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Genentech Inc. is a California-based biotech pioneer recently acquired by Swill pharmaceutical gian Roch Holding AG. Roch paid $46. 8 billion in cash for the 44 percent of Genentech it did not already own, implying a market value of $100 billion for the entire company. For a look at Genentechs 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 (X) 0.38 0.49 0.55 0.63 0.62

Financial leverage (X) 1.64 1.44 1.79 1.99 2.00

Growth rate in sales (%) 26.1 40.0 43.5 40.0 26.3

a) Calculate Genentechs annual sustainable growth rate for the years 2003-2007.

b) Did Genentech face a growth management challenge during this period? Please explain briefly.

c) How did Genentech cope with this challenge?

d) Calculate Genentechs sustainable growth rate in 2007 assuming an asset turnover of 0.72 times. Calculate the sustainable growth rate in 2007 assuming a financial leverage of 2.20 times. Calculate the sustainable growth rate in 2007 assuming both of these changes occur.