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Sanofi-Aventis has finally gone public with its much-speculated upon bid to acquire Genzyme. After failing in private correspondence to convince the biotech firm's management of the merits of a deal, the French pharmaceutical firm is now taking its $69- per-share offer directly to Genzyme shareholders. Meanwhile, Genzyme made its own stance public, rejecting what it calls an "opportunistic" offer.
Indeed, Sanofi is approaching Genzyme during a challenging time. Although the biotech firm has a strong stable of drugs for rare diseases, chronic manufacturing problems at its Allston, Mass., site have limited product sales. Worse, the issues led the U.S. government to fine the company $175 million under a consent decree that has yet to be resolved.
Reports of Sanofi's bid have circulated in the media since late July, but this weekend marked the first time either company has publicly acknowledged the discussions. Sanofi sent Genzyme's CEO Henri Termeer a letter on July 29 with a non-binding offer for the company, and says it had made repeated attempts before and after the letter to engage the biotech company in discussions.
In a letter dated Aug. 11, Genzyme's CEO made its position on the acquisition clear: "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."
The companies' financial advisors finally held a brief meeting on Aug. 24, but it only "reinforced our belief they remain uninterested in engaging in constructive discussion," Sanofi's CEO Chris Viehbacher said this morning in a conference call with investors. "Given the benefits of the transaction, we believe we have no choice but to make our offer public to shareholders."
Now that the discussions are out in the open, Viehbacher provided some insight into the rationale behind the deal. Sanofi would be catapulted into the rare diseases sector, creating a new platform for growth. Further, the rare diseases unit would increase its U.S. presence, diversify its mix of businesses, and expand its pipeline of Phase I and II products. After a merger, Viehbacher said Genzyme's rare disease segment would continue to operate as a stand alone unit, while the remainder of Genzyme's business—cardiology, biosurgery, hematology, and oncology—would benefit from being integrated into Sanofi's larger and more experienced marketing infrastructure.
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