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Another Genzyme Rejection as Sanofi Bid Really Gets 'Hostile'

BioWorld Today Assistant Managing Editor

Genzyme Corp.'s board rejected Sanofi-Aventis SA's $69-per-share offer yet again, a move that came as no surprise to anyone following the ongoing saga. But it was a late Thursday SEC filing by the Cambridge, Mass.-based biotech that really got tongues wagging, particularly the disclosure of a meeting between the top execs during which Sanofi's CEO reportedly proposed a $69 to $80 per share price range to start negotiations.

In reports surfacing Friday, Paris-based Sanofi denied that CEO Chris Viehbacher had made such a proposal. Nevertheless, the news alone should make the current tender offer, which values the firm at about $18.5 billion, less tempting to Genzyme shareholders.

Sanofi launched its hostile takeover last week, and Viehbacher told investors that the pharma firm had met with shareholders representing more than 50 percent of Genzyme's outstanding shares and concluded that they were in favor of an acquisition, though no specific price was mentioned. (See BioWorld Today, Oct. 5, 2010.)

Many analysts continue to believe a deal will get done, but at a higher price. Genzyme's shares have closed above $70 since rumors of Sanofi's interest began circulating three months ago.

Shares (NASDAQ:GENZ) gained 39 cents Friday, to close at $72.75.

And the latest filing, which discloses details covering the three months of discussions between the two firms, indicated that Sanofi will not walk away from the deal easily. During the Sept. 20 meeting between Viehbacher and Genzyme CEO Henri Termeer, the former reportedly had called that an "unacceptable option in light of the value of the transaction to Sanofi and the substantial time he had put into the proposed deal," according to the filing.

Sanofi is facing increasing pressure to bolster its pipeline to offset the generic threat to its best-selling blood-thinning agent Lovenox (enoxaparin) and the recent invalidation of two patents covering chemotherapy drug Taxotere (docetaxel). The firm Friday said it was cutting 1,700 jobs due to increasing generic competition.

Viehbacher, apparently, had even appealed to billionaire investor Carl Icahn, who had been embroiled in a proxy battle with Genzyme earlier this year. Icahn suggested that Viehbacher meet directly with Termeer, which led to the Sept. 20 discussion.

Throughout that meeting, Genzyme reported, Viehbacher "stated that his proposed price range of $69 per share to $80 per share was manageable, but that, based on his current understanding, he could not get to $80 per share."

If true, Sanofi's public tack has been very different. The pharma company refused to increase its bid, despite two previous rejections by Genzyme, when launching its tender offer.

Viehbacher defended the low-end bid price last week, stating that Genzyme has underperformed compared to its peers over the past few years and its troubles at Allston Landing facility, which resulted in shortages of enzyme replacement therapies Cerezyme (imiglucerase) and Fabrazyme (agalsidase beta), likely will take some more time to fully resolve.

Genzyme's filing confirmed that the two firms have been unable to agree on a starting point for negotiations. For its part, the biotech has called Sanofi's bid "opportunistic," and said it fails to take into account Genzyme's efforts to rectify problems that plagued the Allston manufacturing plant last year and undervalues its pipeline, including the potential of alemtuzumab in multiple sclerosis. (See BioWorld Today, Aug. 31, 2010.)

Sanofi has said it would be willing to consider a higher bid, but will not bid against itself. And, to date, no other prospective buyers have emerged.

But Piper Jaffray analyst Ian Somaiya expects the biotech firm to go looking actively for other bidders. "We expect Genzyme to pursue strategic alternatives, including a White Knight, which could command an acquisition price more in line with our sum of the parts analysis of $85 per share," he wrote in a research note.

Since Sanofi's original offer, Genzyme has divested its genetics business unit at a higher-than-expected price of $925 million and has plans to sell its diagnostics and pharmaceutical intermediates units as well, in a restructuring move aimed at boosting shareholder value. (See BioWorld Today, Sept. 14, 2010.)

Published: October 11, 2010