Genzyme Stock Surges 15 Percent on Sanofi Buyout Speculation

7/23/10Follow @xconomy

Genzyme stock boomed today on speculation that the company could get acquired by Paris-based drug giant Sanofi-Aventis. The news was reported earlier today by the Wall Street Journal and Bloomberg News.

No deal was actually announced, and a Genzyme spokesman stated the obvious—that the company, with headquarters in Cambridge, MA, and significant operations in San Diego, doesn’t comment on speculation about transactions. But investors went into a frenzy, driving shares of Genzyme (NASDAQ: GENZ) up 15 percent to close today at $62.52 a share, on more than five-fold higher than normal trading volume. Sanofi-Aventis (NYSE: SNY) fell 4 percent, although that may have been partly because of news that its second-biggest selling drug will now face competition from a generic competitor.

Genzyme, founded in 1981, has grown into one of biotech’s powerhouse companies and the world’s largest maker of drugs for rare genetic diseases. It had about 12,000 employees worldwide at the beginning of this year, $4.5 billion in revenue a year ago, and a stock market valuation of $16.6 billion at today’s close. But the company ran into some nightmarish manufacturing problems when it said on June 16, 2009 that it had discovered a viral contamination at its Allston, MA biotech drug factory.

The ensuing decontamination process led to shortages of Genzyme’s two best-selling drugs. The shortages created an opening for competitors seeking to fill the void, and depressed the stock enough to attract activist investors such as Carl Icahn and Ralph Whitworth to press for new leadership on the Genzyme board of directors.

Sanofi-Aventis certainly has the financial muscle to pull off such a takeover of Genzyme. Sanofi is the world’s sixth-biggest pharmaceutical company, with $40.8 billion in 2009 revenue and market capitalization of $76.9 billion as of today’s closing stock price. Sanofi CEO Chris Viehbacher has proven to be an aggressive dealmaker since he took the helm in December 2008. But while he’s done partnerships with or acquisitions of small biotech companies, he hasn’t overseen a mega-merger like Pfizer’s takeover of Wyeth, Merck’s purchase of Schering-Plough, or Roche’s takeover of Genentech. Viehbacher, in an interview with Xconomy in June 2009, said he looks to small biotech companies as the source for innovative new products to help Sanofi grow.

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