Genzyme Shoots Down Sanofi-Aventis’s Buyout Offer

Xconomy Boston — 

Genzyme’s board of directors has unanimously rejected a new $18.5 billion buyout bid that came in from French drug giant Sanofi-Aventis over the weekend, saying that the offer doesn’t recognize the progress the Cambridge, MA-based biotech powerhouse (NASDAQ: GENZ) has made in rectifying its manufacturing issues, according to a Genzyme press release this morning.

The press release includes a copy of a frank letter from Genzyme CEO Henri Termeer to Sanofi chief executive Chris Viehbacher. In the letter, Termeer states that Sanofi’s latest unsolicited buyout offer of $69 per share in cash the same as the original offer Genzyme received from Sanofi in July. Genzyme has maintained that Sanofi’s offer doesn’t account for the firm’s progress in overcoming manufacturing delays of its drugs and the potential of its product pipeline, which includes alemtuzumab (Campath) for multiple sclerosis that the company feels is a potential big seller.

Today’s release is Genzyme’s first public acknowledgement of the buyout talks between it and Sanofi—even though the potential acquisition of Genzyme, the world’s largest maker of drugs for rare genetic diseases and the biggest biotech firm in Massachusetts, has been huge news both here and abroad for weeks. Genzyme’s stock price has generally moved in concert with leaked information about Sanofi’s appetite for acquiring the company, and this morning its shares were up to $70.51 as of 8:45 am Eastern time on news that the firm’s board had rejected Sanofi’s offer of $69 per share. (In an informal poll late last month, Xconomy readers said they thought Genzyme was worth $20 billion, or $76.26 per share).

Sanofi’s board has authorized the company to pay up to $70 per share to acquire Genzyme, the Wall Street Journal reported. Yet it’s apparent that Genzyme is seeking a significant step up from that amount in a buyout deal. In his letter, Termeer states that Viehbacher is unwilling to bid against himself, meaning that he probably won’t offer the company more unless another bidder comes to the table and ups the ante. There’s been talk that Genzyme, which is coveted for its focus on specialty markets where profit margins are high and competition is low, would be a prize for several major drug companies in need of new revenue streams. But no others have been reported to have countered Sanofi’s offer.

Still, Termeer was firm in his company’s rejection of Sanofi’s offer. “The Genzyme board is not prepared to engage in merger negotiations with Sanofi based upon an opportunistic proposal with an unrealistic starting price that dramatically undervalues our company,” he wrote in the letter to Viehbacher.

According to the WSJ, Genzyme’s stance to not negotiate increases the chances of Sanofi attempting a hostile takeover of the company. Stay tuned.