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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.

Bloomberg:

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.

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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

And in this corner…Brilique!

It looks like the world’s second-best-selling medication, Plavix, may possibly have some head-to-head competition in the form of Brilique (also known as Brilinta, and known generically as ticagrelor). In the U.S., the FDA extended the time to complete its review of the New Drug Application ticagrelor from Sept. 16 to Dec. 16, but in Europe, the European Commission has granted marketing authorization to the drug for the prevention of atherothrombotic events in adult patients with acute coronary syndromes.

AstraZeneca, the drug’s maker, expects to begin selling the pill in the second half of 2011, once price negotiations are completed with member countries of the European Union, and the company plans to market Brilique based on the results of a study that showed it cut the risk of heart attacks, strokes and death linked to heart disease more than Plavix.

Plavix, which is also known by its generic name clopidogrel, is sold by sanofi-aventis and Bristol-Myers Squibb Co. and posted $9.8 billion in revenue last year, second in sales only to Pfizer Inc.’s Lipitor for lowering cholesterol.

The AstraZeneca study indicates that Brilique, known by the generic name ticagrelor, works regardless of the patients’ genetic makeup, compared with Plavix, which isn’t as effective in patients with a certain genetic variation. Reportedly, AstraZeneca’s drug showed a higher risk of spontaneous major bleeding in the study.

Brilique got a thumbs-up from an FDA advisory panel in the United States, so it is expected that the FDA make a similar marketing decision for the drug as did its European counterpart, in just a couple days. The drug will be known as Brilinta in the United States.

Plavix, which is also known by its generic name clopidogrel, is sold by Sanofi-Aventis SA and Bristol-Myers Squibb Co. and had $9.8 billion in revenue last year, second in sales only to Pfizer Inc.’s Lipitor cholesterol-lowering pill.

December 14, 2010 Posted by | Corporate | , , , , | Leave a comment

Leaders, layoffs and losses

It’s been an interesting month in the pharmaceutical industry, with a few of the top pharma’s leaders leaving, more pink slips piling up and stocks morphing in the face of all of the change.

On Nov. 30, Merck & Co. Inc. announced its appointment of President Kenneth Frazier, who as Merck’s former chief counsel was instrumental in helping the pharma overcome its Vioxx litigation, as its new CEO. Frazier will succeed current CEO Richard Clark, who will reach Merck’s mandatory retirement age next year. Clark will continue as chairman of the board. Although analysts are optimistic that Frazier will see Merck through its next big challenge—the expiration of the Singulair patent, which accounts for 11 percent of the company’s sales—and continue Clark’s work on investing in the next generation of blockbusters, the announcement prompted a 4 percent drop in Merck’s shares to $34.64.

Recently retired Pfizer CEO Jeffrey Kindler speaks at the Reuters Health Summit in New York

Days later came the news that Pfizer Inc. Chairman and CEO Jeffrey Kindler abruptly announced his resignation after four years of leadership at the company. Although Kindler said he needed to “recharge my batteries,” analysts have speculated that he was forced out by a board and investors who are unhappy with Pfizer’s languishing stock price, late-stage clinical failures and a strategy emphasizing repeated acquisitions to boost revenue and cut costs as a way to improve the bottom line. The appointment of Ian Reid, Pfizer’s head of global pharmaceuticals, as Kindler’s replacement has also raised analyst concerns about Pfizer’s long-term performance and leadership. With Pfizer’s shares down 9.6 percent over the last year of Kindler’s tenure, shares rebounded on the resignation news, gaining 20 cents to $16.92.

With the holidays upon us, and many analysts taking a look at the highlights of 2010, layoffs are also making headlines. Fierce Pharma recently unveiled its annual top 10 layoffs list, highlighting the 10 largest job cut announcements by company. Counting the year’s total pink slips at more than 50,000 jobs, the list begins with AstraZeneca, which let 8,550 employees go this year, and counts job losses in the thousands at Pfizer, GlaxoSmithKline, Roche, Bayer, Abbott Labs, sanofi-aventis, Takeda, Novartis and Bristol Myers-Squibb. Given how often these companies made the front page of ddn this year with their merger and acquisition activity, these cuts are no surprise, as all of these transactions inevitably mean consolidation of resources.

With new leadership, more modest operations and the pressure of patent expirations, all of this should make for a very interesting 2011 in Big Pharma. As the Yieldpig blog notes, “with the dicey situation in Europe, stubborn domestic unemployment, a housing market that’s bottoming at best, and the great unknown of interest rates, equity portfolios should probably continue to play defense. Big, cheap, pharmas with sick dividend yields should help.”

December 10, 2010 Posted by | Corporate | , , , , , , , , , , , , , , | 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

Pink slips pile up in Big Pharma

We here at ddn are in the business of covering the business side of Big Pharma. But behind every headline touting million- or billion-dollar price tags for mergers, acquisitions and partnership deals, there are the untold stories of collateral damage.

Those stories are coming to the forefront lately as headlines are taking note of the number of pink slips piling up in the pharmaceutical and biotech industries.

According to the U.S. Bureau of Labor Statistics, unemployment in the United States was 9.6 percent in September. The unemployment rate has hovered around that figure for most of this year, but it’s about to gain a few percentage points, thanks to recently announced layoffs in Big Pharma.

According to PharmaManufacturing.com, the unemployment rate in pharmaceuticals and life sciences is estimated at 16 percent. Market research firm Reportlinker attributes pharma job losses to several factors. Besides the obvious ones—the economic downturn, the rising number of uninsured Americans and the impending 2011 patent cliff—the firm notes that action taken by the U.S. government as part of healthcare reform legislation will also impact Big Pharma.

“U.S. healthcare reform is set to improve coverage but this will be at the expense of containing healthcare costs,” Reportlinker says. “Although the pharma industry will benefit from the rise in insured individuals, measures such as the increased Medicaid drug rebate and Medicare donut hole discount will have an immediate negative impact on revenues out to 2014.”

Ed Silver, editor of Pharmalot, points out that these numbers may not tell the whole story, since not all job cuts are disclosed: “Some companies cut staff in dribs and drabs, and therefore are not required to file notices with their state governments. The implication is that job losses are greater than the survey implies.”

It can be argued that many of the layoffs are part of the life cycle of merger and acquisition activity. Consider the following:

  • Last year, Abbott Labs purchased Solvay’s drug business for $6.2 billion. Abbott is now cutting about 3,000 jobs in commercial, R&D, manufacturing and staff operations. The company will also close Solvay’s U.S. headquarters in Marietta, Ga.
  • Bristol-Myers Squibb Co., which recently acquired ZymoGenetics Inc. for about $885 million, plans to eliminate 3 percent of its headcount—or about 840 jobs—in the next few months.
  • After signing an agreement reportedly worth $1 million with the J. David Gladstone Institutes aimed at identifying treatments for multiple sclerosis, Alzheimer’s and other neurological diseases, Danish drugmaker H. Lundbeck A/S said it will cut 50 people from its R&D operations in the United States and Europe.
  • Just one month after agreeing to buy Penwest Pharmaceuticals for $144 million, Endo Pharmaceuticals is said to be in the process of laying off an unspecified number of sales managers and sales reps.
  • And most recently, sanofi-aventis—which in recent months has dominated our headlines with its many multimillion- and billion-dollar deals and plans to bring more companies into its fold—announced it will eliminate about 1,700 job in the United States, or about 25 percent of the company’s U.S. pharmaceutical operations division.

In announcing its recent agreement to acquire King Pharmaceuticals Inc., Pfizer Inc. focused on the “cost synergies” it expects to see from the $3.6 billion deal. According to Pfizer, it will take only three years for the dust to settle on the consolidation involved in the bolt-on acquisition. By then, it will have cleared a substantial patent expiration hurdle.

We’ll bring you the details of that acquisition in our November issue, but until then, what is your opinion of the mounting job losses we are seeing in Big Pharma?

October 15, 2010 Posted by | M&A activity | , , , , , | 1 Comment

Storming Genzyme’s walls

I can’t help but hear in my head right now the parting words of Miracle Max and his wife to the heroes of the movie The Princess Bride, when they shout out, “Have fun storming the castle, boys!”

I don’t know that sanofi-aventis is having any fun yet as it looks to acquire Genzyme, but at least it seems unlikely that any reinforcements will be arriving for the target company as it digs its trenches and sanofi, in turn, begins the first stages of its assault.

Yes, the deal has finally gone into hostile takeover mode.

Ever since sanofi made it clear this summer that it wants to acquire Genzyme for $69 per share, many analysts have been equally clear in their opinion that no white knight is likely to show up and complicate the issue for sanofi. Some have dropped names like GlaxoSmithKline, Johnson & Johnson and Pfizer, but none have yet surfaced, and at least one executive at GlaxoSmithKline has said openly that the cost of Genzyme would be too high for his company.

So, with no other champion to vie for the hand of Genzyme, sanofi decided on Oct. 7 to go ahead with an assault on the castle, launching the hostile takeover effort and telling shareholders this is a good deal, since it represents a 38 percent premium over where Genzyme’s share price was sitting before acquisition speculations surfaced in July.

Points for persistence go to both sides. Genzyme insists it is being undervalued, and sanofi is still sticking to its offer of $69 per share. However, it is unclear how realistic that price tag is or how attractive it will be to shareholders, given that Genzyme has traded above that mark consistently since the acquisition news first hit the streets.

So, one prediction still seems to be holding out: That no one seems motivated to challenge sanofi and start a bidding war. What remains to be seen is whether sanofi will continue to hold fast on $69 per share as it picks at Genzyme’s defenses, or whether it will end up conceding to the opinion of many analysts and market watchers that a figure closer to $80 than to $70 will be needed to move either the leaders of Genzyme…or its stockholders.

Of course, there’s always the possibility that sanofi will simply move on to another castle, as Datamonitor  suggested in the article we ran in late August on this acquisition tale.

(By the way, with these latest developments, it might be a good time to cast a vote in our poll here if you haven’t already done so)

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

CROh-my-goodness!

Well, it looks like Christmas came early for Covance, landing a $2.2 billion deal with sanofi-aventis (more on that here). I don’t think I’m anywhere near alone when I say, “Didn’t see that one coming!”

Whether this is a sign of much larger things to come in terms of the contract research space and continued pharma and biotech outsourcing, only time will tell. But I’m guessing we’ll see more deals and even bigger dollar amounts before long.

By the way, maybe it’s me just showing my age (42, for the record), but I still have trouble wrapping my mind around multibillion-dollar collaborations. Buying a whole company for billions…well, I’ve gotten used to that, and understand it totally. But the world is moving fast, because I don’t recall too many deals (aside from acquisitions) going into the billions-and-billions of dollars territory until pretty recently.

Anyway, more details on, and insights into, the Covance/sanofi-aventis deal from us in the weeks to come.

September 30, 2010 Posted by | Corporate, Dealmakers | , , , , , | Leave a 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