SANOFI-AVENTIS has reached an agreement in principle to buy US biotech group Genzyme for $19.2 billion in cash plus future payments based on the performance of an experimental Genzyme drug, according to two sources with knowledge of the talks.
Under the agreement, Genzyme investors will receive $74 per share in cash plus a contingent value right, or CVR, whose value will depend on Genzyme’s experimental multiple sclerosis drug Lemtrada, the sources said yesterday. The value of the CVR could not immediately be established.
The deal is expected to be announced this morning, the sources said. The two companies’ boards are expected to vote on the agreement shortly.
The deal is the second biggest in biotech history, and gives France’s Sanofi, which has pursued Genzyme for nearly nine months, a foothold in the market to treat rare diseases. It will help Sanofi compensate for declining revenue from drugs that have lost, or are set to lose, patent protection.
Officials at Sanofi were not immediately available for comment. Bo Piela, a spokesman for Cambridge, Massachusetts-based Genzyme, said he “cannot confirm” that a deal has been reached.
Genzyme shares rose 3.7 per cent in afternoon trading to $74.42 on Nasdaq. Sanofi’s US shares rose 1.6 per cent.
Genzyme shareholders last year rejected an initial offer from Sanofi of $69 per share.
Sources previously told Reuters the CVR would likely be valued at $5 to $6 a share. That could subsequently have changed. Some investors do not expect the CVR to trade at more than $2 a share. Short-term investors and index funds, which do not normally like owning this kind of instrument, will move quickly to sell.
Genzyme was the first company to show that money could be made by making drugs for diseases with small patient populations. In 2009 it generated revenue of $4.5 billion, enough to replace roughly a third of the sales Sanofi is expected to lose through 2013 to generic competition.
The deal in principle was struck after a lengthy stand-off between two determined chief executives: Genzyme’s Henri Termeer, a Dutchman who has led the company for more than 25 years, and German-Canadian Chris Viehbacher, who took over as chief executive of Sanofi at the end of 2008 after a 20-year career at GlaxoSmithKline.
Mr Termeer was reluctant to sell the company but a manufacturing crisis had caused a shortage of two of Genzyme’s life-saving drugs, leading to outrage among patients and investors. – (Reuters)
