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Genzyme and sanofi-aventis are getting closer

The folks at Bloomberg and the Wall Street Journal have their “inside sources” (I was never good at espionage), so we’ll let them tell you what’s going on with the continuing saga of sanofi-aventis trying to acquire a (so far) reluctant Genzyme.


Genzyme Corp. agreed to give Sanofi-Aventis SA access to confidential information, bringing the companies a step closer to a deal five months after the French drugmaker offered to buy Genzyme for $18.5 billion.

The companies may reach a deal in the next two weeks, said three people with knowledge of the situation who spoke on the condition of anonymity because the talks are private. The confidentiality pact means that Sanofi and Genzyme are aligned on broad terms, with Sanofi likely to slightly raise its $69-a- share offer, the people said. The French drugmaker may also make additional payments based on the success of a Genzyme experimental multiple sclerosis drug, the people said. The companies have yet to agree on final terms.

Wall Street Journal blog:

It Might Actually Happen: Genzyme and Sanofi-Aventis have agreed in principle to a deal and plan to nail down the details in the next week, though there is still no guarantee of a final agreement, the WSJ reports, citing people familiar with the situation. Genzyme has previously rejected Sanofi’s $69-per-share offer as too low and instead wanted something more like $80 to sell, but recently “the two sides have made significant progress in bridging the value gap,” the paper says.


February 1, 2011 Posted by | Corporate, M&A activity | , , , , , | 1 Comment

Delays, delays…

Perhaps one of many reasons Genzyme seems more willing to talk with sanofi-aventis about possibly being acquired in a peaceful fashion instead of in a hostile takeover (or having no deal at all)? …

Genzyme lowers guidance following Fabrazyme production delay

Jan. 13, 2011

Genzyme has lowered 2011 financial projections after delaying the date that it expects Fabrazyme production to return to normal. The manufacture of Fabrazyme (agalsidase beta) had been moved to a plant in Framingham, Mass.,  but production levels have not yet returned to earlier levels. Genzyme had expected supply to meet demand in the first half of 2011 but has now pushed back that timeline.

January 13, 2011 Posted by | Corporate, M&A activity | , , | Leave a comment

For M&As right now, Glaxo seems a no-go

I know I reported on this in early September (right here), but apparently the news bears repeating—and elaboration—since the company in question is again being pretty blunt about its view of M&As right now:

GlaxoSmithKline doesn’t want to acquire Genzyme.

Either that, or GSK is engaging a stealthy distraction of such grace and magnitude that it would make a team of elite ninjas commit ritual suicide in jealous disgrace.

Glaxo, of course, has been noted as one of several companies contacted by Genzyme to determine its value as it fends off an $18.5 billion hostile takeover bid by sanofi-aventis. But speaking late last week to reporters in Cambridge, Mass., where Genzyme is based, Patrick Vallance, senior vice president of medicines discovery and development for GSK, along with other Glaxo executives, gave an overview of their drug discovery and development strategies, and they were pretty clear that large M&A deals aren’t really a focus right now.

Vallance described such big deals as often being destructive to R&D efforts, and instead Glaxo has been toying with some new business models in discovery and development to reduce its risk and maximize its successes, something I’ll touch upon in the coming days and weeks as I share information from GSK R&D Day last week in Cambridge, which I had the pleasure to attend along with other members of the mainstream, business and pharma media.

GSK is increasingly looking outward for new ideas and new compounds to fill its pipelines, but it doesn’t seem eager to want to just buy companies based on potential, and certainly not for huge sums, as Moncef Slaoui, the British pharma’s head of research and development, noted when he said in September that “An offer by GlaxoSmithKline for Genzyme does not make sense. It is too expensive.”

So, for those still holding out that GSK is simply waiting to pounce in from the shadows to duel with sanofi over Geznyme, you’d probably be better making a bet that Glaxo might make a partnership deal with the company one day. Because Vallance and Slaoui have both been pretty clear that GSK is willing to look for the best ideas outside the company, but it isn’t that fired up about spending a mint to bring them in-house unless they look like they’re already on the way to big payoffs.

November 21, 2010 Posted by | Corporate, M&A activity | , , , , | Leave a comment

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.)

November 9, 2010 Posted by | Corporate, M&A activity | , , , , , , | 1 Comment

Metaphors and M&As

I am a man who likes metaphors.

Perhaps too much.

I don’t get to cut loose much on that front in the magazine, but I’m feeling a little more casual here at the blog, so let me give you my metaphorical take on the two big merger-and-acquisition (M&A) situations going on right now: sanofi-aventis’ bid to woo (or take over) Genzyme Corp. and on the other end of the spectrum, Johnson & Johnson and Crucell both looking to get hooked up.

Many have said that the sanofi/Genzyme situation is a game of chicken. I don’t like that. In a game of chicken, someone’s going to get run off the road, and this seems more like each party trying to get as much as it can, not ruin the other person. So, that also takes my initial metaphor of two gunslingers facing off in a dusty street off the table, because no one’s out to destroy anyone. And I myself have used the staring contest metaphor, except that there’s not much action in that game.

No, I think perhaps it’s an arm wrestling match. Each side is exerting effort to shore up their case and enhance their position, and right now, neither side can pin the other’s arm down to the table. So, we just have to wait to see who does, or if someone calls a tie.

As for the J&J/Crucell situation, I liken that to a couple of lovers making eyes at each other and officially becoming engaged. Most of their friends and family (analysts and investors) like the idea of them getting together and think they’ll be quite happy, but a few close relatives are saying, “Maybe you shouldn’t walk down the aisle unless he buys you a bigger diamond ring or a house or something.”

September 21, 2010 Posted by | Corporate, M&A activity | , , , , | Leave a comment

Genzyme vs. sanofi-aventis: Who’s asking for too much?

We’ve run several stories on the developments around sanofi-aventis’ bid for Genzyme, from the intial overture and refusal to a potential suitor backing off to some interesting cuts and sales by Genzyme in the midst of all this.

All in all, it’s been quite a ride, and it gave the entire ddn staff flop sweats as we went to press with the September issue wondering just what might happen last-minute to nullify our coverage up to that point. Thank goodness for our online presence to keep up, eh?

In any case, with all that’s happened thus far, we thought we’d ask all of you what you think of the value of Genzyme in this potential merger or perhaps even hostile takeover.

September 13, 2010 Posted by | Corporate, M&A activity | , , , | Leave a comment

Genzyme sells business unit and announces cuts

Two big numbers are making the news right now for Genzyme as it works to either fend off a potential takeover by French pharma sanofi-aventis or drive up the offer price: $925 million and 1,000. The former is the price Genzyme will get for selling its Genzyme Genetics business unit to Burlington, N.C.-based Laboratory Corporation of America Holdings, better knowns as LabCorp. The latter is roughly the number of jobs—some 10 percent of its workforce worldwide—that Genzyme plans to cut by 2012.

Reports of the $925 million dollar deal made the news with the Sept. 13  announcement by LabCorp that subject to customary closing conditions, it will buy Genzyme Genetics and, net of expected income tax benefits—less acquisition-related expenses—the acquisition will pose a net cash cost to LabCorp of approximately $795 million.

“Genzyme Genetics is among the premier genetics and oncology laboratories in the United States. It has an excellent clinical reputation, a track record of growth and innovation and outstanding people,” says David P. King, chairman and CEO of LabCorp. “This acquisition will substantially expand our capabilities in reproductive, genetic, hematology-oncology and clinical trials central laboratory testing. The acquisition of Genzyme Genetics provides us with an unprecedented opportunity for revenue growth in our key strategic focus areas of esoteric testing and personalized medicine.”

Genzyme Genetics performs more than 1.5 million high-quality, high-clinical-value tests annually, with reported revenue in 2009 of approximately $371 million. LabCorp has reported that it is committed to keeping the unit’s 1,900 employees, and it will gain all of Genzyme Genetics’ services, technology and intellectual property rights, as well as its nine testing laboratories.

Although the sale of the business unit coincides closely with the acquisition overtures by sanofi-aventis and the cold shoulder to sanofi from Genzyme, the divestment of Genzyme Genetics doesn’t appear to be an out-of-the-blue response. Back in May, the company announced a series of strategic moves, including buying back $2 billion dollars worth of its stock, largely with proceeds to be gained by ridding itself of three businesses that are not part of its core operation.

Genzyme’s genetic testing, diagnostics and pharmaceutical intermediates businesses were all put on the potential bidding floor in May, with Genzyme CEO Henri Termeer saying at the time, “As we evaluated our company to create a mix of businesses that will deliver sustainable growth and stronger returns on invested capital, it became clear that these businesses do not fit within this strategy.”

With the sale of the genetic testing unit presumably behind it, Genzyme has indicated that it is still on track in its plans to sell the diagnostic products and pharmaceutical intermediates units.

The other news, about the job cuts, seems to have reached the Genzyme workforce first late on Friday, Sept. 10. That announcement came via a memo to employees from Termeer, though the Boston Herald and the Boston Globe were quick to get wind of—and get copies of—the memo and report on the news.

In announcing a roughly 10 percent cut of the more than 12,000-strong Genzyme workforce, Termeer told employees, “The recent takeover proposal reinforces how important it is to take control and maximize the value we bring to patients and shareholders.”

A Genzyme spokesperson confirmed that the company is cutting jobs, saying that further details would be revealed this week and adding that the cuts would have happened even in the absence of interest from sanofi-aventis in a merger or takeover.

Speaking about the sale of the Genzyme Genetics unit, Geoffrey Porges, an analyst with Sanford Bernstein & Co., told Bloomberg that sanofi may now feel pressures by the sale of the unit to increase the amount of its offer to acquire Genzyme. “Genzyme is making it clear they’re not sitting around waiting for Sanofi to raise their bid,” he said.

“Our offer to acquire Genzyme for $69 a share in cash remains unchanged,” Jean-Marc Podvin, a Paris-based spokesman for sanofi told Bloomberg, and sanofi-aventis’ CEO, Chris Viehbacher, made it clear in an Aug. 30 conference call that the Genzyme Genetics unit wasn’t a major focus in the acquisition bid.

Still, Michael Yee, an analyst with RBC Capital Markets, noted in a report Sept. 13 that sanofi’s bid for Genzyme may rise “into the low $70s,” adding that sales of the diagnostics and pharmaceuticals units could generate a combined $1.3 billion.

September 13, 2010 Posted by | Corporate, M&A activity, Sales, Shutdowns & Spinoffs | , , | Leave a comment

One less suitor for Genzyme?

Well, it looks like GlaxoSmithKline may be removing itself from any potential bidding war over Genzyme Corp. based on Moncef Slaoui, the British pharma’s head of research and development, telling French newspaper Les Echos recently, “An offer by GlaxoSmithKline for Genzyme does not make sense. It is too expensive.”

The reason analysts have even been predicting a bidding war was because sanofi-aventis made public a non-binding offer Aug. 30 to buy Genzyme Corp. for about $18.5 billion in cash, with Genzyme refusing the offer less than a day later and sanofi-aventis hinting at possible hostile takeover action.

“If the best idea is to be found outside the company, it is better to conclude a partnership agreement.” Slaoui added in the interview with Les Echos. His statement is in line with GSK’s stated goal of looking to balance its R&D portfolio more or less evenly with drugs developed through in-house research along with outside partnerships. Also, while Genzyme has a foothold in niche disease areas, GSK, already has a presence in rare diseases through its partnership with JCR Pharmaceuticals.

According to coverage by Reuters, analysts are now saying it looks far less likely that any “white knight” would emerge to trigger a bidding war to either force sanofi to significantly its offer or give Genzyme a more desirable suitor.

Genzyme is considered attractive to sanofi partly because its pipeline includes promising drugs for treating high cholesterol but also because of treatments for other disorders that are in late development. Also, Genzyme already sells some lucrative drugs for rare genetic disorders, and sanofi, like so many pharmas, has been buying smaller companies or paying for rights to experimental drugs as generic competition to blockbuster drugs continues to heat up.

Dr. Brian Abrahams, an analyst with Oppenheimer Funds, has said that he thinks a better deal than the $18.5 billion one will be negotiated between sanofi and Genzyme, despite the former implying it is considering a hostile bid. Abrahams says the price could range between $72 and $74 per share, given historical biotech acquisition premiums and Genzyme’s products. At the moment, sanofi’s offer stands at $69 per share.

Genzyme has said that in unanimously rejecting the sanofi offer, its board of directors felt that they were “not prepared to engage in merger negotiations with [sanofi-aventis] based upon an opportunistic proposal with an unrealistic starting price that dramatically undervalues our company.”

For its part, sanofi has publicly expressed doubts over Genzyme’s performance under its chief executive, Henri Termeer, noting in particular manufacturing problems that have created challenges for the company bringing products to market.

As MarketWatch noted Sept. 5, “Genzyme’s stock plunged in early 2009 after the U.S. Food and Drug Administration found problems relating to microbiological monitoring at a manufacturing facility. The FDA’s scrutiny led to the company effectively losing control over one of its largest production facilities, in Allston, Mass., and contributed to the company cutting 2009 earnings expectations. The unwanted regulatory scrutiny has prompted the attention of some key shareholder activists who will be watching Sanofi’s moves carefully. Earlier this year billionaire activist investor Carl Icahn said he planned to nominate four directors to the Genzyme board, including himself. Genzyme also agreed to name Ralph Whitworth, head of Relational Investors to the board.”

The notion that GSK might have been interested in entering a bidding tug-of-war with sanofi-aventis wasn’t at all far-fetched, though—even if it does seem unlikely now. After all, as the Wall Street Journal reported in July, GSK made a “very casual approach” to Genzyme asking to be notified by the company’s officials if they considered selling to anyone.

September 7, 2010 Posted by | Corporate, Dealmakers, M&A activity | , , | Leave a comment

The French connection

Aug. 30 finally saw the end of widespread speculation that French pharmaceutical giant sanofi-aventis was in the early stages of a large U.S. acquisition for somewhere in the neighborhood of $20 billion when it made a non-binding offer to buy Genzyme Corp. for about $18.5 billion in cash.

The scuttlebut since early July had been that Genzyme was the target, with more recently stories in mid-August reporting that Genzyme said “No.”

Apparently, the rumors were true, as sanofi finally offered $69 a share in a letter to Genzyme CEO Henri A. Termeer and decided to go public with its bid after “several unsuccessful attempts to engage Genzyme’s management in discussions.” The French pharma added that it is prepared to “consider all alternatives” to complete an acquisition.

However, hardly a day passed before Genzyme announced that its board unanimously rejected the offer, stating that the biotech is “not prepared to engage in merger negotiations with [sanofi-aventis] based upon an opportunistic proposal with an unrealistic starting price that dramatically undervalues our company.”

In early July, unnamed sources close to the matter said sanofi had offered a price just under $20 billion for Genzyme. They also said that Chris Viehbacher, CEO of sanofi, briefed his company’s board of directors the week of June 28 that there were plans for a major acquisition in the United States.

But July 26 brought news from Bloomberg, and from two sources close to the matter—presumably the same people quoted in earlier Bloomberg stories—that Genzyme officially turned sanofi-aventis down. Analysts were saying at that point that Genzyme could command at least $22 billion, or $80 a share, because of the potential for a revenue surge once Genzyme resolves manufacturing defects that have been keeping sales down for its existing products and slowing its introduction of new medicines into the market.

Genzyme’s revenue, which was $4.5 billion last year, could rise by 47 percent to around $6.6 billion by 2013, says Geoff Porges, an analyst with Sanford C. Bernstein & Co.

Analysts were also noting that if additional companies were to enter into negotiations with Genzyme for a deal, an $80-per-share price could be reached and perhaps exceeded quite quickly.

“If sanofi goes hostile, I don’t believe a price under $75 [per share] will get it done,” said Mark Schoenebaum, an analyst with ISI Group in news reports August 30. “The majority of shareholders probably will hold out until sanofi offers something closer to $80 than $70.”

An acquisition of Genzyme would help sanofi expand in the biotech arena, market watchers have noted since the rumors first started flying, but the Genzyme story wasn’t the only speculation around, and one could argue that other U.S. targets for acquisition exist if Genzyme proves too pricey. In fact, as people were speculating over the past month or two what company was sanofi’s target, business analysis and opinion firm Datamonitor offered some other thoughts as to others that might have been the target—or who perhaps might become a target if Genzyme proves to be a non-starter.

Giles Somers, a senior healthcare analyst at Datamonitor, had said in July that “based on current market capitalizations and strategic fits,” Biogen Idec, Allergan or Genzyme were all likely candidates for a sanofi acquisition. “Currently capitalized at $13.3 billion, allowing for a premium, an acquisition of Genzyme would likely end up somewhere in the region of $20 billion. Similarly, Biogen Idec has a market capitalization of $12.5 billion, while at $17.9 billion, Allergan would potentially require somewhat more than $20 billion,” he also pointed out.

sanofi-aventis has completed numerous acquisitions as part of a diversification strategy implemented since Viehbacher took the reins of sanofi in September 2008, Somers noted, adding, “To date, the majority of these acquisitions have taken place in the generics, consumer healthcare and vaccine sectors as the company looks to expand its presence in areas that both benefit from high-growth potential but are also insulated from the competitive threat of patent expiration and generic competition.

“If suggestions of an imminent $20 billion acquisition are true, however, this would signal a notable statement of intent by the company as it looks to reshape the focus of its core prescription pharmaceuticals business, building on the major overhaul of the company’s internal R&D pipeline last year,” Somers added.

Looking at the potential fits with sanofi, Datamonitor notes these facts about the three companies:

First, Allergan represents a fit with sanofi’s recent activity in the ophthalmology space, following the acquisition of Fovea and gene therapy deal with Oxford Biomedica. However, Datamonitor believes that the motivation behind these deals was the high unmet needs addressed by these companies’ treatments rather than a desire to build a wider presence in ophthalmology, per se.

Second, Biogen Idec would bring sanofi-aventis Avonex and Tysabri, leading treatments for multiple sclerosis. Sanofi co-promotes competing product Copaxone in the European Union until 2012 when Teva will regain full rights. (U.S. rights were returned to Teva in 2008.). Biogen Idec would also provide biologic capabilities, particularly in monoclonal antibodies.

Third, Genzyme’s business is focused on specialized, niche disorders. The company’s share price has been knocked over the past year by manufacturing issues and as such providing an opportunity to acquire the company at a less demanding price. Datamonitor forecasts strong revenue growth for Genzyme at 11.1 percent CAGR from 2009 to 2015, compared to 3.5 percent for Allergan and a slight decline for Biogen Idec over that period. Genzyme, like Biogen Idec, offers a platform for further expansion into the biologics sector. Therefore, combining a good strategic fit with strong growth prospects and a depressed stock price, Genzyme can in some ways be seen as the most attractive target for sanofi of the three companies discussed, price allowing.

Amy Reilly, a spokeswoman for Cambridge, Mass.-based Biogen, and Caroline Van Hove, a spokeswoman for Irvine, Calif.-based Allergan have both said—like the Genzyme spokeperson has—that they don’t comment on market rumors.

Viehbacher has indicated in the past the he is counting on acquisitions to help replace revenue that sanofi is losing as its medicines face competition from lower-priced generic drugs, and the company already has spent about $17 billion on 25 acquisitions since 2008, according to data compiled by Bloomberg.

August 30, 2010 Posted by | Corporate, M&A activity | , , , | Leave a comment