Genzyme Corp. agreed to give Sanofi- Aventis SA access to confidential information, bringing the companies a step closer to a deal five months after the French drugmaker offered to buy Genzyme for $18.5 billion.
The companies may reach a deal in the next two weeks, said three people with knowledge of the situation who spoke on the condition of anonymity because the talks are private. The confidentiality pact means that Sanofi and Genzyme are aligned on broad terms, with Sanofi likely to slightly raise its $69-a- share offer, the people said. The French drugmaker may also make additional payments based on the success of a Genzyme experimental multiple sclerosis drug, the people said. The companies have yet to agree on final terms.
“This probably means things have moved forward,” Jerome Forneris, who helps manage $12 billion, including Sanofi shares, at Banque Martin Maurel in Marseille, said in a telephone interview. “Sanofi is determined to pull this deal through.”
Genzyme will provide data such as profit margins and customer lists, which Paris-based Sanofi agreed not to divulge, Sanofi said in a filing today with the U.S. Securities and Exchange Commission. France’s biggest drugmaker last week extended its bid for Cambridge, Massachusetts-based Genzyme to Feb. 15, giving the sides more time to negotiate.
Genzyme, the world’s biggest maker of drugs for rare genetic diseases, rose $2.25, or 3.2 percent, to $73.35 at 4 p.m. New York time in Nasdaq Stock Market trading, the shares’ biggest gain since Aug. 30. Sanofi gained 66 cents, or 1.3 percent, to 49.88 euros at the 5:30 p.m. close of trading in Paris.
Sanofi made its offer for Genzyme public on Aug. 29 and took the bid directly to shareholders on Oct. 4, after Genzyme Chief Executive Officer Henri Termeer spurned it as too low and refused to negotiate. The two companies later began talks. Sanofi CEO Chris Viehbacher said on Jan. 26 that talks with Genzyme had made “some progress” although “some gaps” remained on how the two parties valued Genzyme’s business.
“The discussions are continuing, and Genzyme will be sharing certain non-public information with” Sanofi, according to today’s filing. “There is no guarantee that these discussions will continue or that the parties will come to an agreement.”
No agreement has been reached on the extra payment, known as a contingent value right, for the experimental multiple sclerosis drug alemtuzumab, said Bo Piela, a Genzyme spokesman.
Genzyme has projected peak sales of $3.5 billion for alemtuzumab, which would be sold under the name Lemtrada. Sanofi said in October analysts’ estimates of about $700 million were a valuation “probably closer to the reality of the product.” Lemtrada, which is known as Campath when used for blood cancer, is in the final stages of testing and Genzyme expects data from those trials this year.
Viehbacher is looking for acquisitions to replace revenue the company is losing as its top-selling drugs face generic competition. Sanofi also is under pressure as its Multaq heart treatment has been linked to possible liver complications and its promising iniparib cancer drug failed in a key clinical study.
Sanofi is weighing a symbolic increase to its offer, two people with knowledge of the situation said Jan. 7. Sanofi was open to raising its offer by about $2 a share to get access to Genzyme’s books once the two sides agree on the extra payments, said the people, who declined to be identified because the negotiations are private. The CVR payments may be worth $5 to $6 a share, one of the people said at the time.
Talks with Sanofi “have focused to a significant degree on the potential use” of a CVR for alemtuzumab “as a part of a potential resolution of the differences in valuation between the parties,” Genzyme said in a statement today. “The parties have also discussed other potential terms for a negotiated transaction,” the U.S. company said.
The companies probably will reach a deal in the next few months for Sanofi to buy Genzyme for $74 a share, plus another $5 to $10 a share in potential payments tied to Lemtrada, according to Mark Schoenebaum, an analyst at ISI Group in New York.
Genzyme will give Sanofi access to profit margins, price lists, customer and supplier lists, customer contracts, purchase orders, financial projections and other information that Genzyme considers to be “competitively sensitive,” according to today’s filing.
Under the terms of the agreement, Sanofi won’t “solicit for employment or hire” for 12 months any Genzyme employee it came in contact with during its evaluation of the U.S. biotechnology company.
Jean-Marc Podvin, a spokesman for Sanofi in Paris, declined to comment further on the negotiations. “We are not going to discuss the details of our discussions” with Genzyme, he said in an e-mail today.
“We have entered into a confidentiality agreement so that we can share non-public information as part of a due diligence process,” Piela said today in an e-mail. “We have not reached agreement on a CVR.”
To contact the reporter on this story: Albertina Torsoli in Paris at firstname.lastname@example.org