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Feb 16, 2011

Sanofi-Aventis and Genzyme Finally Agree to $20.1B plus CVR Acquisition Deal

Sanofi-Aventis and Genzyme Finally Agree to $20.1B plus CVR Acquisition Deal

CVR payments will depend primarily on commercialization and sales milestones for MS therapy Lemtrada.[Robert Mizerek-Fotolia.com]

  • Sanofi-aventis’ dogged pursuit of Genzyme has finally led to the boards of both firms agreeing to a $74 cash per share plus contingent value rights (CVRs) acquisition of the latter by the French drug giant. The deal is worth about $20.1 billion before CVR conversion and is reportedly the second biggest ever in the biotech sector. Antitrust clearance by the EC and U.S. FTC was previously granted for the acquisition.

    The agreement provides for Genzyme stakeholders to receive one CVR for each of their existing shares, on top of the initial cash payout by sanofi-aventis. Each CVR is worth up to $14 in cash, the overall value of which is dependent to the largest part on the achievement of specified milestones relating to the development of Genzyme’s late-stage Lemtrada™ (alemtuzumab MS) for multiple sclerosis (MS) but initially on production volumes in 2011 for the marketed enzyme-replacement therapies Cerezyme® and Fabrazyme®.

    Sanofi-aventis has been making a play for Genzyme since the middle of 2010 and resorted to taking its initial $69 per share bid directly to the firm’s stakeholders after the Genzyme board refused even to discuss the offer. With Genzyme’s president and CEO, Henri A. Termeer, having slammed the original bid as opportunistic and unrealistic, the firms did finally get around the table to discuss a workable solution, but the CVR issue remained a very real stumbling block. Termeer now says the successful completion of negotiations represents “a new beginning.”

    Sanofi-aventis aims to make Genzyme its global center for excellence in rare diseases. Christopher A. Viehbacher, sanofi-aventis CEO, has high hopes for the acquisition deal. “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.”

    Genzyme’s late-stage pipeline includes three products for which it projects regulatory approval by the end of 2013. These are alemtuzumab for multiple sclerosis, mipomersen for familial hypercholesterolemia, and eliglustat tartrate, for type 1 Gaucher disease. Regulatory approval of and sales milestones for alembuzumab for MS are central to the CVR agreement.

    The drug is currently undergoing two pivotal Rebif-comparitor Phase III trials, and filing for U.S. and EU approval is projected for early 2012. Genzyme projects peak sales of Lemtrada could reach about $3-3.5 billion within five years of launch.

    Genzyme’s financial woes since the 2009 contamination of its Allston Landing manufacturing plant for Cerezyme and Fabrazyme have been extensively and oft-documented. It included a $175 million disgorgement fee metered out by FDA. 2010 also saw Genzyme embark on a $2 billion stock repurchase program and sell off its genetic testing business to LabCorp. Just last week the firm announced completion of the $265 million sale of its diagnostic products business to Sekisui Chemical.

    On the up-side in January Genzyme announced it would be building a new, €250 million Belgian manufacturing plant for its Pompe disease treatments, Myozyme® and Lumizyme®. The firm’s 4Q 2010 results, released today, confirmed that overall revenues for the period were up 23% on Q4 2009, at $1.15 billion. Full-year 2010 revenues were $4.05 billion, just up from $3.98 billion in 2009.

    The lion's share of Genzyme’s sales come from the orphan disease drugs that make up its personalized genetic health business. This business unit generated revenues of $506 million in  Q4 2010, up 45% on the same period in 2009. This growth largely reflected increasing supplies of Cerezyme and Fabrazyme, and the U.S. launch of Lumizyme®, Genzyme notes. Revenues for the personalized genetics health business for 2010 as a whole were $1.65 billion, down from $1.85 billion in 2009.

    More specifically, sales of Myozyme/Lumizyme for the Q4 2010 period were up 39% at $128 million, with full-year sales of the drugs up 27% to $412 million. Increases in both fourth-quarter and full-year revenues reflected, in part, sales of Lumizyme following FDA approval in May 2010, the firm says.

    Meanwhile, Q4 2010 sales of Cerezyme were $222 million, compared with $105 million in the same period in 2009. Full-year 2010 Cerezyme sales were $722 million, compared with $793 million in 2009. Sales of Fabrazyme in the fourth quarter 2010 were $62 million, compared with $58 million in the fourth quarter of 2009; full-year sales were $188 million compared with $430 million in 2009.

    Outside its personalized genetic health business, Genzyme’s renal and endocrinology business reported revenues of $289 million in the fourth quarter of 2010, up 12% on the 2009 period. Full-year 2010 revenues for the renal and endocrinology business were $1.07 billion, up 6%. Genzyme said sales growth was driven by the new tender in Brazil, the launch of Renvela® (sevelamer carbonate) in major EU markets including France and Italy, and strong Renvela performance in the U.S, where the drug remains the market-leading phosphate binder.

    Genzyme’s hematology and oncology business has also grown significantly over the last five years, with revenues increasing from $213 million in 2006, to $679 million in 2010. This growth stems primarily from the approval and launch of Mozobil® (plerixafor injection); and the steady growth of Clolar® (clofarabine) and Thymoglobulin® (antithymocyte globulin (rabbit)), the firm adds. Fourth quarter revenues for the hematology and oncology business were $179 million, up $10 million on Q4 2009


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