By Jessica Hall and Toni Clarke
NEW YORK/BOSTON, July 23 (Reuters) - Sanofi-Aventis SA is sounding out biotech company Genzyme Corp as the French drugmaker hunts for a large acquisition, sources familiar with the matter said on Friday.
Genzyme, whose shares rose more than 15 percent, is beginning to emerge from a manufacturing crisis that caused shortages of two of its biggest-selling drugs.
The crisis also prompted changes to the company's board, and led to a consent decree that placed its manufacturing operations under third-party control.
The talks are at an early stage and no deal is imminent, the sources said. Issues such as price and management structure have not been discussed. A Genzyme spokesman said the company does not comment on rumor or speculation.
Genzyme's current market capitalization is close to $14 billion, but the company would be expected to argue for a significant premium to that based on its pipeline of experimental products, which include treatments for multiple sclerosis and high cholesterol.
'If you started to use the $20 billion number that has been discussed in the past, it puts Genzyme closer to $75 (a share),' said RBC Capital Markets analyst Michael Yee. The shares closed at $62.52 on Friday.
Earlier this month, a source told Reuters that Sanofi was looking at several U.S. deals, including one or two that could be worth at least $15 billion..
Sanofi approached Genzyme informally about two weeks ago and is still waiting for a formal response, according to a source. The two companies have so far had 'low-level conversations,' the source said.
Sanofi is feeling the sting of patent expirations on a number of its biggest products, hurting its profit outlook.
U.S. sales of its colon cancer drug Eloxatin have tumbled following recent generic launches, and its blockbuster cancer drug Taxotere will lose patent protection by November in Europe and the United States.
Sanofi's approach comes on the heels of a turbulent two years for Genzyme and its chief executive, Henri Termeer, who is nearing retirement and is expected to step down within the next year or two.
Earlier this year, Termeer fought off a threatened proxy fight by coming to negotiated settlements with investors Carl Icahn, who now has two representatives on the company's board, and Ralph Whitworth of Relational Investors LLC, who also sits on the board.
But if Sanofi thinks it can pick up Genzyme on the cheap it is likely mistaken, said Karen Andersen, an analyst at Morningstar.
'I view this as an attempt to take advantage of Genzyme's manufacturing problems and could see the conversation turning hostile because Genzyme will be reluctant to look at offers unless a clear value is placed on the company beyond its poor performance in 2010,' she said.
Until Friday's surge, Genzyme's shares had lost a third of their value since the U.S. Food and Drug Administration found problems at Genzyme's Allston plant in Boston in September 2008.
RIVAL BIDDERS IN THE WINGS
Other drugmakers could step up and counterbid, Andersen said. One potentially intriguing candidate could be biotechnology company Amgen Inc, she said.
Big drugmakers, including Sanofi, are eager to acquire new products to offset the effect of generic competition to some of their biggest products. So-called orphan drugs -- those that treat small numbers of patients but command high prices, are much less amenable to generic competition than pills and are therefore attractive acquisition candidates.
Genzyme's biggest-selling drug is Cerezyme, a treatment for Gaucher disease, a rare genetic disorder. The company also has some promising drugs in late stage development, including a treatment for multiple sclerosis. For facts about Genzyme click on
'We have fully expected that big pharmaceutical companies will continue to gobble up assets in the biotech space and possibly in other areas as well, such as consumer health and generics,' said Geoffrey Porges, an analyst at Sanford Bernstein. 'So Sanofi moving towards Genzyme fits this thesis.'
Genzyme, which is based in Cambridge, Massachusetts, and employs more than 12,000 people worldwide, reported revenue in 2009 of $4.5 billion. It expects 2010 revenue of $4.4 billion to $4.5 billion. That is down from a previous estimate of $5.23 billion to $5.53 billion.
Reports in early July of Sanofi's acquisition interest buoyed drugmaker shares, including Genzyme and Botox maker Allergan Inc.
On Friday, Allergan shares slipped about 3 percent, while Biogen Idec Inc, named as another possible Sanofi target in early July, slid more than 5 percent.
The talks were first reported by The Wall Street Journal.
(Reporting by Jessica Hall, Toni Clarke, Ransdell Pierson, Lewis Krauskopf and Debra Sherman; Writing by Michele Gershberg; Editing by Gerald E. McCormick, Richard Chang and Matthew Lewis)
((michele.gershberg@thomsonreuters.com; + 1 646-223-6185; Reuters Messaging: michele.gershberg.reuters.com@reuters.net)) Keywords: GENZYME/SANOFI (Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK/BOSTON, July 23 (Reuters) - Sanofi-Aventis SA is sounding out biotech company Genzyme Corp as the French drugmaker hunts for a large acquisition, sources familiar with the matter said on Friday.
Genzyme, whose shares rose more than 15 percent, is beginning to emerge from a manufacturing crisis that caused shortages of two of its biggest-selling drugs.
The crisis also prompted changes to the company's board, and led to a consent decree that placed its manufacturing operations under third-party control.
The talks are at an early stage and no deal is imminent, the sources said. Issues such as price and management structure have not been discussed. A Genzyme spokesman said the company does not comment on rumor or speculation.
Genzyme's current market capitalization is close to $14 billion, but the company would be expected to argue for a significant premium to that based on its pipeline of experimental products, which include treatments for multiple sclerosis and high cholesterol.
'If you started to use the $20 billion number that has been discussed in the past, it puts Genzyme closer to $75 (a share),' said RBC Capital Markets analyst Michael Yee. The shares closed at $62.52 on Friday.
Earlier this month, a source told Reuters that Sanofi was looking at several U.S. deals, including one or two that could be worth at least $15 billion..
Sanofi approached Genzyme informally about two weeks ago and is still waiting for a formal response, according to a source. The two companies have so far had 'low-level conversations,' the source said.
Sanofi is feeling the sting of patent expirations on a number of its biggest products, hurting its profit outlook.
U.S. sales of its colon cancer drug Eloxatin have tumbled following recent generic launches, and its blockbuster cancer drug Taxotere will lose patent protection by November in Europe and the United States.
Sanofi's approach comes on the heels of a turbulent two years for Genzyme and its chief executive, Henri Termeer, who is nearing retirement and is expected to step down within the next year or two.
Earlier this year, Termeer fought off a threatened proxy fight by coming to negotiated settlements with investors Carl Icahn, who now has two representatives on the company's board, and Ralph Whitworth of Relational Investors LLC, who also sits on the board.
But if Sanofi thinks it can pick up Genzyme on the cheap it is likely mistaken, said Karen Andersen, an analyst at Morningstar.
'I view this as an attempt to take advantage of Genzyme's manufacturing problems and could see the conversation turning hostile because Genzyme will be reluctant to look at offers unless a clear value is placed on the company beyond its poor performance in 2010,' she said.
Until Friday's surge, Genzyme's shares had lost a third of their value since the U.S. Food and Drug Administration found problems at Genzyme's Allston plant in Boston in September 2008.
RIVAL BIDDERS IN THE WINGS
Other drugmakers could step up and counterbid, Andersen said. One potentially intriguing candidate could be biotechnology company Amgen Inc, she said.
Big drugmakers, including Sanofi, are eager to acquire new products to offset the effect of generic competition to some of their biggest products. So-called orphan drugs -- those that treat small numbers of patients but command high prices, are much less amenable to generic competition than pills and are therefore attractive acquisition candidates.
Genzyme's biggest-selling drug is Cerezyme, a treatment for Gaucher disease, a rare genetic disorder. The company also has some promising drugs in late stage development, including a treatment for multiple sclerosis. For facts about Genzyme click on
'We have fully expected that big pharmaceutical companies will continue to gobble up assets in the biotech space and possibly in other areas as well, such as consumer health and generics,' said Geoffrey Porges, an analyst at Sanford Bernstein. 'So Sanofi moving towards Genzyme fits this thesis.'
Genzyme, which is based in Cambridge, Massachusetts, and employs more than 12,000 people worldwide, reported revenue in 2009 of $4.5 billion. It expects 2010 revenue of $4.4 billion to $4.5 billion. That is down from a previous estimate of $5.23 billion to $5.53 billion.
Reports in early July of Sanofi's acquisition interest buoyed drugmaker shares, including Genzyme and Botox maker Allergan Inc.
On Friday, Allergan shares slipped about 3 percent, while Biogen Idec Inc, named as another possible Sanofi target in early July, slid more than 5 percent.
The talks were first reported by The Wall Street Journal.
(Reporting by Jessica Hall, Toni Clarke, Ransdell Pierson, Lewis Krauskopf and Debra Sherman; Writing by Michele Gershberg; Editing by Gerald E. McCormick, Richard Chang and Matthew Lewis)
((michele.gershberg@thomsonreuters.com; + 1 646-223-6185; Reuters Messaging: michele.gershberg.reuters.com@reuters.net)) Keywords: GENZYME/SANOFI (Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.