Sanofi to buy Genzyme for $20.1bn and performance-based CVR
The deal will see Sanofi pay $20.1bn in cash upfront as well as a contingent value right (CVR) that could be worth between $2 and $3 per share based on specific criteria.
These include that Genzyme: meets production targets for its Gaucher’s and Fabry disease drugs Cerezyme and Fabrzyme; gains US approval for the multiple sclerosis treatment Lemtrada; and achieves certain sales milestones.
The agreement brings to an end nearly a year of haggling that saw Genzyme repeatedly reject Sanofi's original $18.5bn offer, arguing that its pipeline and dominance of several therapeutic markets was worth $22.5bn.
Sanofi, in response, maintained that its $69 per share valuation was more realistic in terms of future sales and because it took into account Genzyme’s recent manufacturing problems that interrupted supply of key products.
This disagreement became increasingly acrimonious, culminating in Sanofi’s launch of a hostile takeover bid in October. However, more positive noises emerged in the months that followed with the companies confirming that discussions had started.
The real breakthrough came on January 31 when Genzyme granted Sanofi access to its books for due diligence in an effort to agree on a value which, as evidenced by today’s announcement, is exactly what happened.
Market response
Today's news saw Sanofi’s price rise nearly 3 per cent to $51.61 per share in early morning trading on the Paris exchange.
In a press statement Sanofi CEO Christopher Veibacher said: “This transaction will create a meaningful new growth platform for Sanofi Aventis, while expanding our footprint in biotechnology.”
This was echoed by Genzyme chief Henri Termeer who described the takeover as a new beginning for Genzyme, adding that: “Sanofi Aventis believes in what we do, in our people and our potential.”
Similar views were expressed by a number of observers who said the deal will help Sanofi mitigate the impact of future generic competition and give it a portfolio of hard to copy products.
In a research note Leerink Swann analyst Joshua Schimmer said: “Genzyme does have quite a number of attractive assets that synergize nicely with Sanofi,” but also predicted that the merger will lead to job cuts.
Similarly UBS told the Financial Times that: “Genzyme completes Sanofi’s competencies for a new world pharma order. With Genzyme offering Sanofi new competencies, as well as improved access to an important pool of human capital for R&D, we expect many in the market to embrace this deal.”
