The biotechnology company, Genentech, as expected, turned down a buyout offer yesterday from its majority owner Roche, saying the bid of $89 a share was far too low.
But in a statement, a special committee of Genentech's board said it would consider a higher offer, which some analysts took as suggesting a deal would eventually be done.
The committee also approved a "broad-based" employee retention program, an indication that Genentech executives, and Roche executives as well, were worried that employees would leave amid the uncertainty of whether Genentech might lose its status as an independent company.
Roche, a Swiss pharmaceutical giant that owns 55.9 percent of Genentech, made a surprise offer last month to buy the rest of the company for $89 a share, or $43.7 billion, an 8.8 percent premium to the share price before the bid.
Genentech's stock price immediately rose above that level in anticipation that Roche would eventually have to pay at least $100 a share.
Mark Schoenebaum, biotechnology analyst at Deutsche Bank, said Genentech's response contained "no major surprises," and that the statement "appears friendly to us." Therefore, he said, "consummation of a deal continues to seem likely to us."
Roche first bought a majority stake in Genentech, the pioneering biotechnology company, in 1990, and the partnership has been considered a model one since then.
Roche's three biggest-selling drugs - the cancer medicines Rituxan, Herceptin and Avastin - were developed by Genentech. But with a minority of Genentech stock still trading publicly, Genentech was able to retain an entrepreneurial culture, with stock options, and a record for innovation that is widely considered unmatched in the biotechnology and pharmaceutical industries.
Roche's bid threatens to erode that culture and record for innovation. Roche had been planning to offer incentives to retain Genentech employees. The fact that Genentech itself is doing this suggests some concern that people might jump ship even before the outcome is determined.
There are numerous other biotechnology companies in and around South San Francisco, Calif., where Genentech is based, as well as many venture capitalists looking to finance companies. Many biotech companies in the Bay Area, in fact, are started or run by former Genentech employees.
Roche's offer has been considered by a special committee of Genentech's board made up of the three directors who are not Roche or Genentech employees. The committee includes Herbert W. Boyer, an emeritus professor at the University of California, San Francisco, who co-founded Genentech in 1976 after having co-invented a key technique of genetic engineering.
The committee said Roche's proposal "substantially undervalues the company."
Charles A. Sanders, chairman of the special committee, said in a statement that the committee was "confident in the company's strong financial and clinical momentum and its uniquely productive R&D capabilities, which will continue to enhance shareholder value."
Some analysts have said that Roche's proposal had so poisoned the relationship with Genentech's management that the companies could not go back to working together should a deal not take place.