Sanofi Goes Public in Genzyme Bid
Aug30

Sanofi Goes Public in Genzyme Bid

Sanofi-Aventis finally went public with its bid for Genzyme, and the biotech fired back with a press release noting its rejection of what it called an “opportunistic” bid that undervalues the company. A little dateline to bring everyone who spent August laying on beaches up to speed on Sanofi’s courtship of Genzyme: Media reports of talks between Sanofi and Genzyme first surfaced on July 24. Sanofi’s CEO Chris Viehbacher sent over its “bear hug” offer (for those not in the financial world, a bear hug is a friendly bid that is well above the company’s recent share price) to Genzyme on July 29th. On August 11, Genzyme’s CEO Henri Termeer fired back a letter to Viehbacher rejecting the bid as “opportunistic.” Nevertheless, the companies’ financial advisors subsequently met on August 24, although Viehbacher said the meeting only reinforced Genzyme’s uncooperativeness. Yesterday, Sanofi put the pressure on by issuing a press release saying it had made its offer for Genzyme and this morning held a conference call with analysts to discuss the proposed transaction. Genzyme issued its own press release this morning calling the price tag “unrealistic” and undervaluing the company. To review, Genzyme has been on a bit of a rollercoaster ride due to serious manufacturing issues at its Allston, Mass., plant. A viral contamination at the facility led to shortages of Cerezyme and Fabryzme, both treatments for rare diseases. Patients, many with nowhere else to turn for therapy, were infuriated by the protracted process of getting the plant back up and running. In March, the government finally issued a consent decree, under which a third party steps in to assess the plant’s operations. Genzyme was fined $175 million in the ordeal, and only last week said Cerezyme supply would soon be back to normal. Needless to say, the manufacturing woes and drug shortages pushed down Genzyme’s stock price, making it an attractive acquisition target. Sanofi’s bid was a 38% premium on the biotech’s stock price on July 1, but Genzyme feels the company is being undervalued. So far, Sanofi has refused to budge on price. When news of the potential acquisition first surfaced in July, many analysts said they expected Genzyme to garner closer to $75 per share. On this morning’s call, analysts probed whether and by how much Sanofi would be willing to increase its bid if the biotech were to be in better shape than it appeared. After all, some of the manufacturing issues appear to be clearing. And Viehbacher said today that the meeting of the companies’ financial advisors only lasted an hour and a half, not really enough time to constitute due diligence on...

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Genzyme’s Consent Decree Saga Continues
Apr21

Genzyme’s Consent Decree Saga Continues

A month after Genzyme revealed FDA was likely to hit the company with a consent decree after numerous issues at its Allston, Mass., plant, we’re finally starting to get an idea of just how much it will cost the company to resolve its manufacturing mess. In its first-quarter earnings statement this morning, Genzyme said it had received a draft consent decree that called for it to hand over $175 million in past sales of products made at troubled Allston facility. Investment bank Leerink Swann said the figure was in line with expectations. A consent decree is a rare action taken by FDA after a company has had repeated, egregious quality issues at a manufacturing site. It generally calls for an independent party to inspect and assess a plant’s operations over time to guarantee it is up to good manufacturing practices (GMP). FDA decided to go beyond the typical warning letters it issues about GMP violations after Genzyme had to repeatedly stop and restart manufacturing at Allston. The production issues caused prolonged periods of limited shipments of Cerezyme, for Gaucher disease, and Fabrazyme, for Fabry disease. Genzyme could take another financial hit if it doesn’t move its fill/finish operations from the Allston site by a yet to be determined deadline. FDA will take 18.5% of sales from any drugs made at the site after the deadline. The biotech also said first-quarter sales were down 7% to $1.07 billion due to the limited shipments of Cerezyme and Fabrazyme. Making biologics is no cake walk, and initially it seemed appropriate to give Genzyme some leeway as it worked to overcome its manufacturing woes. But the big biotech made the additional mistake of not having an inventory on hand when the issues at its facility occurred. To remind readers, the diseases Genzyme tackles are rare, and no alternative treatments are approved for Gaucher and Fabry. As a result, any available supplies of Cerezyme and Fabryzme had to be meted out to patients, who then had to cut back their doses until the shortage let up. For a good look at how the move affected patients taking Genzyme’s drugs, check out this recent story in NY Times. To make matters worse, full shipments of Cerezyme have again been delayed, this time due to a power failure in the city that caused issues with Allston’s water system. As a result, Genzyme will continue to ship Cerezyme at 50% its normal level for the next two to three...

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