Rumors fly of huge sanofi-aventis U.S. acquisition brewing

Everyone's mum right now, but the United States seems to be the target, and $20 billion seems to be the figure for the mystery company in sanofi's sights

Jeffrey Bouley
PARIS—Widespread speculation is that French pharmaceutical giant sanofi-aventis is in the early stages of a planned acquisition that is reportedly in the $20 billion range and involves a U.S-based company. That's a big purchase and a bold move into the United States, but there's one mystery about all of this still: On what company does sanofi-aventis have its gaze fixed?

The rumors were truly vague and speculative in early July when the stories first began to circulate, but a recent story published by Bloomberg has Genzyme Corp. on many peoples lips and minds.

According to the Bloomberg story that ran in late July, sanofi-aventis actually made takeover overtures to Genzyme Corp., the largest maker of medicines for genetic diseases, quoting two unnamed sources "with knowledge of the matter." Reportedly, France's biggest pharma was still waiting for a response and hadn't entered into any merger negotiations of substances, but those sources close to the matter noted that the price tag being considered is less than $20 billion. They also say that Chris Viehbacher, CEO of sanofi,, briefed his company's board of directors the week of June 28 that there were plans for a major acquisition in the United States.

If it is Genzyme, the acquisition would help sanofi expand in the biotech arena, market watchers note, but for now, the mystery remains, as Genzyme spokesperson John Lacey has simply said, "We don't comment on rumors and speculation" and the sanofi spokesperson wasn't even answering calls on the matter.

The news at the time caused Genzyme stock prices to jump 15 percent to $62.52, and Sanford Bernstein & Co. analyst Geoffrey Porges told Bloomberg that "This is plausible; it's not ridiculous."

But the Genzyme story isn't the only speculation around, and business analysis and opinion firm Datamonitor has some other thoughts as to who might be the target—or who might become a target if Genzyme proves to be a non-starter.

"Based on current market capitalizations and strategic fits, Datamonitor considers that in terms of prescription pharmaceutical companies, the unidentified target could be one of Biogen Idec, Allergan or Genzyme," says Giles Somers, a senior healthcare analyst at Datamonitor. "Currently capitalized at $13.3 billion, allowing for a premium, an acquisition of Genzyme would likely end up somewhere in the region of $20 billion. Similarly, Biogen Idec has a market capitalization of $12.5 billion, while at $17.9 billion, Allergan would potentially require somewhat more than $20 billion.
 
Over the past two years, sanofi-aventis has completed numerous acquisitions as part of a diversification strategy implemented since Viehbacher took the reins of sanofi in September 2008, Somers notes, adding, "To date, the majority of these acquisitions have taken place in the generics, consumer healthcare and vaccine sectors as the company looks to expand its presence in areas that both benefit from high-growth potential but are also insulated from the competitive threat of patent expiration and generic competition."
 
"If suggestions of an imminent $20 billion acquisition are true, however, this would signal a notable statement of intent by the company as it looks to re-shape the focus of its core prescription pharmaceuticals business, building on the major overhaul of the company's internal R&D pipeline last year," Somers adds.  
 
Looking at the potential fits with sanofi, Datamonitor notes:
 
  • Allergan represents a fit with sanofi's recent activity in the ophthalmology space, following the acquisition of Fovea and gene therapy deal with Oxford Biomedica. However, Datamonitor believes that the motivation behind these deals was the high unmet needs addressed by these companies' treatments rather than a desire to build a wider presence in ophthalmology per se.
  • Biogen Idec would bring sanofi-aventis Avonex and Tysabri, leading treatments for multiple sclerosis. Sanofi co-promotes competing product Copaxone in the EU until 2012 when Teva will regain full rights. (US rights were returned to Teva in 2008.). Biogen Idec would also provide biologic capabilities, particularly in monoclonal antibodies.
  • Genzyme's business is focused on specialized, niche disorders. The company's share price has been knocked over the past year by manufacturing issues and as such providing an opportunity to acquire the company at a less demanding price. Datamonitor forecasts strong revenue growth for Genzyme at 11.1 percent CAGR 2009–15, compared to 3.5 percent for Allergan and a slight decline for Biogen Idec over that period. Genzyme, like Biogen Idec, offers a platform for further expansion into the biologics sector. Therefore, combining a good strategic fit with strong growth prospects and a depressed stock price, Genzyme can in some ways be seen as the most attractive target for Sanofi of the three companies discussed, price allowing.

Amy Reilly, a spokeswoman for Cambridge, Mass.-based Biogen, and Caroline Van Hove, a spokeswoman for Irvine, Calif.-based Allergan have both said—like the Genzyme spokeperson, that they don't comment on market rumors.

Viehbacher has indicated in the past the he is counting on acquisitions to help replace revenue that sanofi is losing as its medicines face competition from lower-priced generic drugs, and the company already has spent about $17 billion on 25 acquisitions since 2008, according to data compiled by Bloomberg.


Jeffrey Bouley

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