UPDATE 2-Roche stands by dividend as Genentech talk swirls

"We are not surprised to hear that Roche eventually needs to sweeten its deal. We continue to believe that the current financial market crisis is of transient nature and that banks will need to return to their primary function, i.e. alimenting the economy with credit," said Vontobel analyst Andrew Weiss.

"Improved deal terms would mean Roche is still adamantly interested in buying Genentech and that it has most likely spoken to its banker with regard to the potential of raising cash in the debt market," Weiss said.

If it goes ahead, Roche's buyout of Genentech will be the biggest biotechnology deal ever. An improved $95 offer would value the rump of the U.S. biotechnology business not already in Roche's hands at around $47 billion.

Initially, shares in Genentech rose to a high of $99.05 after Roche made its first bid last July. But the credit crisis has since raised severe doubts about Roche's ability to secure the necessary $30 billion to $35 billion debt financing to conclude the deal.

As a result, Genentech shares have fallen back below the $89 level and after gaining following the FT report, they were near flat at $86.28 in late trade on Monday. Roche stock was down 2.8 percent at 167.10 Swiss francs.

MORE THAN $100 A SHARE?

Even so, many analysts think Roche will have to stump up more than $95 a share to win a recommendation from Genentech's board.

"We anticipate Roche will ultimately be forced to offer in excess of $100 a share to secure Genentech board approval," analysts at Morgan Stanley said in a research note.