UPDATE 9-Roche goes hostile, cuts Genentech bid to $42 bln

* Roche cuts Genentech bid to $42 bln

* Launches hostile offer at $86.50/shr, down from $89

* To use own funds, commercial paper, bonds, bank loan

* Genentech urges shareholders to take no action

* Roche stock up 1.9 pct, Genentech down 3.4 pct (Adds Genentech response, background, updates shares)

By Sam Cage

ZURICH, Jan 30 (Reuters) - Swiss drugmaker Roche Holding Ag (ROG.VX) launched a surprise hostile bid for U.S. biotechnology giant Genentech Inc DNA.N at a price below its original rejected offer, reflecting tougher financing conditions and a drop in Genentech shares.

Roche is now making a public tender offer at $86.50 per share in cash for the 44 percent of Genentech it does not already own, valuing the deal at $42 billion and replacing its initial $44 billion bid. [ID:nL3259814]

The move comes just days after the world's biggest drugmaker, Pfizer Inc (PFE.N), agreed to buy smaller rival Wyeth WYE.N for $68 billion, backed by a $22.5 billion loan, indicating debt markets for cash-rich pharmaceutical makers are far from dead. [ID:nN26367941]