sanofi aventis Buys Genzyme

On Feb. 16, 2011, sanofi aventis agreed to acquire Genzyme for $74 per share in cash, or approximately $20.1 billion. In addition to the cash payment, each Genzyme shareholder will receive one contingent value right (CVR) for each share that he or she owns. The CVRs entitle the holders to receive additional cash payments if specified milestones related to Genzyme’s Lemtrada (alemtuzumab MS) are achieved, or if a milestone related to 2011 production volumes for Genzyme’s Cerezyme and Fabrazyme is achieved. Lemtrada is a treatment in development for multiple sclerosis, Cerezyme is a medicine for Gaucher disease, and Fabrazyme is a therapy for Fabry disease.

The agreement ends a standoff between the companies’ leaders that had lasted for months. sanofi’s original offer was to pay $69 per share of Genzyme, but few of the latter company’s shareholders favored the deal, and Henri A. Termeer, Genzyme’s CEO, said that the offer undervalued his company. The current agreement appears to confirm recent reports that sanofi was considering a higher share price and a CVR to bridge the parties’ differences about Genzyme’s value.

The CVR will be publicly traded and is structured so that sanofi aventis and Genzyme shareholders will share the economic benefits when each milestone is achieved. Shareholders will receive the following payments under the CVR arrangement:

• $1.00 per CVR if specified Cerezyme or Fabrazyme production levels are met in 2011

• $1.00 per CVR upon final FDA approval of Lemtrada for multiple sclerosis

• $2.00 per CVR if net sales exceed $400 million within specified periods per territory

• $3.00 per CVR if global net sales exceed $1.8 billion

• $4.00 per CVR if global net sales exceed $2.3 billion

• $3.00 per CVR if global net sales exceed $2.8 billion.

Genzyme and sanofi aventis formed a joint Integration Steering Committee to begin integration planning, with Termeer and Christopher A. Viehbacher, CEO of sanofi aventis, as its cochairs. Termeer will resign as chairman of the board, president, and CEO of Genzyme following the close of the transaction, but will advise on the integration. Genzyme will retain its corporate brand when the integration is complete. Both companies’ boards of directors unanimously approved the transaction, which is expected to close during the second quarter of 2011. The European Commission and the US Federal Trade Commission already have given sanofi aventis antitrust clearance for the acquisition.

“This agreement with Genzyme is both consistent with our long-term strategy and creates significant long-term value for our shareholders,” Viehbacher said in a press release. “This transaction will create a meaningful new growth platform for sanofi aventis while expanding our footprint in biotechnology. We expect it to be accretive from year one, and the CVR structure, which served as an important value bridge between our two companies, rewards both Genzyme and sanofi aventis shareholders, particularly if Lemtrada outperforms the market’s current expectations.”

Sanofi aventis plans to use its global footprint and resources to create new long-term growth opportunities for the combined company, particularly in emerging markets. Genzyme will expand sanofi’s presence in biotechnology and become a new platform in its strategy of sustainable growth. In addition, sanofi will make Genzyme its global center for excellence in rare diseases.

See related PharmTech articles:
The Latest Sanofi/Genzyme Rumors (blog post)

Genzyme Meets Consent Decree Deadline (ePT)

Genzyme Says It Is Worth More Than Sanofi Bid (PharmTech Europe)