Xconomy Readers Set $20B Pricetag on Genzyme—Is That Too Rich for Sanofi-Aventis?

7/29/10

We asked our readers to chime in this week on the value of the venerable biotech Genzyme (NASDAQ:GENZ), which has reportedly become an acquisition target of the French drug giant Sanofi-Aventis (NYSE:SNY). Well, the results are in, but the question remains how our readers’ predicted price will match up with what Sanofi offers, and whether that offer will be enough to persuade the powers that be at Genzyme—especially company chief Henri Termeer—to sell.

Our readers sent in the Genzyme stock price that they felt best reflected the company’s value in a buyout, and the average price from our first 100 respondents was $76.29 per share. (See our graph below for a distribution of prices that people submitted.) Thus, our readers think that Genzyme, the world’s biggest maker of drugs for rare diseases, is worth about $20.4 billion. That’s a good deal more than the $70.24 price of Genzyme stock as of 10:31 am Eastern time today, and it might be more than Sanofi wants to part with to own the biotech company.

Sanofi’s board has authorized the company’s executives, led by CEO Chris Viehbacher, to formally offer up to $70 per share or $18.7 billion for Genzyme, Thomson Reuters reported this morning. If it were up to our readers, Genzyme’s Termeer will say “no thanks” to Sanofi’s offer. And according to a Bloomberg News report, Termeer already passed on an informal offer from Sanofi last week, and sources tell the news service that Genzyme is worth up to $22 billion or $80 per share in a takeover.

Genzyme, which had 2009 revenue of $4.5 billion, makes several high-margin drugs for rare illnesses like Gaucher’s and Fabry diseases that would make nice additions to almost any Big Pharma company’s menu of products. (Reports say that other potential Genzyme bidders include British drug behemoth GlaxoSmithKline (NYSE:GSK) and New Jersey-based Johnson & Johnson (NYSE:JNJ). On the other hand, Genzyme’s manufacturing woes in recent years, especially at its Allston Landing factory in Boston, present any prospective buyer with some unwanted baggage to inherit in a takeover. Genzyme already paid $175 million in fines to the FDA this year for messy drug-vial-filling operations in Allston, and the agency is threatening the firm with further expensive penalties if it doesn’t clean up its act.

After major shareholders complained about the company’s handling of the manufacturing problems, Genzyme cut deals with activist investors Ralph Whitworth and Carl Icahn this year. Whitworth and two Icahn associates have taken seats on Genzyme’s 13-member board of directors.

Very quickly, we will learn what the Genzyme board’s appetite is for selling the company. In most such cases, it all comes down to how much.

Xconomy Survey, Genzyme

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