What makes Genentech so special is its innovation culture

Almost two decades ago, in 1990, Roche had control over all of Genentech shares for nearly $2 billion. Then, it sold a large part of its equity and brought the controlling stake down to 56%.
Genentech subsequently got re-listed and operated as a separate entity, but Roche continued to hold a majority stake. Now, with a $47 billion offer and a protracted battle with the Genentech board over the past eight months, Roche has finally regained control of the company that drove its worldwide success.

Swiss-headquartered Roche mostly depended on Genentech’s prowess in biology. The latter’s scientists made a difference by turning out cutting edge drugs such as Avastin and Rituxan. These medicines have not only revolutionised treatment procedures for cancer, but also set new benchmarks in the field of drug discovery and innovation for other global pharmaceutical companies. The innovation culture that makes Genentech so different was the most compelling reason for Roche to reacquire it.

Quelling doubts about an unnecessary intrusion into Genentech’s culture, Roche chairman Franz Humer has said, “The most important thing is that Genentech scientists can and will continue to maintain their own culture, their own independence, their own freedom to set priorities and review projects the same way they have done in the past.”

The freedom given to researchers has been an example of free thinking at Genentech.

Today, Genentech’s Avastin, Herceptin, Rituxan and Tarceva are all leading products for Roche.

Roche itself has been spurring innovation and could bring out products like Actemra, Cellcept, Mabthera and Neupogen, but that has not been sufficient to buffer the company from the wild shocks of future challenges of a thinning research pipeline.

Genentech scientists have always been ahead of the curve, which has made them so special that every company wants to get them on rolls. In fact, the creation of Genentech itself is very interesting. The foundation of the iconic symbol of medical innovation was laid in 1976 by venture capitalist Robert Swanson and biochemist Herbert Boyer.

According to Genentech’s website, in the early seventies, Boyer and geneticist Stanley Cohen pioneered a new scientific field called recombinant DNA technology. Upon learning about this development, Swanson placed a call to Boyer and requested a meeting. Boyer agreed to give the young entrepreneur 10 minutes of his time. Swanson’s enthusiasm for the technology and his faith in its commercial potential were contagious, and the meeting extended from 10 minutes to three hours. By its conclusion, Genxentech was born.

Though Swanson and Boyer faced scepticism from both academic and business communities, they forged ahead with their idea. The company’s goal was to develop a new generation of therapeutics from genetically engineered copies of naturally occurring molecules important in human health and disease. Within a few years, Genentech scientists proved it was possible to make medicines by splicing genes into fast-growing bacteria that produced therapeutic proteins. Today, Genentech continues to use genetic engineering techniques in most of its molecules in research.

For Roche, Genentech had always been an irresistible offer. The relentless effort of Roche to sweeten the value to buy Genentech is a testimony of Roche’s management bandwidth and far sight. Very few companies have been able to manage drugs and diagnostics as two large business units. At times when personalised healthcare is increasingly gaining significance, Roche has been able to draw the desired benefits from both segments of the business.

Medicines are being increasingly combined with tools that detect its efficacy before being prescribed to the patients.

Roche and Johnson and Johnson are perhaps the only players which present a full bouquet of drugs and devices.

Fusing medical tests with drugs will determine the future rankings in the fast consolidating world of pharmaceuticals. The challenge will be to keep Genentech ahead in medical innovation so that the wide gap that has been created due to a differentiated thinking can be maintained.

Reports in the international media suggest that Genentech scientists may not be very happy to be part of Roche. For Roche, it will then be hugely important to retain the human resource that helped change medical treatments for terminally ill patients. Beyond the billions of dollars that Roche is spending to buy Genentech is the intangible brain power that has created Genentech over the decades.

Pillman is an executive closely linked to the global pharma industry.