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Sanofi seals Genzyme deal for $20 billion

Published on 16/02/11 at 10:23am
Genzyme HQ

Sanofi-Aventis has finally agreed a deal to buy Genzyme for $20.1 billion after eight months of wrangling with the US biotech.

The deal works out at $74 a share, five dollars more that Sanofi originally offered in July and includes additional milestone payments for Genzyme’s multiple sclerosis candidate Lemtrada (alemtuzumab) under a contingent value right structure (CVR).
 
Lemtrada  has recently started phase III trials for MS and Genzyme believe that it could be making peak sales of around $2 billion per year if approved.
 
The deal is expected to be completed by the second quarter of this year but integration planning will begin immediately.  
 
Chris Viehbacher, chief executive of Sanofi said: “This agreement with Genzyme is both consistent with our long term strategy and creates significant long term value for our shareholders.
 
“This transaction will create a meaningful new growth platform for Sanofi-Aventis while expanding our footprint in biotechnology,” he said.
 
Viehbacher said he expects the deal to be accretive from year one, and said the CVR structure, which served as “an important value bridge” between the two companies, would reward both Genzyme and Sanofi shareholders, particularly if Lemtrada outperforms the market’s current expectations.
 
The CVR means that Genzyme shareholders could receive an additional $1 per CVR if Lemtrada is approved by the FDA and up to $4 per CVR in milestone payments if global net sales reach over $2.3 billion.
 
Tied into this structure is an additional $1 per CVR if Genzyme’s top drugs Cerezyme for Gaucher’s disease and Fabrazyme for Fabry disease meet agreed upon production levels this year.
 
Contamination issues at Genzyme’s Allston manufacturing plant left the company open to a takeover as production levels of Fabrzyme and Cerezyme fell significantly.
 
Henri Termeer, chief executive of Genzyme said that this deal represents a “new beginning” the company.
 
“Genzyme has a record of innovation and a unique and pioneering approach to serving patients,” he said.
 
“We also 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.”  
 
Biologics have become increasingly attractive for big pharma as they have longer patent lives and are difficult to copy.
 
Orphan drugs, such as those made by Genzyme, have further protection as they treat extremely rare diseases and will help Sanofi offset looming patent expiries on some of its biggest earners.
 
Sanofi now joins a long list of pharma firms with an integrated biologics unit that includes recent tie-ups between AstraZeneca and MedImmune and Roche and Genentech.
 
Ben Adams

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