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Genzyme Said to Start Talks With Sanofi on Buyout Bid

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Genzyme Said to Talk With Sanofi on Price After Buyout Bid
Henri A. Termeer, chief executive officer of Genzyme Corporation, listens during the India Economic Summit in New Delhi. Photographer: Pankaj Nangia/Bloomberg

Aug. 3 (Bloomberg) -- Genzyme Corp., the world’s largest maker of medicines for genetic diseases, has begun takeover talks with Sanofi-Aventis SA after receiving a proposal from the French drugmaker, according to two people with knowledge of the matter.

Sanofi, based in Paris, outlined an offer of $67 to $70 a share in a letter to Genzyme’s board, said one of the people, who declined to be identified because the discussions are private. Genzyme’s shareholders are looking for a bid above $80 per share, or $21.3 billion, these people said. The boards met separately yesterday to discuss their strategies and how to proceed, said one of the people.

Sanofi needs takeovers to help replace revenue it will lose as its medicines face competition from generic drugs. The drugmaker, the largest in France, cut its 2010 earnings forecast this month after U.S. regulators approved a generic rival to its Lovenox blood thinner.

“Genzyme is pretty unique,” said Sven Borho, a partner with Orbimed Advisors, holder of about 2.5 million Genzyme shares, in a July 26 telephone interview. “I don’t think the $80s are unrealistic.”

Genzyme, based in Cambridge, Massachusetts, fell 16 cents to $70.20 at 4 p.m. in Nasdaq Stock Market composite trading. Sanofi rose 26 euro cents to 45.67 euros in Paris.

Not for Sale

Genzyme Chief Executive Officer Henri Termeer said in a June 14 interview that the company wasn’t for sale. Genzyme is focused on fixing manufacturing defects that cut into sales of its biggest products, Termeer said. He is seeking to revive the drugmaker after sales slumped 2 percent to $4.5 billion last year, following a virus contamination at Genzyme’s Allston Landing factory in Boston.

Activist Ralph Whitworth of Relational Investors LLC., Genzyme’s second-biggest holder, began buying the stock in the third quarter of 2008, when it traded as high as $83.25. Whitworth, and Carl C. Icahn, the third-largest shareholder, gained four of 13 board seats this year in compromises brokered with Genzyme to avoid a proxy battle.

Icahn didn’t return telephone calls seeking comment. Whitworth declined to comment and referred calls to the company. Bo Piela, a spokesman for Genzyme, declined to comment.

Drug Pipeline

Genzyme has five new drugs in the third and final stage of testing typically required for marketing approval by the U.S. Food and Drug Administration, according to the company’s website. These include a new therapy for Gaucher’s disease, two biosurgery products, a cholesterol drug, and a stem-cell treatment for graft vs. host disease.

The three most important trials are the new Gaucher’s disease drug, the cholesterol drug, and a trial for blood cancer drug Campath in multiple sclerosis, wrote analyst Geoffrey Porges, in a note to investors on July 23. They are all likely to come to market in the next 18 to 24 months, Porges wrote.

Genzyme’s average closing price was $52.75 in the month before an offer by Sanofi was first reported on July 23, according to Bloomberg data. An offer of $80-a-share would represent a 52 percent premium.

To contact the reporters on this story: Elizabeth Lopatto in New York at elopatto@bloomberg.net; Jeffrey McCracken in New York at jmccracken3@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net.

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