Genzyme Rejects Sanofi's Offer, While Biotech Stocks Boom

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Genzyme's board blasted a $69-per-share offer from France's Sanofi as "unrealistic" and "opportunistic," while biotech stocks rallied in line with the rest of Wall Street on upbeat economic data.

This article published with permission from The Burrill Report.

Sanofi-Aventis SA made a formal offer to acquire Genzyme Corp. (NASDAQ: GENZ) for $69 per share, an offer that was unanimously rejected by Genzyme’s board of directors as unrealistic and opportunistic.

“Without exception, each member of the Genzyme board believes this is not the right time to sell the company, because your opportunistic takeover proposal does not begin to recognize the significant progress underway to rectify our manufacturing challenges or the potential for our new-product pipeline,” said Genzyme CEO Henri Termeer in a response letter to Sanofi CEO Chris Viehbacher.

In an interview, Termeer told Reuters that he didn’t think Sanofi would go hostile and he thought there was a good chance that the two companies could come to terms. Whether or not the two CEOs and their boards reach a meeting of the minds will be the subject of much speculation in the coming weeks and possibly months. Termeer says Genzyme’s board is not opposed in principle to a sale of the company, just not at $69 a share.

Some analysts feel Genzyme may be willing to consider opening its books to Sanofi if the offer is raised to $75 a share. So far, Sanofi’s board has authorized a bid of no more than $70 a share for the Cambridge, Massachusetts-based biotech. In afternoon trading Tuesday, shares of Genzyme were trading at $70.60.

Sanofi is staring at the loss of as much as 20 percent of its revenue by 2013 as its drugs lose patent protection. Sales of Genzyme’s drugs for rare diseases generated $4.5 billion in 2009. In his offering letter, Viehbacher told Termeer that Sanofi “would put its full resources behind Genzyme” and that its legacy within Sanofi would be assured.

In other dealmaking activity, Swedish specialty pharmaceutical Meda AB said it will acquire U.S. specialty pharmaceutical Alaven Pharmaceutical LLC for $350 million in cash. The acquisition expands Meda’s U.S. presence in gastroenterology and women’s health -- areas that the company already operates in outside the U.S. Alaven also has a strategic over-the-counter platform that accounts for approximately 25 percent of sales, a business that will further diversify Meda’s revenue base in this country, as well as serve as a platform for commercializing strategic pipeline opportunities. The acquisition of Alaven is expected to be accretive to Meda’s earnings per share already during 2011 and is expected to be completed by early October.

Pfizer (NYSE: PFE) is acquiring Massachusetts startup FoldRx Pharmaceuticals, a drug discovery and development company focused on small molecule therapeutics for diseases caused by protein misfolding, to expand its pipeline in rare diseases. FoldRx’s lead product candidate tafamidis has fast track designation in the United States for the treatment of TTR amyloid polyneuropathy, a progressively fatal genetic neurodegenerative disease, for which liver transplant is the only treatment option that is currently available. Although specific financial terms were not disclosed, Pfizer will make an upfront payment and contingent payments if certain milestones are achieved. (Read more.) Shares of Pfizer were trading at $16.24.

Elsewhere, Orexigen Therapeutics Inc. (NADAQ: OREX) entered into an exclusive partnership with Takeda Pharmaceutical Co. to develop and commercialize its investigational obesity treatment Contrave in the U.S., Canada, and Mexico. The drug is under U.S. regulatory review with an action date set for the end of January 2011. The deal follows Japanese pharmaceutical Eisai Co.’s billion-dollar marketing deal with Arena Pharmaceuticals Inc. (NASDAQ: ARNA) for its investigational obesity drug Lorqess. A U.S. Food and Drug Administration review panel will look at the drug in mid-September.

Takeda will pay Orexigen $50 million upfront for exclusive marketing rights in the U.S., Canada, and Mexico, while Orexigen will retain the right to co-promote with Takeda in the U.S. Orexigen will be eligible to receive payments of over $1 billion upon achieving certain regulatory and sales-based milestones, and tiered double-digit royalties on sales if the drug is commercialized. In afternoon trading, Orexigen shares were at $5.22.

In other market-moving news:

Stocks headed into the Labor Day holiday weekend on a strong note. Recent economic data, including a stronger-than-expected labor-market report, put investors in an optimistic mood, leading them to believe that the economy would not fall back into recession. The Dow Jones Industrial Average closed the week up almost 3 percent, while the Nasdaq Composite Index posted a 3.7 percent gain.

The positive investor environment spilled over to the biotech sector: All blue-chip biotech companies posted positive numbers except for Amgen Inc. (NASDAQ: AMGN), which dropped 2.5 percent. Gilead Sciences Inc. (NASDAQ: GILD) closed the week up 4.6 percent after the company reported that it has repurchased approximately $2.2 billion in common stock under a $5 billion stock-repurchase program. And Celgene Corp. shares closed the week up 2.6 percent after the company said it plans to file a complaint alleging infringement against India's Natco Pharma, which has submitted a request to the FDA for authorization to make and sell generic versions of Celgene's cancer drug Revlimid in the U.S.

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