Sanofi-Aventis agreed to buy Genzyme, ending a nine-month pursuit of the US biotechnology company with a sweetened offer of at least $20.1 billion that gives France’s biggest drugmaker treatments for rare diseases.
Genzyme’s stockholders will get $74 a share in cash, Paris-based Sanofi said today in a statement. They also will receive so-called contingent value rights that entitle them to payments of as much as $14 a share depending on the performance of Genzyme’s experimental multiple-sclerosis drug Lemtrada and production levels of two other products, the company said.
Acquiring Genzyme, the world’s largest maker of medicines for rare genetic disorders, will help Chief Executive Officer Chris Viehbacher offset revenue losses as some of Sanofi’s biggest-selling products face competition from generic versions. Sanofi gains treatments for Fabry, Gaucher and Pompe diseases.
“This deal buys him time,” Jerome Forneris, who helps manage $12 billion, including Sanofi shares, at Banque Martin Maurel in Marseille, said in a telephone interview. “The problem is the same for all drugmakers. They lose revenue as their top sellers go generic.”
The offer represents a 48 per cent premium over Genzyme’s price of $49.86 before Bloomberg News reported July 2 that the company may be a target of Sanofi. The French company announced a $69-a-share, $18.5 billion cash bid on August 29, and made a hostile tender offer to shareholders at the same price on October 4.
Genzyme’s history
The purchase values Genzyme at 4.7 times sales, compared with a median multiple of 4.3 for US drug and biotechnology companies in the past five years, according to data compiled by Bloomberg.
The agreement will end Genzyme’s 30-year history as an independent drug developer. Manufacturing glitches in 2009 led to shortages of the Cerezyme and Fabrazyme drugs and drove shares down, leaving the Cambridge, Massachusetts-based company vulnerable to a takeover. The sale also may mark the end of the career of Genzyme Chief Executive Officer Henri Termeer, a biotechnology pioneer who transformed the company from a start- up into a drugmaker with $4.5 billion in annual sales.
Since joining Sanofi in December 2008, Viehbacher has been hunting outside the company’s laboratories for products that will help replenish its pipeline of new drugs. Sanofi’s top-selling medicines, including the blood thinner Plavix and the cancer drug Taxotere, are facing competition from generics.
Sanofi rose ¤1.60, or 3.2 per cent, to ¤51.40 at 3.43 pm in Paris. Genzyme gained $1.14, or 1.5 per cent, to $75.44 at 9.43 am in Nasdaq Stock Market composite trading.
The difference between Genzyme’s share price and Sanofi’s offer reflects the worth investors are putting on the contingent value right, said Lionel Melka, co-manager of Paris-based Bernheim, Dreyfus & Co’s Diva Synergy Fund, which focuses on acquisition targets.
The transaction will be completed early in the second quarter, Sanofi said today. The deal will add to Sanofi’s earnings in the first year after closing, and will add 75 cents to ¤1 to earnings per share by 2013, the company said.
Genzyme holders will receive one contingent value right per share. Sanofi will pay $1 per CVR if Genzyme produces specified levels of Cerezyme and Fabrazyme this year and another $1 if the US Food and Drug Administration approves Lemtrada to treat multiple sclerosis. CVR owners will receive $2 if Lemtrada sales exceed $400 million within specified periods per territory, $3 if sales exceed $1.8 billion, $4 if they surpass $2.3 billion and $3 if they top $2.8 billion.
