Feds Rarely File Charges In Tainted Food Cases
“Part of that system is the ability to penalize the people that fail,” said Michael Taylor, a food safety scientist at George Washington University. “And theres been a real failure to do so at the federal and state level.”
Food safety advocates hope that is starting to change.
The Food and Drug Administration said Friday it has asked the Justice Department to launch a criminal investigation into Virginia-based Peanut Corp. of America, which authorities say shipped products that initially tested positive for salmonella after retesting and getting a negative result. At least 529 people have been sickened as a result of the outbreak, and at least eight may have died because of it. More than 430 products have been recalled.
If they decide to press charges, prosecutors could use the 1938 Federal Food Drug and Cosmetic Act, which gave the government leeway to charge food manufacturers if they were responsible for contaminated food. The Supreme Court gave prosecutors more leverage in 1975 when it ruled they didnt have to prove the companies knew the food was contaminated.
The ruling prompted only a modest increase in prosecutions.
“There have been innumerable times they could have prosecuted but didnt,” said Bill Marler, a Seattle-based food safety lawyer who has filed two lawsuits against Peanut Corp. of America over the recent outbreak. “My sad speculation, frankly, is that prosecutors in the U.S. on the Justice Department side or state side dont see poisoning people with food for profit as a crime.”
The Food and Drug Administration said it doesnt track food-related prosecutions separately, but said its investigative arm logged 341 arrests and 279 convictions in 2006. Many of those involved counterfeit medicines and faulty or tampered products, which also fall under its jurisdiction.
Recent convictions include the 1996 case against juice-maker Odwalla Inc., which was fined $1.5 million on charges of shipping unpasteurized apple juice that killed a baby.
Five years later, Sara Lee Corp. was fined $200,000 after pleading guilty to misdemeanor charges of selling tainted meats in a listeria outbreak that killed 15 people.
The FDA also points to prosecutions in lower-profile cases, such as the 2007 conviction of a man who made false reports to investigators after a mix-up led to antibiotics being dumped into unpasteurized milk at a New York farm.
Although cases may not yield criminal charges, firms are often targeted with a flood of civil lawsuits seeking monetary damages. In some cases, the companies also agree to tighten testing standards and spend more money on safety measures.
Federal charges also were never filed against ConAgra in the 2002 E. coli outbreak that prompted a massive meat recall and sickened at least 19, or the companys 2007 peanut butter recall after a salmonella outbreak spread to more than 400 people.
And prosecutors decided against pursuing charges against two produce companies involved in the 2006 tainted spinach case, saying the investigation found the growers and processors did not deliberately skirt the law.
Part of the problem, attorneys say, is that prosecutors arent using other criminal charges to pursue cases. In the current outbreak stemming from tainted peanut butter, Georgia agricultural officials had said they would consider pursuing state manslaughter charges if federal authorities did not take up a case against the peanut processing plant in rural southwest Georgia.
“If a U.S. attorney wanted to prosecute this as a felony, there are enough statutes they could use to charge it out as a felony,” said Fred Pritzker, a food safety lawyer in Minneapolis who has filed a wrongful death lawsuit on behalf of a 72-year-old woman whose death may be linked to the current outbreak.
Eric Greenberg, a Chicago-based attorney who defends food and drug companies, said some prosecutors also may shy away from such cases because they take time and manpower for an agency thats already stretched thin.
Source: cacru
Daschle Pays Back Taxes, Has President Obamas Confidence
“The president has confidence that Senator Daschle is the right person to lead the fight for health-care reform,” Burton said yesterday in a statement.
Daschle, 61, paid more than $100,000 in back taxes and interest, the New York Times reported yesterday, citing “administration officials.” Daschle paid the taxes on the use of a car and driver provided free by Leo Hindery Jr., a founder of the private equity firm InterMedia Advisors, the Times and ABC News reported
Daschles nomination as Health and Human Services secretary must be confirmed by the Senate Finance Committee. Chairman Max Baucus, a Montana Democrat, and ranking Republican Charles Grassley of Iowa, will meet Feb. 2 to discuss nominations, Carol Guthrie, committee spokeswoman, said in a telephone interview.
“In preparation for his nomination, Senator Daschle and his accountant identified some tax issues and fixed them,” Burton said. “We are confident the committee is going to schedule a hearing for him very soon and he will be confirmed.”
Obama nominated Daschle, a former U.S. senator who rose to majority leader, on Dec. 11, saying he would be a “leading architect” of efforts to revamp the U.S. health-care system.
Stalled in Committee
His confirmation has been stalled in the Senate Finance Committee. The same panel confirmed Timothy Geithner after grilling him on his failure to pay almost $50,000 in taxes.
Daschle served in Congress for 26 years, losing his Senate seat in 2004. In 2005, he joined an advisory board for InterMedia. Daschle most recently worked as a special policy adviser for the Washington office of law firm Alston and Bird, advising clients on issues related to health care, among other things, according to a statement on the firms Web Site
Hindery, formerly an executive in the cable-TV industry, didnt immediately return a voice mail left on his cell phone.
Lilly, Daiichis Prasugrel Backed With Restrictions
Lillys shares fell after the Food and Drug Administration posted the staff report today. The drug was found to help heart- attack patients. Still, some reviewers said the medicine should be used only for short periods and carry the strictest caution about the danger of excess bleeding. The report also suggested excluding patients older than 75 and warning about cancer risks.
Conditions and warnings may make it harder for the drug to take sales from Plavix, an $8.1 billion seller for Bristol-Myers Squibb Co. and Sanofi-Aventis SA. Prasugrel, to be sold as Effient, is vital to Indianapolis-based Lillys plans to replace revenue lost when its top-selling antipsychotic Zyprexa loses patent protection in 2011.
“It does set the product up for a difficult launch, since the label will contain a warning and patients will need to be enrolled in a patient management system, which could be an added hassle and scare for some doctors,” Jon LeCroy, an analyst at Natixis Bleichroeder in New York, said in a note to clients today. He recommends selling Lilly shares and doesnt own them.
Outside advisers to the FDA will meet Feb. 3 in the Washington suburb of Silver Spring, Maryland, to discuss the staffs findings and recommend whether Effient should be cleared for sale. The agency has also asked the committee of doctors and scientists to consider what limitations would be needed if the drug is approved.
Shares Fall
Lilly dropped $1.15, or 3 percent, to $36.82 at 4 p.m. in New York Stock Exchange composite trading. The drugmaker also announced today that its U.S. president, Deirdre Connelly, is departing for GlaxoSmithKline Plc. Before the review was released, Daiichi Sankyo fell 15 yen to close at 2,040 yen in trading in its hometown of Tokyo.
Effient is designed to prevent blood clots in patients with heart problems who are undergoing procedures to unclog their arteries. These procedures, called percutaneous coronary interventions, are usually followed by insertion of a stent to keep the arteries propped open.
A company-funded study of 13,000 patients found that Effient prevented more heart attacks than Plavix, though more people taking Effient died from bleeding. The drug was also linked to an increased risk of stroke in patients who had previously had one, and more cases of cancer, according to the FDA review.
Disagreement on Limits
The agencys Division of Cardiovascular and Renal Products recommended that Effient be marketed to prevent heart attacks. At the same time, it said too little proof existed to support the companies request to claim a benefit against strokes or deaths.
While some reviewers suggested limiting Effient use to one week to manage the risk of bleeding and prevent a possible association with cancer, there was no consensus in the agency report whether this was necessary.
Deadline Missed
Lilly and Daiichi Sankyo applied for FDA approval in December 2007. The agency early last year granted a priority review, with a decision due in June rather than the longer wait typical under the standard review. The FDA extended the review when new data became available, then missed a September deadline for action, and said Dec. 31 it would convene the advisory panel.
The FDA hasnt told Lilly when it will decide on the application, Chief Executive Officer John Lechleiter said to investors on Jan. 7. The agency usually follows the recommendations of its advisory panels, though it isnt required to do so.
A European advisory panel recommended approval of Effient on Dec. 18, and a final ruling by the European Commission typically follows within three months.
Barbara Ryan, an analyst at Deutsche Bank in Greenwich, Connecticut, expects FDA approval of Effient in the second half of this year and annual sales of $1.3 billion by 2013.
The “cautionary/restrictive language” recommended in the FDA staff review “is consistent with our views for this drug,” Ryan said today in a note to clients. She has a hold rating on shares and doesnt own any.
Even if the drug is approved, it may not be enough to make up for the loss of Zyprexa sales, according to Tim Anderson, an analyst at Sanford C. Bernstein & Co. in New York.
Peanut Butter-maker Under Criminal Probe In Deaths, Sickness
The Justice Department and the Food and Drug Administration are together investigating closely held Peanut Corp. of America, said Stephen Sundloff, director of the agencys Center for Food Safety and Applied Nutrition, in a conference call with reporters today. The companys Blakely, Georgia, plant has been identified as the source of the bacteria.
White House spokesman Robert Gibbs confirmed the investigation during a briefing with journalists, when asked about an Associated Press report that the FDA knew in April about a shipment of peanuts from the plant containing pieces of metal and never tested by inspectors. Agency records also found that an outside lab uncovered salmonella at the plant as recently as last year, AP reported. A second round of testing by a different company turned up negative for salmonella, the news agency said.
“I think the revelations have no doubt been alarming, that whether it was our own regulatory system or a company that repeatedly found salmonella in its own testing would continue to ship out that product is beyond disturbing for millions of parents,” Gibbs said.
More Recalls
The FDA expects more recalls beyond the 350 products with peanut butter or paste already flagged, Sundloff said. The list of sickened consumers has grown by 28 over the past five days, Robert Tauxe, a deputy director in FDAs foodborne diseases division, said on the call.
The outbreak doesnt affect supermarket peanut butter brands. Peanut Corp.s peanut butter and paste are used by food manufacturers in “hundreds of different products, such as cookies, crackers, cereal, candy and ice cream,” according to the FDA Web site, which lists recalled products.
“The outbreak appears to be ongoing,” Tauxe said.
A Justice Department spokesman, Charles Miller, said the agency wasnt commenting and referred calls to the FDA.
Peanut Corp. spokesman George Clarke said the company will make a statement soon. He wouldnt elaborate.
“We have been devastated by this and we have been working around the clock with the FDA,” said a recorded message on the companys news media phone line.
Consumers concerned about peanut-butter containing products should check the FDAs Web site at www.fda.gov or call a CDC information line at 800-232-4636 for updates on recalled products, Sundloff said. Those who handle potentially contaminated items should wash their hands afterward, he said.
The company, based in Lynchburg, Virginia, recalled all peanut products made since January 2007 at its Blakely plant, FDA officials said Jan. 28. The factory has been identified as the source of an outbreak of the bacteria salmonella typhimurium that began in September and has sickened people in 43 states and Canada, the agency has said.
Peanut Corp. shipped crackers and other foods from the plant after tests on a dozen occasions in 2007 and 2008 showed salmonella, the FDA and U.S. Centers for Disease Control and Prevention said.
Painkiller Linked to Deaths Should Be Withdrawn, Fda Panel Says
A joint FDA advisory committee meeting in Gaithersburg, Maryland, today voted 14-12 that the risks of Darvon outweigh its benefits, said Karen Riley, a spokeswoman for the agency, in an e-mail. The prescription medicine, known chemically as propoxyphene, has been sold since 1957 for mild to moderate pain.
The panels recommendation, while not binding on the FDA, is a victory for Public Citizen, a Washington consumer group that petitioned the agency in 2006 to take the painkiller off the market. The group said the drug and its generic equivalents were linked to more than 2,000 accidental deaths in the U.S. from 1981 to 1999. FDA staff disagreed in a report released on Jan. 16, saying the known risks were consistent with product labeling.
“There is little doubt that were propoxyphene and propoxyphene-containing products to come before these committees today for approval, based on what is now known, they would be rejected because of one of the most unfavorable benefit-to-risk ratios ever seen for a drug,” Sidney Wolfe, head of Public Citizens health research group, told the advisory panel today.
The FDA usually follows the recommendations of its advisory panels, though it isnt required to do so. Theres no deadline by which the FDA must decide what action to take.
Closely held Xanodyne Pharmaceuticals Inc. of Newport, Kentucky, markets the Darvon and Darvocet brands and believes they are safe and effective, said Kevin Anderson, the companys chief compliance officer, in an e-mail last month. Darvocet contains acetaminophen, the active ingredient in Johnson & Johnsons Tylenol.
U.s. Senate Votes to Expand Childrens Health Fund
The vote was 66-32 late yesterday to add $32.8 billion over 4 1/2 years to the State Childrens Health Insurance Program, or Schip, expanding coverage to more than 11 million children from 7.4 million last year. The House passed a similar measure on Jan. 14, and the two versions must be reconciled before the legislation is sent to Obama.
Then-President George W. Bush in 2007 twice vetoed an expansion of the program, aimed at low-income children whose families earn too much for the Medicaid health plan for the poor, saying that Democrats were trying to undermine private health coverage. Lawmakers said job losses in the recession threaten to cut more children from insurance rolls, and Obama said he wants expanded coverage to be among the first measures he signs into law as president.
“As the worsening economy causes families to lose their jobs and health insurance, it is vital that we redouble our efforts to ensure that every child in America has access to affordable health care,” Obama said today in an e-mailed statement. The expanded program “will serve as a down payment on my commitment to ensure that every American has access to quality, affordable health care.”
Republicans who voted against the measure objected to a change that extends benefits to legal immigrant children, without requiring that they be residents in the U.S. for five years, as currently called for. The Senate rejected Republican amendments to limit such coverage.
Poorest Families
The proposal also doesnt ensure that states enroll children from the poorest families first before expanding coverage to children in other families, some Republicans said.
The legislation the Senate approved brings the U.S. governments contribution to the joint state-federal program to about $12 billion annually from the current $5 billion.
Schip originally was intended for households with incomes up to $42,400 for a family of four, or 200 percent of the poverty level. Medicaid, the jointly funded federal-state health program, generally is targeted at children in families with incomes no higher than the federal poverty level, which is $21,200 for a family of four.
Over the years, some states raised income eligibility for Schip, citing higher costs of living. Eight states, along with Washington, D.C., allow children to enroll if their parents have incomes of $63,600 a year, or 300 percent of the poverty level for a family of four. A ninth state, New Jersey, sets the income level at $74,200, the most generous. Companies such as UnitedHealth Group Inc. and Aetna Inc. contract with states to provide coverage.
Low-Income Kids
“When the government steps in and says lets have taxpayers pay for your coverage, it should be focused on low-income kids,” Senator Charles Grassley, an Iowa Republican and the ranking minority member of the Senate Finance Committee, said during debate two days ago.
Grassley, who supported a Senate measure to expand Schip in 2007, said previous proposals had stronger provisions to protect against families dropping private coverage in favor of the subsidized care. He voted against the legislation last night.
An estimated 2.4 million children with private insurance, in addition to the 4 million without any coverage, are expected to sign up for Schip under the Senate measure, according to an analysis by the nonpartisan Congressional Budget Office.
Critical First Step
“Inexplicably, we hear a chorus of why we shouldnt expand Schip,” said Senator Olympia Snowe, a Maine Republican, who backed the attempts to extend the program in 2007 and voted in favor of the current version. “This bill is a critical first step to greater health reform.”
Obama campaigned on a pledge to overhaul the U.S. health- care system, reducing the number of uninsured. About 15 percent of the population lacks coverage, according to the Census Bureau.
The Senate and House versions call for financing the changes by raising the federal tax on cigarettes to $1 a pack from 39 cents. The current tax on tobacco now helps finance the program, which was created in 1997 and will expire at the end of March unless new money is authorized.
Republicans, who say they dont want to raise taxes, offered a measure to add $19 billion over five years to enroll an additional 2 million uninsured children. Most of the funding would have come from reducing the amount of money states get from Medicaid for their administrative expenses. Their proposal also would end up insuring about 1 million children who have private coverage, according to the Congressional Budget Office.
Fda: Feds Open Criminal Investigation Into Georgia Plant That Shipped Tainted Products
More than 500 people have been sickened as a result of the outbreak, and at least eight may have died because of salmonella infections. More than 430 products have been pulled off the shelves in a recall that reaches to Canada and Europe.
In another development Friday, officials urged consumers to be cautious about “boutique” brands of peanut butter, which had not previously figured in the recall.
Although national brands of peanut butter are unaffected, some smaller companies may have received peanuts from the processing plant in Blakely, Ga., the FDA said.
Meanwhile, the White House pledged stricter oversight of food safety.
Press secretary Robert Gibbs said Friday that President Barack Obama plans to name a new FDA commissioner and other oversight officials in coming days. Gibbs said they will establish a “stricter regulatory structure” to prevent breakdowns in food safety.
“I think the revelations have no doubt been alarming,” said Gibbs. That a company which found salmonella in its own testing would continue to ship products “is beyond disturbing for millions of parents,” he added.
FDA officials said they last inspected the Blakely facility in 2001, when it wasnt being used to make peanut butter.
It did not get much attention from the federal government again until earlier this year, when a shipment of peanuts from the plant was returned from Canada because it was contaminated with metal fragments. The FDA then asked Georgia authorities to inspect.
But the state inspections did not detect what FDA officials say was a salmonella problem at the plant dating back to at least June of 2007.
The return of the contaminated shipment of peanuts was first reported by the Associated Press.
—
Source: wijan
Zimbabwe Opposition Officials Say Party to Join Unity Government Next Month
As those figures emerged, opposition leader Morgan Tsvangirai was meeting in the Zimbabwean capital with aides to discuss a recommendation from regional leaders that a coalition agreement stalled since September finally be implemented.
“We have decided to abide” by the regional leaders resolution, Tsvangirai told reporters after his meeting. “We are committed to joining the government of national unity and hope that (President Robert Mugabes party officials) are going to treat us as equal partners.”
He added: “Let us make no mistake, by joining an inclusive government, we are not saying that this is a solution to the Zimbabwe crisis, instead our participation signifies that we have chosen to continue the struggle for a democratic Zimbabwe in a new arena.”
A Tsvangirai-Mugabe political marriage will be rocky.
The two have clashed repeatedly over the years, and Tsvangirai has been beaten and jailed by Mugabes regime. In 2007, police attacked him after he held an opposition meeting the government had banned. Images shown on news broadcasts around the world of Tsvangirais bruised and bloodied face came to symbolize the challenges his movement faced.
Some of Tsvangirais allies say he never should have agreed to serve as prime minister in a government that left Mugabe as president. Mugabe, meanwhile, was under pressure from aides in the military and government who dont want to give up power and prestige to the opposition.
Preparing for new elections is among the main tasks of the unity government. Tsvangirai won the most votes in a presidential race almost a year ago, then withdrew from a runoff against Mugabe because of state-sponsored violence against opposition supporters.
The opposition had earlier insisted there would be no coalition until a dispute over how to fairly share Cabinet and other posts was resolved after Mugabe insisted on keeping the most powerful posts for his ZANU-PF party. The opposition also had wanted attacks on dissidents to stop.
Mugabes party and leaders of neighboring countries have said the opposition should first enter the government, then resolve outstanding issues. With Fridays decision, the opposition adopted that strategy.
After an all-night summit, the main regional grouping on Tuesday had called on Zimbabwes factions to swear in a prime minister, the post Tsvangirai is to hold in the unity government, on Feb. 11. Mugabe, in power in the southern African country since its independence from Britain in 1980, was to remain president.
The opposition faced the threat Mugabe would take the regional leaders recommendation as license to simply form a government without Tsvangirai and the pressure from neighboring countries. Neither may have weighed as heavily as a sense that their country was in urgent need of a political solution so it could address a growing humanitarian crisis. Mugabe is accused of presiding over his countrys economic collapse.
Mugabe had faced sharp criticism from the West. But, for the most part, African leaders have stood by one of their own.
Kenyas Prime Minister Raila Odinga, long one of the few African leaders to criticize Mugabe, repeated calls on him to step down Friday. Senegalese President Abdoulaye Wade, who joined Odinga on a panel at the World Economic Forum in Switzerland, said Mugabe could come to Senegal if he did go.
Instead, Fridays opposition decision means Mugabe will cling to his post, albeit with curtailed powers.
In Washington, State Department spokesman Robert Wood told reporters Friday that the United States is “a bit skeptical” because Mugabe has shown no previous willingness to share power.
“These types of things have been announced before, and the key is always implementation.” Wood said. “Whats important here is actions and not words, and we want to see real, serious power-sharing by the Mugabe regime.
Source: wijan
U.s. Senate Votes to More Than Double Child Health-care Funds
The vote was 66-32 late yesterday to add $31.5 billion over 4 1/2 years to the State Childrens Health Insurance Program, or Schip, expanding coverage to more than 11 million children from 7.4 million last year. The House passed a similar measure on Jan. 14, and the two versions must be reconciled before the legislation is sent to Obama.
Then-President George W. Bush in 2007 twice vetoed an expansion of the program, aimed at low-income children whose families earn too much for the Medicaid health plan for the poor, saying that Democrats were trying to undermine private health coverage. Lawmakers said job losses in the recession threaten to cut more children from insurance rolls, and Obama said he wants expanded coverage to be among the first measures he signs into law as president.
“Its a program that gets children the care they need,” said Democratic Senator Dianne Feinstein of California. “They will have pediatricians. They will have immunizations.”
Republicans who voted against the measure objected to a change that extends benefits to legal immigrant children, without requiring that they be residents in the U.S. for five years, as currently called for. The Senate rejected Republican amendments to limit such coverage.
Poorest Families
The proposal also doesnt ensure that states enroll children from the poorest families first before expanding coverage to children in other families, some Republicans said.
The legislation the Senate approved brings the U.S. governments contribution to the joint state-federal program to about $12 billion annually from the current $5 billion.
Schip originally was intended for households with incomes up to $42,400 for a family of four, or 200 percent of the poverty level. Medicaid, the jointly funded federal-state health program, generally is targeted at children in families with incomes no higher than the federal poverty level, which is $21,200 for a family of four.
Over the years, some states raised income eligibility for Schip, citing higher costs of living. Eight states, along with Washington, D.C., allow children to enroll if their parents have incomes of $63,600 a year, or 300 percent of the poverty level for a family of four. A ninth state, New Jersey, sets the income level at $74,200, the most generous. Companies such as UnitedHealth Group Inc. and Aetna Inc. contract with states to provide coverage.
Low-Income Kids
“When the government steps in and says lets have taxpayers pay for your coverage, it should be focused on low- income kids,” Senator Charles Grassley, an Iowa Republican and the ranking minority member of the Senate Finance Committee, said during debate two days ago.
Grassley, who supported a Senate measure to expand Schip in 2007, said previous proposals had stronger provisions to protect against families dropping private coverage in favor of the subsidized care. He voted against the legislation last night.
An estimated 2.4 million children with private insurance, in addition to the 4 million without any coverage, are expected to sign up for Schip under the Senate measure, according to an analysis by the nonpartisan Congressional Budget Office.
Critical First Step
“Inexplicably, we hear a chorus of why we shouldnt expand Schip,” said Senator Olympia Snowe, a Maine Republican, who backed the attempts to extend the program in 2007 and voted in favor of the current version. “This bill is a critical first step to greater health reform.”
Obama campaigned on a pledge to overhaul the U.S. health- care system, reducing the number of uninsured. About 15 percent of the population lacks coverage, according to the Census Bureau.
The Senate and House versions call for financing the changes by raising the federal tax on cigarettes to $1 a pack from 39 cents. The current tax on tobacco now helps finance the program, which was created in 1997 and will expire at the end of March unless new money is authorized.
Republicans, who say they dont want to raise taxes, offered a measure to add $19 billion over five years to enroll an additional 2 million uninsured children. Most of the funding would have come from reducing the amount of money states get from Medicaid for their administrative expenses. Their proposal also would end up insuring about 1 million children who have private coverage, according to the Congressional Budget Office.
Roche Makes Hostile Bid For Genentech, Lowers Price
The cash offering replaces the original $89-a-share proposal that was intended to lead to a negotiated merger, the Basel, Switzerland-based company said in a statement today. Roche will begin a tender offer within two weeks.
The latest approach, Roches second unsolicited bid following the purchase of U.S. diagnostics company Ventana Medical Systems Inc. last year, comes on the heels of Pfizer Inc.s $68 billion planned takeover of Wyeth announced on Jan. 26. Drugmakers are seeking a way out of the deepening global recession that threatens prices and increases the pressure to speed more products to the market at a time when some of the industrys biggest medicines are losing patent protection.
“Its pretty much Ventana revisited and along with it comes risks and potential benefits,” said Karl Heinz Koch, an analyst at Helvea in Zurich. “Because its no longer friendly, theres a higher risk of losing key people.”
Roche gained as much as 3.4 percent in Zurich trading to 165.7 Swiss francs, selling for 163.7 francs as of 9:33 a.m. to give it a market value of 142 billion francs ($123 billion). Genentech gained 65 cents, or less than 1 percent, to close at $84.09 in New York yesterday, 2.8 percent below todays offer price. That gives Genentech a market value of $88.5 billion.
Direct Offer
“In light of the lack of progress towards an agreed transaction” with Genentech, “Roche has now decided to make an offer directly to Genentech shareholders,” the Swiss company said in the statement.
Full ownership would help Roche, which has held a stake in the U.S. company for almost 20 years, boost income from Genentechs products and ensures access to its labs after an existing accord expires in 2015.
Roche intends to keep Genentechs research and early drug development independent, and said it would move its own U.S. commercial operations to Genentechs South San Francisco, California, site. The combined U.S. pharmaceutical operations would carry the Genentech name, Roche said.
The Swiss drugmaker said in July the weakness of the dollar against the franc played a role in the timing of its offer. The U.S. currency has since strengthened about 13 percent against the franc.
Second for Schwan
A takeover would be the second major transaction for Severin Schwan, 41, who took over from Franz B. Humer as chief executive officer less than a year ago. Schwan led Roches $3.4 billion purchase of Ventana as head of Roches diagnostics unit.
Buying Genentech would cut costs and boost earnings for Roche, the worlds biggest maker of tumor-fighting drugs. The Swiss company has used Genentechs advances in cancer treatment to become the fastest-growing among the worlds largest pharmaceutical manufacturers.
Genentech products, including the Rituxan and the Avastin cancer medicines, account for about 40 percent of Roches revenue.
Avastin is approved to treat colon, lung and breast tumors and is being tested in more than 400 clinical trials involving 40,000 patients worldwide. Avastin may also become the best- selling medicine in the world within six years, according to London-based consultant EvaluatePharma. The medicine generated 3.7 billion francs in sales for Roche during the first nine months of 2008.
Conditions Attached
Roches offer is subject to the majority of outstanding shares being tendered and is conditional upon Roche obtaining sufficient financing. The Swiss drugmaker plans to finance the transaction with a mixture of its own cash, commercial paper, bonds and bank loans.
The Swiss company plans to tap bond markets first for financing. Pfizers takeover of Wyeth had no influence on the decision to pursue a hostile bid for Genentech, Humer said on a conference call.
Roches move follows an agreement by its controlling family two days ago, extending a shareholders pact to keep their majority stake in one pool for an unlimited period and preserving the Swiss companys independence.