2011.

According to Roche, U.S. was the greatest contributor to growth and international sales also increased, while Western European sales were impacted by continued pricing pressure.

Looking ahead, for fiscal 2012, the company continues to expect a high single-digit increase in core earnings per share and a low to mid-single-digit growth in sales - both at constant exchange rates. Pharma sales growth is expected to accelerate, while sales by the diagnostics division are expected to again outpace the market.

Schwan said, "The ongoing positive newsflow on our product pipeline underscores our growth prospects for the coming years: since the beginning of the year we have announced positive results from five out of five key late-stage clinical trials."

In Zurich, Roche shares closed Wednesday's trading at 154.30 francs, down 0.60 francs or 0.38 percent.

Illumina shares settled at $52.57, up $0.14 or 0.27 percent. In the after-hours trading, shares dropped $0.12 or 0.23 percent to close at $52.45.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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