Sanofi-Aventis Finally Buys Genzyme


Image: joanneQescober/Flickr

After six months of negotiations, French drug giant Sanofi-Aventis has picked up Genzyme, which specializes in the treatment of rare diseases, for roughly $20 billion. FiercePharma’s Tracy Staton sums up the deal:

The two companies have finally agreed to a price–$74 per share, plus contingent value rights–that amounts to $20.1 billion in cash up front. At least one analyst called it a win-win deal. And if that’s the case, it’s because of the CVR approach, which “was an extremely important tool to bridge differences in value,” Sanofi chief Chris Viehbacher (photo) said on a conference call.

The CVRs could be worth as much as $14 each, provided Genzyme and its experimental multiple sclerosis drug meet every target. Genzyme shareholders are due $1 per CVR if the company meets certain production targets for its rare disease drugs, which ran short after manufacturing troubles shuttered a key plant.

More on CVRs here.

The Financial Times explains Sanofi and Genzyme’s motivations:

The deal will help the French pharma group to strengthen its product range as it faces a series of patent expiries on existing so-called blockbusters. At the same time, the FT notes in a separate report, the deal will provide “an exit for Genzyme investors”:

The company has developed a profitable niche in selling high-priced treatments for “orphan diseases” that affect a small number of patients globally, but has suffered setbacks partly triggered by manufacturing problems and supply shortfalls that depressed its share price.

Forbes’ Matthew Herper has more on the strategy and challenges associated with the deal:

The Genzyme acquisition is really a bet that in the future drug companies will need stable businesses like vaccines and consumer health that are insulated from the sudden drops of sales that happen with traditional small molecule drugs in the U.S. market. Generic versions of biotech drugs like the ones Genzyme sells are never going to create this kind of sudden competition.

(Sanofi CEO) Viehbacher has also said that Sanofi, which just installed a former head of the National Institutes of Health as its research chief, did not have enough presence near U.S. research hot spots. Genzyme’s home near Harvard, MIT, and Boston’s rich group of biotech startups certainly helps up the company’s presence there.

One key for making the deal work will be holding on to the expertise in Genzyme’s core rare disease drug business. Sanofi would be wise to walk in and offer all those employees raises, and focus any cost-cutting efforts on back office employees and those in other Genzyme businesses. This is the tough trick, here. Roche made all sorts of noise about preserving Genentech’s culture, but it is not at all clear that the company managed to do so.