Sanofi expands footprint in biologics with Genzyme
After a prolonged nail-biting wait for almost a year, Sanofi-Aventis
formally announced on February 16, 2011 that it has acquired biotech
major Genzyme for $20 billion. Although there were speculations that
Sanofi was trying to stall the deal to make negotiations with the offer
price, Genzyme seems to have made a good deal.
“The deal is valued at approximately 4.5 times Genzyme’s sales for the
trailing 12 months ending September 2010. Some of the other deals that
took place in recent times have been in the same range,” says Mr
Prashant Sharma, lead analyst — company and market intelligence,
As part of the deal, in addition to the cash payment, each Genzyme
shareholder will receive one Contingent Value Right (CVR) for each
share they own, entitling the holder to receive additional cash
payments if specified milestones related to Lemtrada (alemtuzumab MS)
are achieved over time or a milestone related to production volumes in
2011 for cerezyme and fabrazyme is achieved.
“This agreement with Genzyme is both consistent with our long-term
strategy and creates significant long-term value for our shareholders.
It will create a meaningful new growth platform for Sanofi-Aventis
while expanding our footprint in biotechnology. 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,” says Mr Christopher A Viehbacher,
Commenting on the deal, Mr Henri A Termeer, president and CEO of
Genzyme Corporation, says “We share an exciting vision of the future,
one in which Genzyme and Sanofi-Aventis grow and innovate by developing
breakthrough treatments that change the lives of people with serious
diseases. We look forward to building a sustainable future together.”
Mr Henri A Termeer will resign as President and CEO of Genzyme
following the close of the transaction, but will advise on the
integration in his role as co-chairman of the Integration Steering
Committee with Mr Christopher A Viehbacher.
“Sanofi-Aventis’ $20 billion acquisition of Genzyme will help
accelerate the French Pharma giant’s move into segments where market
exclusivity is not solely controlled by intellectual property. It would
certainly position Sanofi-Aventis at the forefront of the niche Orphan
Drugs market, an important and high margin pharmaceutical segment,”
says Mr Paul Raj, analyst — company and market intelligence,
Finding the niche
Being a leading Orphan Drug manufacturing company, Genzyme was an ideal
and smart choice by Sanofi. The Orphan Drug law grants them exclusivity
and gives them the privilege and added advantage of being the only
manufacturer in the industry, minus competitors.
Genzyme is strongly positioned in a number of niche markets which are
very lucrative despite low patient numbers. Furthermore, a number of
key brands in its portfolio have been enjoying Orphan Drug status that
provides market exclusivity (seven years in the US and 10 years in the
European Union). In addition to the expertise in rare diseases, Genzyme
has built strong renal-endocrinology, hematology-oncology and
biosurgery businesses that are complementary to existing
Sanofi-Aventis’ businesses and include highly differentiated,
market-leading products that provide significant benefit to patients.
Sanofi-aventis will work with Genzyme through the integration process
to develop plans to enhance the opportunities for these businesses
going forward. Consistent with Sanofi-Aventis’ approach in other
transactions, Genzyme will retain its corporate brand.
Sanofi-Aventis’ global footprint, significant resources and proven
track record of successfully expanding franchises will create new
long-term growth opportunities for the combined company, particularly
in emerging markets. Genzyme will become an important new platform in
Sanofi-Aventis’ sustainable growth strategy and expand the company’s
presence in biotechnology. Sanofi-Aventis intends to make Genzyme its
global center for excellence in rare diseases and the acquisition will
reinforce Sanofi-Aventis’ commitment to the greater Boston area, where
it already has a sizable presence.
Sanofi has been looking at all possible means to fight the off-patent
boom that has been plaguing its development. Datamonitor forecasts
Sanofi-Aventis’ prescription pharmaceutical revenues to decline to
$36.9 billion by 2015, equal to a compound annual growth rate (CAGR) of
-1.0 percent. As compared to Sanofi’s negative growth, Datamonitor has
predicted a CAGR of 9.8 percent from $4.1 billion in 2009 to $7.2
billion in 2015, which will definitely give Sanofi an edge over the
others. ‘’Genzyme’s growth is primarily driven by Genzyme’s niche
market focus, which is in marked contrast to the traditional Big Pharma
operating model,’’ says Mr Raj of Datamonitor, India.
The acquisition of Genzyme will see development by Sanofi in the field
of biologics, something that Genzyme is strong at. “Genzyme’s
therapeutic proteins portfolio and monoclonal antibody (MAb) offering
would represent a significant opportunity for Sanofi-Aventis to
diversify into biologics” concludes Mr Prashant.
Romi R in Bangalore