The long standoff between Sanofi-Aventis and Genzyme has finally ended right about where the analysts had expected for months; with a buyout deal at $74 a share in cash and a contingent value right that most expect will soon bring that up to around $78. The upfront is worth $20.1 billion to Genzyme investors, and the CVR caps out at $14 if the most optimistic projections for the MS drug Lemtrada are right, adding a potential $2.7 billion to the deal.
The Genzyme deal gives Sanofi an enormously expanded presence in Boston, where it is already building a sizeable oncology development division. And it makes the company a big player in the rare disease field, another hot commodity in Big Pharma. But there's a big potential downside for Boston as well, as Sanofi eyes operational cuts that can add value to the big acquisition.
The deal also raises the profile of the CVR, a security that has the potential to deliver a string of milestones for the seller. The CVR pays out $1 on Genzyme's ability to hit production targets on two key products, with another $1 triggered by an FDA approval of Lemtrada, a drug that Genzyme CEO Henri Termeer has boldly predicted will go on to become a mega-blockbuster in MS. If Termeer is right, Genzyme shareholders can earn up to $12 as sales rise to $2.8 billion.
Marc Booty with Pictet Asset Management told the New York Times that a "realistic estimate" of the pact comes in at $78, a figure that will put a smile on the face of the vast majority of Genzyme's investors.
"This transaction will create a meaningful new growth platform for Sanofi-Aventis while expanding our footprint in biotechnology," said Sanofi CEO Chris Viehbacher. To make the deal a real success, notes veteran Forbes writer Matthew Herper, Sanofi will need to hang on to the scientific talent it inherits with the buyout.
"One key for making the deal work will be holding on to the expertise in Genzyme's core rare disease drug business," writes Herper. "Sanofi would be wise to walk in and offer all those employees raises, and focus any cost-cutting efforts on back office employees and those in other Genzyme businesses. This is the tough trick, here. Roche made all sorts of noise about preserving Genentech's culture, but it is not at all clear that the company managed to do so."