Will it be a "Mais Oui" from Genzyme for Sanofi-Aventis $19 Billion Dowry Offer?

Reported by Annette Kreuger, Industrial Info Resources (Sugar Land, Texas)--Like many courtships, French drug giant Sanofi-Aventis' (NYSE:SNY) (U.S. Headquarters: Bridgewater, New Jersey) interest in biological manufacturer Genzyme (NASDAQ:GENZ) (Cambridge, Massachusetts) began with, and remains mired in, rumors. Through the month of July, hints of Sanofi's interest in acquiring the troubled biotech (see October 1, 2009, article - Genzyme Survives Virus Infection at Allston Manufacturing Plant and Resumes Drug Production) filtered out, thanks to a series of "anonymous" press leaks. By close of business Friday, July 30, 2010, the expected formal announcement of a $19 billion Sanofi offer for Genzyme never happened.

What did happen on Friday is that the rumors increased Genzyme's share price by $2.00 to $69.58, almost hitting the rumored $70 per share Sanofi offer. Financial analysts believe the offer will have to reach $80 a share, or $21.3 billion for Genzyme to acquiesce to any deal. For now, the atmosphere surrounding the non-offer is friendly, but that could change.

In its apparent quest to acquire Genzyme and its extremely profitable drugs like Genzyme's Cerezyme and Fabrazyme, which treat small numbers of patients with rare genetic diseases, Sanofi is following the lead of the rest of Big Pharma: growth through acquisition and staving off losses to generics, following the expiration of key drug patents over the next few years. Almost a quarter of Sanofi's 2008 drug sales face patent expiration by 2013. These losses are in addition to a blow dealt Sanofi by the Food and Drug Administration's July approval of a generic version of the company's blood thinner Lovenox. The drug is Sanofi's second-best seller and generates almost $4 billion a year.

The company's existing pipeline simply cannot offset those kinds of losses. Acquiring Genzyme would give Sanofi a company that is considered one of the biotech industry's most profitable businesses, generating annual revenue of more than $5 billion. Genzyme has about 12,500 employees, including 4,500 in Massachusetts.

No stranger to drama, Genzyme lately has been enjoying a bit of notoriety. In addition to the aforementioned manufacturing problems at its Allston, Massachusetts, site, in June, the company staved off a proxy fight launched by Carl Icahn. The iconic investor criticized Genzyme's management and suggested the company might be more valuable broken into pieces.

There are still a lot of questions surrounding the "maybe merger." In addition to Sanofi, the rumor mill has other suitors circling around Genzyme. Will Sanofi play hardball and become aggressive if Genzyme spurs its advances? Did the company wait too long to announce its intent, allowing another Big Pharma company to swoop in with the right price and ride off into the sunset? It remains to be seen how it all will play out in this latest industry drama, as all is fair in love and takeover war.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.