Roche Is on a Spending Spree

First Roche (RHHBY.PK) offers to buy Genentech (DNA) for ~$44B and in two consecutive days has inked two more deals.

Wednesday, in its second RNAi play in a year, Roche bought Mirus Bio for $125M. The acquisition should add value to the July 2007 preclinical discovery deal with RNAi leader Alnylam. Under the agreement, Mirus will be split into two separate entities based on core competency (RNAi research vs nucleic acid reagent sales).

In the second deal, Roche acquired Arius Research for $189M USD (C$191M). Roche said the move would give it access to a new screening platform for antibody therapeutics, FunctionFIRST, which rapidly identifies and selects antibodies based on their ability to affect disease before progressing into clinical development.

So what do these acquisitions mean?

I think they mean that Roche, at least partially, gets it.

Eighteen years ago, Roche had the insight to acquire majority stake in a bleeding edge biotechnology company in a first-of-its-kind deal and it undoubtedly paid off: an increasingly large part (20%-30%) of Roche’s revenue is from Genentech’s major biologics: Avastin, Herceptin, Tarceva and Rituxan.

These small deals for platform technologies and know how in RNAi and mAb’s only strengthens Roche’s overall position away from small molecules.

These small synergistic deals can be paid for basically with petty cash and can potentially add value starting the minute the deals close. I’m a huge fan of deals under $200M that have potential for tremendous upside and Roche nailed two within a week.