Roche Holding AG (RHHBY) Chief Executive Severin Schwan reiterated his confidence in acquiring the 44% of Genentech Inc. (DNA) that it doesn't already own, while expressing frustration at the negotiations regarding the deal.

In an interview Friday in New York, Schwan said the acquisition distinguishes the Swiss drug maker's growth strategy from that of other large pharmaceutical companies. He believes Roche's almost two-decade relationship with the South San Francisco biotech giant makes the deal naturally complementary, and that the needed financing will be available despite tough credit markets.

"We are very confident that we can get financing in place as soon as we need," said the 41-year old Schwan, who took the helm at Roche last March.

"It will be a mixture of various tools such as bonds, cash on hand, commercial paper, bank financing, and we would approach first the bond markets," he said.

Schwan declined to comment on where such offerings would occur, or whether Roche was actively building a bank syndicate for such plans. More details on the tender offer will come next week when the company files it with the Securities and Exchange Commission.

Schwan wouldn't comment on whether Roche has hedged its foreign exchange exposure for the deal as the dollar has strengthened against the Swiss franc since the July offer.

Genentech shares recently rose 61 cents to $83.01, below Roche's current offer of $86.50. The stock hasn't traded above the original July offer of $89 a share since September because of doubts that Roche could finance the deal. American depositary shares of Roche added 20 cents to $31.25.

In August, a Genentech independent board rejected Roche's original offer. Last week, after months of failed negotiations, Roche brought the issue to shareholders with a lower tender offer price.

Schwan scoffed at the perception that Roche has turned "hostile" in using a tender offer to takeover Genentech.

"Not at all. What has happened is that we didn't agree in a negotiated transaction with the special committee of the board. We have different views on the value, and that is the very reason why we believe it is now the right time to go directly to the shareholders."

He reiterated that the current tender offer is "fair" and expressed frustration that Roche and independent board couldn't come to an agreed price, especially because the world economy and financial markets have significantly deteriorated since the July offer.

"We are disappointed," Schwan said. "A couple of months ago, I would have been much more optimistic. I would have said that we should be able to reach a negotiated agreement."

"Certainly with the turmoil in the financial markets, and how the environment has changed, we would have thought even more so that we would be able to agree," Schwan said. "Unfortunately, this wasn't the case."

 
   Ventana Parallels

The pursuit of Genentech has been compared to Roche's $3.4 billion acquisition of Ventana, a seven-month chase led by Schwan when he was still head of the diagnostics division.

In that deal, Roche made an offer of $75 a share that was repeatedly rejected as "inadequate." Roche refused to raise the price and even sought to remove the company's board, but it eventually acquiesced, closing the deal at $89.50 a share, 19% above the original bid.

Schwan admits parallels exist between the two situations but stresses that all acquisitions have two components - finding the right price for shareholders and effectively integrating the operations - and that it is important to keep them separate.

"The moment (shareholders) get their money, they are out and they don't care anymore," he said, adding that the company has melded well with Roche's culture.

He believes the same will happen with Genentech because of the complementary nature of the two businesses, which has evolved from their long-term relationship. Genentech is focused in the U.S. and primarily on cancer treatment, while Roche has a broader, global reach.

This lack of overlap will reduce layoffs after the deal, with Genentech keeping its sales force and research center at its South San Francisco headquarters.

The merger will eliminate some redundant back office operations and create some manufacturing cost savings. Roche will continue to evaluate other areas to cut costs as the integration progresses and still expects to save $750 million to $850 million annually from the deal.

 
   Bucking The Trend

Despite the uncertainty surrounding the Genentech deal, Schwan expressed excitement towards owning all the company, which should aid growth and foster innovation.

He said that Roche is in an "anti-cyclical" position at the moment and is out of sync with other large pharmaceutical companies that are scrambling to fill their pipelines, diversify their operations and make deals to boost revenue.

"There are deals out there that are adding to the top line, and then they slash out all the cost below the top line. That is not our strategy," he said.

He said Roche isn't planning any major job cuts to increase its efficiency, unlike many other pharmaceutical companies that have been announcing layoffs including Pfizer Inc. (PFE), GlaxoSmithKline Plc (GSK) and AstraZeneca Plc. (AZN).

Continued efficiency improvements can avoid such drastic moves, he said, noting that Roche's manufacturing headcount has been quietly reduced by about 10% in the past two years.

"Operational efficiency isn't something that just suddenly appears," he said with a laugh.

Schwan said that Roche isn't interested in a "mega-merger" with another company and noted that such deals have historically been unsuccessful in enhancing shareholder value over the long term.

He said the company still has room for some "small to mid-size" deals in pharmaceuticals or diagnostics, but it isn't seeking to diversify its operations, at a time when some drug makers are moving into businesses such as consumer products, animal care or generic drugs.

"If times are turbulent, you have to stick with what you are good at. This is exactly the time when you have to be very conscious where you allocate your resources and focus on your core business," he said.

-By Thomas Gryta, Dow Jones Newswires; 201-938-2053; thomas.gryta@dowjones.com