Now it’s official. Rumors about sanofi-aventis’s (Paris) desire to purchase Genzyme (Cambridge, MA) have stirred speculation for weeks. The French drugmaker laid its cards on the table on Sunday by publishing its offer letter to Henri Termeer, Genzyme’s CEO. Sanofi proposed to pay $69 in cash per Genzyme share, or a total of about $18.5 billion, to acquire the biologics manufacturer. On Friday, Genzyme shares closed at $67.62.
Termeer’s response came this morning. It can be summed up in two words: nothing doing.
In his letter, Termeer said that sanofi’s offer was identical with one it had made last month, which was not public. Termeer called both offers “opportunistic” and said that they did not “begin to recognize the significant progress underway to rectify our manufacturing challenges or the potential for our new-product pipeline.”
Indeed, days before sanofi’s public bid, Genzyme said it would end rationing of its Gaucher disease drug Cerezyme for US patients in September. If things go according to plan, Genzyme will have begun to convince the industry that its manufacturing crisis is nearly over. Genzyme’s board of directors seems to want to use this good news as a bargaining chip to get a higher offer from sanofi.
Trouble is, sanofi might be loath to sweeten the deal. Cosmetics company L’Oréal and oil company Total own roughly 15% of sanofi between them. They probably will not support an offer above $70 per share, bankers close to those companies told Reuters. Yet insiders say that Genzyme won’t come to the table without an opening offer of $75 per share—and will hold out for a final price of $80—according to Reuters.
What will sanofi’s next move be? According to Bloomberg, sanofi might consider buying Celgene (Summit, NJ) or Allergan (Irvine, CA) if Genzyme refuses to negotiate. But OrbiMed Advisors said that Celgene and Allergan would be more expensive targets for sanofi, and that the report was a ploy to push Genzyme’s price down. On the other hand, sanofi could consider buying Shire (Dublin), which would cost them less than Genzyme.
sanofi’s share price has fallen roughly 19% this year, partly because several of its patents will expire soon. Acquiring a biopharmaceutical company could improve sanofi’s sales and profits. Yet L’Oréal and Total seem to think that acquisitions are not a good strategy for the drugmaker, according to Reuters.
So even though sanofi’s offer is now public, its future, and that of Genzyme, is as clear as mud.