SAN FRANCISCO — Shareholders of biotechnology pioneer Genentech voted overwhelmingly Friday to approve the company's $2.1-billion merger with Roche Holding, a Swiss pharmaceutical giant, despite last-ditch efforts by disgruntled longtime investors to derail the plan.
At the end of a rancorous annual meeting in Millbrae, south of San Francisco, the company said 97% of those voting favored the deal. The merger must also win approval by the Federal Trade Commission in Washington, which is still collecting product information from the two companies.
Under the merger plan proposed in February, shareholders will sell half of their 85 million common shares to Roche for $36 each. In addition, Roche, based in Basel, will invest $492 million in exchange for newly issued Genentech shares.
The transaction will give Roche, which also owns the New Jersey-based pharmaceutical firm Hoffmann-La Roche & Co., a controlling 60% stake in this country's largest biotech company, with an option to buy the rest at preset prices ranging from $38 to $60 a share over the next five years.
Some of Genentech's long-suffering investors took issue with the terms, excoriating founder and Chairman Robert A. Swanson for negotiating a deal under which they might lose the opportunity to realize considerable profits down the road should the company's products finally achieve the success that to date has largely proved elusive.
Richard E. Doscher, a rancher from Northern California, referred to his investment in Genentech as a chance "to get on board a train going west to California."
"Now we're told we've reached Ohio and maybe (you will) take us as far as Chicago and (then we) get dumped," said Doscher, one of about 550 shareholders at the standing-room-only session in the Westin Hotel.
Bradley Tait, an investor from Ann Arbor, Mich., noted that Roche is known for a stiff, bureaucratic management style, differing sharply from Genentech's more laid-back approach.
"Do you not have concerns that you've sold your soul and down the road you'll regret it?" he asked Swanson.
Swanson, who remained cool under a barrage of hostile questions, reiterated his view that the merger would be good for shareholders and the company. Stockholders, he said, will receive a premium over the current value of half their shares and the chance to continue to invest in the company, at least for a time.
And Genentech, he added, can draw on the deep-pocket resources of Roche to enhance product research and development.
Genentech, based in South San Francisco, makes drug products using gene-splicing techniques. Among its products are the heart drug TPA and Protropin, a human growth hormone. One of Roche's key products is the tranquilizer Valium.
Under terms of the deal, Swanson would receive about $68 million for his shares. Moreover, as would other officers, he would have a chance to cash out on his options at an accelerated rate. As a result, he could reap an additional $4.2 million. President and Chief Executive G. Kirk Raab stands to make $7.9 million by selling his options.
(The Securities and Exchange Commission is investigating possible insider trading in connection with the merger. The inquiry was triggered by an unusually high volume of trading in Genentech stock, officials said, resulting from a possible leak of insider information by Raab's wife. Neither Raab nor Genentech is a target of the investigation, Swanson told shareholders.)
Asked by a shareholder to respond to concerns about Genentech's loss of independence to a foreign company, Genentech director David Packard, co-founder of high-tech giant Hewlett-Packard, said: "We tried very hard to find a better way to maintain the tremendous capabilities of this company. . . . I wish it could have been an American company instead of a foreign company. Unfortunately, the rules of this country just don't make that possible."
Genentech shares closed up 75 cents at $26.75 in composite New York Stock Exchange trading, with nearly 2 million shares exchanging hands.