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Analyst: Roche-Genentech Buyout Possible In 2009

Thawing credit markets could help Swiss drug developer warm up to another multibillion-dollar buyout offer for Genentech, according to a Jefferies & Co. analyst.

NEW YORK (AP) -- Thawing credit markets could help Swiss drug developer Roche warm up to another multibillion-dollar buyout offer for cancer drug partner Genentech Inc., according to a Jefferies & Co. analyst.

Jefferies analyst Adam Walsh boosted his rating on Genentech to "Buy" from "Hold" saying he expects a deal to happen by the first half of 2009. In August, Genentech rejected Roche's offer of $89 per share, or $43.7 billion, as too low. Most analysts also considered the proposal too low, with many saying Genentech's lineup of blockbuster drugs made it worth more than $100 per share.

Walsh has increased his price target on Genentech to $100 from $95.

Genentech gets most of its revenue from cancer treatments, including the blockbuster drug Avastin. The lung, colon and breast cancer drug had revenue of $2.3 billion in 2007, Meanwhile, the company's rheumatoid arthritis and non-Hodgkin's lymphoma drug Rituxan posted nearly $2.3 billion in sales, while the breast cancer treatment Herceptin had sales of $1.3 billion.

Roche already owns about 55.9 percent of South San Francisco, Calif.-based Genentech, but an agreement between the two companies means that a majority of non-Roche shareholders must approve any sale or merger of Genentech with Roche.

Genentech created a employee-retention program as a potential safeguard to a Roche takeover, after the company indicated there could be job cuts.

Walsh said a new $100 per share offer from Roche would likely be acceptable by Genentech shareholders.

Banc of America Securities, Barclays Capital, BMO Capital Markets, J.P. Morgan, Morgan Stanley and several others all have $100 or higher price targets for Genentech.

Shares of Genentech fell $1.59 to $84.09 in afternoon trading as the broader market fell.