Sanofi-Aventis to buy Genzyme for $20.1 bln
Deal calls for $74 a share, plus CVR worth up to $14
BOSTON (MarketWatch) — French pharmaceutical giant Sanofi-Aventis SA confirmed Wednesday it has struck a deal to buy Genzyme Corp. for $20.1 billion in cash plus a contingent value right, bringing to a successful end its months-long pursuit of the U.S. biotech firm.
Shares of Genzyme were up 1.6% at $75.48 in morning trading. Sanofi shares gained 1% to rest at $34.85.
The companies said in a joint statement that Sanofi-Aventis will pay $74 per share. In addition to that cash payment, every Genzyme shareholder will receive a contingent value right, or CVR, for each share they own, entitling the holder to receive additional cash payments if certain product milestones are met.
The CVR component, which is worth up to an additional $14 a share, is linked to the performances of the drugs Fabrazyme, Cerezyme and Lemtrada. Read more on CVRs.
The boards of both companies have approved the deal, which is expected to close early in the second quarter of 2011.
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The deal is anticipated to add to Sanofi’s earnings per share in the first year following closing, and will add €0.75 to €1.00 a share by 2013, it said.
“This transaction will create a meaningful new growth platform for Sanofi-Aventis while expanding our footprint in biotechnology,” said Sanofi Chief Executive Christopher Viehbacher in the statement.”
“We expect it to be accretive from year one, and the CVR structure, which served as an important value bridge between our two companies, rewards both Genzyme and Sanofi-Aventis shareholders, particularly if Lemtrada outperforms the market’s current expectations,” he said.
Putting a price on Lemtrada
Genzyme has been testing Lemtrada, also known as alemtuzumab, for the treatment of multiple sclerosis. Alemtuzumab is already on the market for the treatment of leukemia under the brand name Campath.
Genzyme has asserted that if approved for multiple sclerosis, Lemtrada would become a blockbuster product. Sanofi has said it believes the drug’s prospects are exaggerated.
Genzyme confirmed Wednesday that it plans to release preliminary results from its first Phase III trial for Lemtrada in mid-2011, and results from a second Phase III trial in the latter half of the year.
The companies said the CVR agreement calls for Genzyme shareholders to receive the following milestone payments: $1 per CVR if Genzyme meets certain production levels for its drugs Fabrazyme and Cerezyme in 2011; $1 per CVR if Lemtrada wins U.S. regulatory approval for MS; $2 per CVR if net sales of Lemtrada exceed $400 million “within specified periods per territory”; $3 if global net sales of Lemtrada surpass $1.8 billion; $4 if net sales exceed $2.3 billion; and $3 if net sales surpass $2.8 billion.
Sales of Genzyme’s two best-selling products, Fabrazyme and Cerezyme, were severely disrupted last year due to contamination problems at a key Genzyme plant that resulted in chronic shortages of the products. The company is currently in the process of shifting its manufacturing operations in order to restore production levels.
Based in Cambridge, Mass., Genzyme is best known for developing therapies for rare diseases for which there are few treatments available.
In its fourth-quarter earnings report, also released Wednesday, Genzyme said that Cerezyme sales bounced to $222 million, up from $105 million in the 2009 period. Fabrazyme sales were still depressed, rising to $61.6 million from $58 million.
Sanofi shares rally in Europe
Meanwhile, shares of Sanofi-Aventisrallied 3.3% in Paris trading Wednesday, leading gains for the French CAC 40
Conclusion of the Sanofi-Genzyme saga is a positive outcome for Sanofi shareholders, in our view, and likely to result in relief that management has remained diligent in its view of the appropriate valuation,” Deutsche Bank said in a note to clients, reiterating its buy rating on the French firm.
“The deal adds a leading growth platform in rare diseases, improving Sanofi’s U.S. presence, diversifying its business, and potentially leveraging the areas of Genzyme which lack critical mass (such as oncology),” the broker said.
Val Brickates Kennedy is a reporter for MarketWatch in Boston. Polya Lesova is chief of MarketWatch’s London bureau.