It has now emerged that Roche Holding Ltd. (RHHBY) recently conducted acquisition talks with Pacific Biosciences of California (NASDAQ:PACB). Roche is said to be particularly interested in Pacific Biosciences’ gene-sequencing technology. The talks between the companies are only in the beginning stages and a deal may or may not happen in the end.
Sources familiar with Roche’s overture to acquire Pacific Biosciences have also cited a disagreement between the companies over the price of the deal if it were to happen. It is not clear what Roche is proposing to offer Pacific Biosciences in a buyout transaction. It is also not clear what Pacific Biosciences is asking for in the talks.
Neither Roche nor Pacific Biosciences has been willing to comment on the rumored buyout talks.
Can Roche seek an alternative?
If talks with Pacific Biosciences break off, Roche could turn its attention to other drug companies with similar technology. At its most recent earnings call, Roche hinted that it was willing to make acquisitions, but only relatively minor ones. Pacific Biosciences has a market cap of about $785 million. If it is true that Roche is in talks with the company, it means it is theoretically willing to spent somewhere in the vicinity of $1 billion in an acquisition. There are many pharmaceutical companies Roche can acquire at that price point.
Earnings miss target
As much as Roche’s full-year 2015 sales rose 5%, earnings fell short of expectations. The management blamed adverse currency fluctuations for the miss, but it also became clear that Roche needs to boost its sales to drive bottom-line improvement. Pacific Biosciences could add the necessary fuel to Roche’s top-line growth.