[Through the Glass Door] Genentech’s Future Looks Much Like Chiron’s Recent Past

From the headline of Tom Abate’s story in the San Francisco Chronicle “Roche-Genentech deal called close, with offer raised”, folks at 1 DNA Way in South San Francisco should take a look across the bay at Chiron’s former campus in Emeryville to see their likely future.

As noted elsewhere (see the “Land O’Spin series on best practices of assessment on this blog), one of the best predictors for future behavior is to look at past patterns of behavior. This pattern of past behavior predicting future actions holds generally true for individuals and it holds generally true for groups and companies.

The not-so-little secret is that most companies do acquisitions badly based on what they say they will do and what actually happens. With rare exceptions – Cisco comes to mind – things turn out differently than folks say they will. Outside of pure intellectual property plays (where everyone is aware someone is jut buying developed technology or technology) many companies proclaim that they will retain key talent and keep the acquired locations viable. It’s a little unfair but in the area of culture integration and acquisition, it’s reasonable to assume the organizations are inept at keeping the culture that let talent perform until proven otherwise.

In the case of would-be acquirer Roche, they have announced specific plans to keep the site, keep the talent happy, and keep the current culture. Roche has indicated it will consolidate some of its operations in South San Francisco to go gain greater efficiencies.

Chiron – now subsumed into Novartis – was no current-day Genentech. While it had great science, which in part came from Chiron’s acquisition of Emeryville neighbor Cetus in 1991, its commercial success matched Genentech’s only in the early years of the companies.  In 1994 Chiron and then Ciba-Geigy formed a collaboration that involved assets swaps and the ownership of 49.9% by Ciba. Ciba-Geigy merged with Sandoz Laboratories in 1996 to form Novartis, which retained the 49.9% stake.  Novartis bought the balance of Chiron that they did not own in a pattern similar to the tact playing out with Genentech: an initial bid termed “too low” followed by a bid higher to seal the deal. When the deal was finalized things quickly started to change.

Today, while the Chiron name remains for certain marketing purpose such as the company’s diagnostic blood testing unit, much of what was Chiron is gone and has not been replaced. Chiron’s vaunted vaccines staff was given the opportunity to move to Cambridge, Massachusetts, which some did. A small group of employees remains at the former site.

The Chiron alums I spoke with regarding the acquisition mainly told the same story: “The Swiss (who knew there was such a national stereotype) didn’t understand how things are done on the West Coast.” “They didn’t expect anyone to leave – and where surprised when so many people left after the acquisition.” Retaining talent – even with generous compensation is problematic.

Talented, bright, creative people who have choices choose organizations where they have some reasonable autonomy to pursue their interests: organizations with heavy formal hierarchies are not exactly incubators for that sort of person.
Roche has had experience buying a business in California, as it did in 1994 with its purchase of Palo Alto-based Syntex. As part of the proposed Genentech acquisition, Roche has announced it will be closing any remaining Syntex operations in Palo Alto and moving them to South San Francisco.