Genzyme Rejects Sanofi-Aventis's Acquisition Proposal

On Monday, Genzyme (Cambridge, MA) confirmed that it had received sanofi-aventis’s (Paris) proposal to acquire all of its outstanding shares for $69 per share. Henri A. Termeer, Genzyme’s CEO, rejected the proposal in a letter to sanofi-aventis’s CEO Christopher A. Viehbacher. In his letter, Termeer said that sanofi’s offer was identical to an offer that the company had made on July 29, 2010, which Genzyme rejected. The new sanofi proposal failed “to establish a basis for engagement by the Genzyme board” because it did not include new information or a higher price, according to Termeer’s letter.

“Without exception, each member of the Genzyme board believes this is not the right time to sell the company, because your opportunistic takeover proposal does not begin to recognize the significant progress underway to rectify our manufacturing challenges or the potential for our new-product pipeline,” said Termeer, reiterating what Genzyme had written in its previous letter. As a sign of its progress, Termeer cited Genzyme’s increased production of the company's Gaucher-disease drug Cerezyme to near-normal levels and the company’s plan to increase supplies of its Fabry-disease drug Fabrazyme in the fourth quarter. Termeer also said that Genzyme had given sanofi nonpublic information about the potential success of its multiple-sclerosis drug alemtuzumab and about its cost-reduction plans.

Viehbacher had conveyed sanofi’s latest offer in a letter to Termeer dated August 29, 2010. The proposed price of $69 per share represented a premium of 38% above Genzyme’s unaffected July 1, 2010 share price of $49.86, said Viehbacher in the letter. Genzyme shares closed at $67.62 on Friday, August 27, 2010.

In his letter, Viehbacher claimed that Genzyme had “underperformed its peers for a number of years” and cited Genzyme’s assessment that its manufacturing problems would take three or four years to resolve. An acquisition would allow sanofi to help Genzyme resolve its manufacturing difficulties quickly, said Viehbacher. sanofi’s resources could help Genzyme develop new treatments, increase its presence in existing markets, and expand into emerging markets, said the letter. Under an acquisition, Genzyme’s rare-disease business would be managed as a separate division under the Genzyme brand with its own research and development, manufacturing, and commercial infrastructure, said Viehbacher.

sanofi is “committed to a transaction with Genzyme,” said Viehbacher in the letter. sanofi decided to “take our compelling proposal directly to your shareholders by making its terms public” because Genzyme was “unwilling to have constructive discussions,” according to the letter.

Last Wednesday, Reuters reported that cosmetics company L’Oréal and oil company Total, which together own about 15% of sanofi, are not enthusiastic about acquiring Genzyme. Bankers close to the stakeholders told Reuters that L’Oréal and Total do not want sanofi to pay too much for Genzyme and that they believe that Shire (Dublin) might be a better acquisition target. In addition, L’Oréal and Total do not think the strategy of bolt-on acquisitions is sound, according to the Reuters report.

See related PharmTech articles:
Sanofi’s Courtship of Genzyme in Limbo (blog post)

A Turning Point for Genzyme? (blog post)

Will Sanofi Bag Genzyme? (blog post)