Genzyme and sanofi continue on…and on…and

There is a good reason why professional arm wrestling isn’t a major television draw. For all the complaints of how boring baseball or golf is to watch, things do change and tides turn in dramatic fashion amid the slow portions. But watching two people with interlocked hands staring each other down while muscles bulge…until finally one opponent just loses the will or strength to continue?

No, not interesting to most people.

In many respects, the sanofi-aventis attempt to acquire Genzyme (whether by willing merger or takeover) is beginning to feel like arm wrestling. It’s only interesting if you’re one of the competitors. Or you have a bet placed.

So, in recent days, sanofi has once again invited Genzyme to come to the table and talk (see this story coming out of Boston, for example, or this one from the Wall Street Journal). Genzyme, in turn, has said “There’s not enough money on the table yet to convince us show up!” (I paraphrase wildly, of course). We’ve been held at a $69 per share offer so long, and the back-and-forth repetition from both sides as to why they won’t budge that…Zzzzzzz

Wha….! Huh?!!!!

Seriously, though, as repetitious as this is seeming, there are little gems of information and insight to be gleaned.

For one thing, despite inviting Genzyme to come back to the table after threatening to take them over, sanofi is still showing its assertive streak by warning the Cambridge, Mass.-based company not to turn to its state’s takeover protections and swallow the proverbial “poison pill” to fend off a hostile acquisition (see this Bloomberg story).

At one website where the latest overtures and refusals had been aired as news, a comment was posted that said, essentially: “Maybe it’s time for sanofi to walk away long enough for Genzyme’s shares to drop back into the 40s and then let Genzyme’s top brass explain the real value of their shares to the stockholders.”

I don’t know that I agree Genzyme isn’t worth more than $69 per share. Maybe it is, maybe it isn’t. But it is certain that the stock rose on the news of a sanofi merger (or takeover). The continued presence of sanofi as an eager suitor (or conqueror) doesn’t seem likely to drive down stock prices. One can only wonder whether with no rival suitors sanofi might be better off stepping away for a time. But then again, with the pressures Big Pharma is facing right now with patents expiring and pipelines being sluggish, perhaps sanofi can’t afford to do that.

It’s also worth putting the current situation into perspective relative to sanofi’s third-quarter earning report in late October. Commenting on those earnings, which were up 13 percent, analyst Simon King of Datamonitor wrote:

“Sanofi-Aventis’s increasing diversified business model is reaping rewards as growth across consumer, generic and vaccine divisions has helped to compensate for generic competition within the branded pharmaceutical segment. However, generic erosion continues to impact performance, driven in part by the somewhat unexpected approval of a generic Lovenox product. With Plavix sales also in decline due to loss of European patent exclusivity, Sanofi-Aventis’s anti-thrombotic empire is in collapse.

“These results occur against a backdrop of continued negotiation regarding Sanofi’s proposed acquisition of Genzyme. Sanofi has used its results announcement to launch its latest salvo towards Genzyme shareholders by suggesting that nothing has been said that will change its current offer. Genzyme though is now being very bullish in terms of sales forecasts – which will be heavily dependent on reversing the loss of sales to Shire in specialist markets and the success of Campath in multiple sclerosis.”

King notes that Genzyme’s stance could backfire, particularly if sanofi does decide to walk away and no other bidders emerge. However, he remains convinced that the Genzyme acquisition “fits the sanofi model.”

For now, it’s still an arm wrestling match. We’ll keep our eyes on it, and let you know who wins in the end…or if we get a draw.

(By the way, sanofi’s public announcement about the latest back and forth is here and Genzyme’s official take is here.)