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Roche sees flat Q1 sales as attempt to buy Illumina intensifies

CEO Severin Schwan says Roche may increase offer if Illumina’s board is willing to negotiate

Roche sees flat Q1 sales as attempt to buy Illumina intensifies

Roche has reported a drop in sales of 1 per cent in its financial results for the first quarter of 2012, the same day the company sent a third letter to Illumina shareholders repeating its desire to engage with the company's board.

The Switzerland-based pharma company saw sales dip from 11.12bn Swiss francs for the first three months of 2011 to 11.03bn Swiss francs over the same period in 2012, although at constant exchange rates sales managed to climb 2 per cent.

Representing 22 per cent of total sales was Roche's diagnostic division, which the company is looking to boost with the purchase of gene sequencing firm Illumina.

Roche's acquisition attempts have faced resistance from Illumina's board, however, with its members seeing the offer as undervaluing Illumina's potential in an emerging industry.

In its latest letter to Illumina's shareholders, Roche said there was a possibility its current offer of $51 per share could increase if the company was able to negotiate with Illumina's board.

This would be a necessary step for Roche, with the letter describing the company's concerns with Illumina's most recent projections and efforts, claiming they do not support Illumina's assertion that Roche's current bid is too low.

“We continue to believe that on the basis of the public information that has been available to us, our offer price of $51 per share is full, fair and extremely attractive by every conceivable financial metric,” said Roche's CEO Severin Schwan.

“Illumina has to date not provided any quantitative support for their aggressive growth assumptions.“

The letter also dismisses Illumina's claim that it is the 'Apple of the genomics business', saying that Illumina's products served a much smaller and highly regulated market compared to Apple's huge consumer base.

The letter reads: '[U]nlike at Apple stores, crowd control of eager buyers has not been a problem for Illumina and not even Illumina has projected any surge in revenues from its products in any specific foreseeable time period.'

Elsewhere in Roche's financial results, pharmaceutical sales fell 1 per cent to 8.62bn Swiss francs for the Q1 period, with the company's top selling drug MabThera/Rituxan increasing its sales performance by 7 percent to bring in 1.6bn Swiss francs.

The company said it expect sales growth to accelerate during 2012 due to newproduct launches, such as Zelboraf and Erivedge.

13th April 2012

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