Genzyme seals Bioenvision deal

Company stands firm on offer of $345 million for New York-based biotech

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Company stands firm on offer of $345 million for New York-based biotech
By Lloyd Dunlap
CAMBRIDGE, Mass.—With investment capitalists cheering (or not) on the sidelines, Genzyme Corp. consummated the acquisition of Bioenvision, with stockholders supporting the merger by a fairly narrow majority of 56 percent. Bioenvision's issued and outstanding shares of common stock and preferred stock voted together as a single class on an as-converted basis.
This represents approximately 67 percent of the total shares voted at a reconvened special shareholder meeting in New York, according to Genzyme. The transaction became effective the day following the meeting. Bioenvision shares have now ceased trading and the company has been delisted from NASDAQ.
With its acquisition of Bioenvision, Genzyme takes a significant step in enhancing its existing oncology business by gaining the exclusive, worldwide rights to clofara-bine. It was precisely the size of the worldwide market for the drug that spurred the intense debate over the $345 million price tag, which was considered by significant shareholders to be far too low.
On Sept. 5, one outspoken detractor, Elliott Associates, L.P., sent a three-page letter to the Bioenvision board of directors over the signature of Jesse A. Cohn, senior technology analyst, detailing its objections. "While we agree that a sale of Bioenvision may ultimately be the best course of action, it is our firm view that remaining a stand-alone entity is far preferable to the currently proposed $5.60 per share offer," the letter states. Noting that a dilutive infusion of capital less than two months prior to agreeing to sell "provided the Company with liquidity and the Board involvement of a large motivated seller of stock (Perseus-Soros – the company's largest shareholder according to Elliott)…provided the Board with even greater reason, beyond its fiduciary obligations, to conduct a robust process to negate even the slightest appearance of conflict of interest."
Elliott cites a number of equity research price targets that ranged from $13 to $8 and claims that "of all the coverage on the Street, we only find one price target below the $5.60 per share offered by Genzyme."
At the center of the dispute is clofarabine, branded as Clolar in the U.S. and Canada, where it is marketed by Genzyme for relapsed and refractory pediatric acute lymphocytic leukemia (ALL). In Europe, Bioenvision and Genzyme co-developed clofarabine and Bioenvision currently markets the product under the brand name Evoltra, for the same indication.
The companies have been developing clofarabine for significantly larger indications, including use as a first-line therapy for the treatment of adult acute myeloid leukemia (AML). Clofarabine has been granted orphan drug status for ALL and AML in both the United States and European Union. According to Elliott's analyst Jesse Cohn, in September 2006, Bioenvision presented a slide in a corporate investor presentation entitled, "Evoltra – Global Blockbuster Potential," claiming an estimated global market for clofarabine of $1.3 billion, excluding further possible indications for treating solid tumors and autoimmune diseases. Again according to Elliott, Genzyme's estimate, as discussed in a May 29, 2007 conference call with investors, was that the drug will reach $600 million of revenue. This shortfall in the buyer's expectations has been criticized by Elliott and others.
In an industry not known for being reticent about making optimistic projections, Genzyme's news releases dated May 29 and Oct. 23, 2007 make no dollar-value estimations of clofarabine's potential. When contacted to solicit their reaction to Elliott and other critics of the deal, Genzyme responded by standing pat with its previously issued comments:
"We are very pleased that Bioenvision shareholders voted to support this merger," stated Mark J. Enyedy, president of Genzyme Oncology, a business unit of Genzyme Corp. "We are deeply committed to furthering the clinical development of clofarabine and making it available on a global basis so that patients around the world with these very difficult forms of cancer will have access to the therapy. The successful completion of this acquisition creates the platform on which we will continue to build an international commercial presence for our oncology business."

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