Genentech employees to get big Roche payout
March 16, 2009
The valuation war set in motion by the Swiss drugmaker’s initial bid in July has opened the door for employees of Genentech to walk away with millions of dollars in retention bonuses and stock payouts, reports the San Francisco Business Times. Roche won full control of Genentech Inc. with a $46.8 billion offer and now owns about 56 percent of Genentech. Thanks to an employee retention plan put into place by Genentech thousands of Genentech employees, including Chairman and CEO Art Levinson, appear free to leave. That plan substituted about $370 million in cash for Genentech’s deeply embedded annual stock options program. In a recent Securities and Exchange Commission filing, Genentech said no discussions have been held regarding keeping management in their current positions due to legal restrictions. According to the retention bonus plan, if the merger occurs by the end of June and 100 percent of outstanding vested stock options accelerate as part of the merger employees will receive 50 percent of the retention bonus when the merger is completed and 50 percent one year after the merger is completed. If an employee is “involuntarily terminated” without cause or resigns for “good reason,” the retention bonus is paid out soon after the employee leaves. Genentech employees could pocket millions of dollars more from the sale of their stock holdings to Roche. Roche has said that bringing Genentech under its full control would bring cost savings of $750 million to $850 million. Its plan includes keeping the Genentech name and making South San Francisco one of its global research hubs. Roche plans to move 150 people in its virology business, 100 in its pharmaceutical development unit and about 30 in its informatics unit — all now housed at its 1,000-employee Palo Alto campus — to South San Francisco in August or September. Another 180 jobs from Palo Alto will move to a Roche facility in New Jersey, and commercial operations in New Jersey will move to South San Francisco. That means almost 500 jobs at the Palo Alto facility will be lost, either by Roche cutting those positions or employees refusing to move to New Jersey. Roche plans to cut 1,500 jobs in New Jersey, where about 1,600 researchers and scientists will remain.