One less potential rival for Genzyme’s affections?

Some have speculated that a bidding war might erupt over Genzyme after the company rejected an offer from sanofi-aventis, but at least one company, GlaxoSmithKline, has indicated that it doesn’t want to make a bid

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LONDON—Well, it looks like GlaxoSmithKline may be removing itself from any potential bidding war over Genzyme Corp. based on Moncef Slaoui, the British pharma's head of research and development, telling French newspaper Les Echos recently, "An offer by GlaxoSmithKline for Genzyme does not make sense. It is too expensive."

The reason analysts have even been predicting a bidding war was because sanofi-aventis made public a non-binding offer Aug. 30 to buy Genzyme Corp. for about $18.5 billion in cash, with Genzyme refusing the offer less than a day later and sanofi-aventis hinting at possible hostile takeover action.

"If the best idea is to be found outside the company, it is better to conclude a partnership agreement." Slaoui added in the interview with Les Echos. His statement is in line with GSK's stated goal of looking to balance its R&D portfolio more or less evenly with drugs developed through in-house research along with outside partnerships. Also, while Genzyme has a foothold in niche disease areas, GSK, already has a presence in rare diseases through its partnership with JCR Pharmaceuticals.

According to coverage by Reuters, analysts are now saying it looks far less likely that any "white knight" would emerge to trigger a bidding war to either force sanofi to significantly its offer or give Genzyme a more desirable suitor.

Genzyme is considered attractive to sanofi partly because its pipeline includes promising drugs for treating high cholesterol but also because of treatments for other disorders that are in late development. Also, Genzyme already sells some lucrative drugs for rare genetic disorders, and sanofi, like so many pharmas, has been buying smaller companies or paying for rights to experimental drugs as generic competition to blockbuster drugs continues to heat up.

Dr. Brian Abrahams, an analyst with Oppenheimer Funds, has said that he thinks a better deal than the $18.5 billion one will be negotiated between sanofi and Genzyme, despite the former implying it is considering a hostile bid. Abrahams says the price could range between $72 and $74 per share, given historical biotech acquisition premiums and Genzyme's products. At the moment, sanofi's offer stands at $69 per share.

Genzyme has said that in unanimously rejecting the sanofi offer, its board of directors felt that they were "not prepared to engage in merger negotiations with [sanofi-aventis] based upon an opportunistic proposal with an unrealistic starting price that dramatically undervalues our company."

For its part, sanofi has publicly expressed doubts over Genzyme's performance under its chief executive, Henri Termeer, noting in particular manufacturing problems that have created challenges for the company bringing products to market.

As MarketWatch noted Sept. 5, "Genzyme's stock plunged in early 2009 after the U.S. Food and Drug Administration found problems relating to microbiological monitoring at a manufacturing facility. The FDA's scrutiny led to the company effectively losing control over one of its largest production facilities, in Allston, Mass., and contributed to the company cutting 2009 earnings expectations. The unwanted regulatory scrutiny has prompted the attention of some key shareholder activists who will be watching Sanofi's moves carefully. Earlier this year billionaire activist investor Carl Icahn said he planned to nominate four directors to the Genzyme board, including himself. Genzyme also agreed to name Ralph Whitworth, head of Relational Investors to the board."

The notion that GSK might have been interested in entering a bidding tug-of-war with sanofi-aventis wasn't at all far-fetched, though—even if it does seem unlikely now. After all, as the Wall Street Journal reported in July, GSK made a "very casual approach" to Genzyme asking to be notified by the company's officials if they considered selling to anyone.

(Do you have any comments you would like to make about this deal? Visit the version of the story we have at our blog, and avail yourself of the comment feature, by clicking here.)

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