1) Genentech Inc. is California-based biotech pioneer just acquired by Swiss pharmaceutical giant Roche Holding AG. Roche paid= $46.8 billion in cash for 44% of Genentech it didn’t already own, implying market value of over= $100 billion for whole company. For look at Genentech’s recent sustainable growth challenges, consider the following selected financial data.
2003 2004 2005 2006 2007
Profit margin (%) 17.0 17.0 19.3 22.8 23.6
Retention Ratio (%) 100.0 100.0 100.0 100.0 100.0
Asset turnover (%) .38 .49 .55 .63 .62
Financial leverage (%) 1.64 1.44 1.79 1.99 2.00
Growth rate in sales (%) 26.1 40.0 43.5 40.0 26.3
i) Calculate Genentech’s annual sustainable growth rate for years 2003–2007.
ii) Did Genentech face a growth management challenge during this period? Please explain briefly.
iii) How did Genentech cope with this challenge?
iv) Compute Genentech’s sustainable growth rate in 2007 supposing the asset turnover of= 0.72 times. Compute sustainable growth rate in 2007 supposing a financial leverage of= 2.20 times. Compute sustainable growth rate in 2007 supposing both of these changes occur.