Roche looks to snatch up Illumina for $5.7B

Continuing 2011's M&A trend seen in the medical device industry, Roche ($RHHBY) has made a hostile bid seeking to acquire all outstanding shares of San Diego's Illumina ($ILMN) for $44.50 per share in cash, or roughly $5.7 billion. Through the deal, Roche would pick up technology to read genetic makeup of tumors, boosting the potential for targeted personalized medicine in this area, as Bloomberg notes.

Roche would combine its applied science unit with Illumina and move the business area's headquarters to San Diego, according to a release.

"The proposed acquisition will strengthen Roche's current offering in the Life Science market by providing complementary solutions to our current portfolio," Daniel O'Day, COO, Roche Diagnostics, says in a statement. "Our ability to offer a total solution to researchers will help enable the discovery of complex new biomarkers improving drug discovery and the selection of patients most likely to respond to a targeted treatment with high clinical relevance. In addition, by building on Illumina's capabilities Roche will be able to use its scale, global distribution and diagnostic test development expertise to develop new diagnostic tests that serve patients and customers even more effectively."

But Illumina has been mum so far about the offer. "We have no comment at this time," Illumina CEO Jay Flatley says in an emailed query from Reuters about the bid.

Analysts are already speculating Roche will have to raise its offer. "Offering $44.50 probably won't satisfy Illumina management and shareholders," explains Birgit Kulhoff of Rahn & Bodmer Co., as quoted by Bloomberg. "If I look at the offer through the glasses of Roche shareholders, they are already offering a very high multiple."

The field of DNA sequencing in which Illumina specializes is currently hot. "Interpreting genomes is about to absolutely explode," says Duke reseacher David Goldstein, as quoted by Forbes. In fact, Roche has already made a foray into the field, buying 454 Life Sciences in 2007. However, 454's technology has been overtaken by Illumina's offerings, Forbes notes.

The bid follows a key trend we've been seeing in both the pharma and device industries over the past year. Pharmaceutical companies like Roche are facing patent cliffs and increased regulatory burdens--among other problems--which are prompting many to turn to M&A, Dow Jones notes.

Although it makes up only a fraction of its parent company's total sales, Roche's diagnostics business is contributing more and more to Roche's recent medical breakthroughs, as Dow Jones notes. "Large scale genomics may, or may not, have an important role in clinical practice in the next 10 to 15 years, but Roche feels it needs to have the option to play just in case the hype eventually becomes reality," Bernstein analysts say, as quoted by the news service.  

- read Roche's release
- see Bloomberg's take
- check out the Dow Jones report
- get more from Reuters
- check out the Forbes story

Special Report: Top 10 medical device deals of 2011