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Roche Still Seeks Sequencing Expansion After Illumina

Roche Holding AG (ROG) still wants to expand in gene sequencing after this year’s failed effort to buy Illumina Inc. (ILMN) and is looking at potential deals, Chief Executive Officer Severin Schwan said.

Illumina fell the most in a year yesterday as investors doubted Roche would renew its interest in buying the world’s biggest maker of DNA sequencing equipment. Illumina declined 6 percent to $48.07 at the close in New York, the biggest drop since Oct. 7, 2011. The San Diego-based company’s shares have gained 58 percent this year.

“Sequencing is certainly one of the business areas we are looking to invest in,” Schwan said on a conference call with reporters today after Roche announced a 15 percent increase in third-quarter sales that beat analyst estimates. “We are looking for a variety of options to build this business both internally and externally.” He declined to comment on “market rumors” of a new Illumina bid.

Buying Illumina would help Roche, the world’s largest maker of cancer medicines, better tailor drugs to patients. Machines made by Illumina can provide a full transcript of a person’s DNA, information used to diagnose rare disease, identify the risk for a genetic condition, or match cancer treatments to patients’ tumors.

Hostile Bid

Illumina fought off a $6.7 billion hostile takeover bid from Basel, Switzerland-based Roche. Illumina Chief Executive Officer Jay Flatley called the $51-a-share offer “woefully inadequate,” in an interview last month.

The Times of London reported Oct. 1 that Roche might consider another bid at $60 a share, without citing sources for the information.

Speculation about a deal with Roche leaked in December, and Roche formally made its interest known a month later by publicly offering $44.50 a share, after it said Illumina was “unwilling to participate in substantive discussions.” After the Swiss drugmaker increased the offer in March, investors voted down its attempt to gain control of Illumina’s board at an April 18 shareholder meeting.

Flatley said in a Sept. 17 interview with Bloomberg that the public offer from Roche stopped Illumina’s board from discussing what price would be acceptable.

Dollar Boost

Roche’s sales last quarter got a boost from gains in the dollar and the yen against the Swiss franc. Sales climbed to 11.3 billion francs ($12 billion), the drugmaker said in a statement. Analysts predicted 11.2 billion francs, the average of 10 estimates compiled by Bloomberg.

The shares rose 0.4 percent to 184.60 francs in Zurich. Roche shares have returned 21 percent this year including reinvested dividends, compared with an 18 percent return for the Bloomberg Europe Pharmaceutical Index. (BEPHARM)

The franc’s weakness and new products such as the breast- cancer drug Perjeta are boosting Roche’s revenue, offsetting the effect of price reductions in western Europe. Currency shifts added about 11 percentage points to sales growth for Roche, Europe’s second-biggest drugmaker by sales after crosstown rival Novartis AG. (NOVN)

Roche, which doesn’t release quarterly earnings, repeated the forecast it issued in February, saying it expects core earnings per share to increase by a high-single-digit percentage excluding currency shifts. Sales should grow this year in the low-to mid-single-digit range at constant exchange rates for the company and the pharmaceutical division, the company said. Roche also expects diagnostic sales to outpace the market.

The dollar gained 30 percent against the franc from the Swiss currency’s peak on Aug. 9, 2011, through the end of the third quarter, and 17 percent against the euro. The Swiss National Bank established a franc ceiling at 1.20 per euro in September 2011.

To contact the reporter on this story: Naomi Kresge in Berlin at nkresge@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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