Genzyme, After Months of Holding Out, Agrees to be Sold to Sanofi-Aventis for $20.1B
It’s been a long time coming, but the sale of Genzyme, the Cambridge, MA-based biotech company, to pharma giant Sanofi-Aventis for $20.1 billion marks a landmark moment in the biotech industry here in Boston and beyond. The deal puts Genzyme, the largest biotech company in Massachusetts, and the fate of 10,000 employees in new hands after a nearly 30-year run as an independent firm.
The deal, valued at $74 a share, is the biggest biotech acquisition ever in Boston’s biotech cluster, and one of the largest ever in the industry. The biggest came in March 2009 when Roche paid $46.8 billion to acquire the remaining 44 percent stake of South San Francisco-based Genentech that it didn’t already own.
Paris-based Sanofi (NYSE: SNY) said today it has acquired the world’s largest maker of rare disease drugs in a deal that includes the $74 per share in cash and additional compensation to shareholders for milestones primarily related to Genzyme’s experimental drug for multiple sclerosis, alemtuzumab (Lemtrada), which is already on the market for treating leukemia under the name Campath. The French drug maker initially went public with its desire to snap up Genzyme in August for $69 per share, a price that Genzyme officials and shareholders said was too low.
The boards of both companies have unanimously approved the merger, which is expected to close early in the second quarter of 2011. A component of the deal is that each shareholder will get what is called a contingent value right for each share of stock they own, and each CVR entitles them to up to $14 in milestone payments tied to alemtuzumab for MS and Genzyme reaching certain production levels for its top drugs imiglucerase (Cerezyme) and agalsidase beta (Fabrazyme) in 2011.
Genzyme has made as large an impact on the Boston-area biotech community as any company has. Led by long-time chairman and CEO Henri Termeer, the company pioneered the business of super-expensive medications for tiny populations of patients who have rare genetic illnesses such as Gaucher’s disease and Fabry disease. And the firm has been a breeding ground for executives who have gone on to take key posts at other biotechs. (We’ve covered several such firms, including On-Q-ity, Hydra Biosciences, and Pervasis Therapeutics.)
“It is sad to see one of the few large, stand alone, biotechnology organizations consumed by a large pharma company,” Russ Herndon, the CEO of Hyrda Biosciences in Cambridge, MA, and a former president of the tissue repair unit of Genzyme, said in an e-mail. “I only hope that Sanofi understands the significant role Genzyme has played in bringing attention and treatments to [rare diseases] and will continue to look for new products to serve these patient populations now that the merger is complete.”
Termeer will resign from Genzyme at the close of the deal and serve in an advisory capacity through the integration of the two companies, according to Sanofi. Genzyme is expected to retain its brand and exist after the close of the deal as Sanofi’s global center of excellence in rare diseases.
For many, it will be hard to imagine Genzyme without Termeer, the Dutch-born executive who joined the firm in 1983 and led it from its humble beginnings as a relatively small maker of raw materials for diagnostic tests in the early-1980s to one of the largest biotech drug makers in the world with more than $4 billion in annual revenue. Of course, Genzyme fell on tough times after its drug-making plant in Allston, MA, was temporarily shut down in June 2009 because of viral contamination. Termeer took much of the blame, and felt the wrath of patients who depend on Genzyme’s treatments, when the company was unable to manufacture enough of its vital drugs to meet demand. The manufacturing stumble emboldened competitors, and invited tough scrutiny from activist investors like Carl Icahn.
Several sources told me in September, not long after Sanofi’s buyout offer became public, that Termeer would remain steadfast in his position, and wanted to continue as chief executive at Genzyme (a post he took in 1985) in order to lead the company to a full recovery from its manufacturing problems in Allston. The CEO had already begun making good on his plan to revive the company’s stock price through such moves as the layoffs of 1,000 workers and an agreement to sell its genetic testing unit to Laboratory Corporation of America for $925 million in September.
Termeer can take some solace that he and his team were able to get Sanofi to pay more for the company than it had originally offered.
Now begins the game of watching what happens to Genzyme under the stewardship of Sanofi and the drug giant’s chief executive, Chris Viehbacher. There’s little doubt that some number of Genzyme employees won’t stay for various reasons as the companies integrate. Genzyme now employs 4,500 workers in Massachusetts, more than twice as many workers as the state’s next-largest biotech firm, Weston, MA-based Biogen Idec (NASDAQ:BIIB). Sanofi, whose blockbuster sleeping drug zolpidem (Ambien) has entered the lexicon of pop culture, is buying Genzyme as it seeks to revamp its product offerings as generic drug competition chews into sales of brand-name medicines that are losing patent protection.
Sanofi has shown signs that it wants to invest more R&D dollars in Boston. Even before making a run at Genzyme, Sanofi was growing its existing research presence in Cambridge. In July the company said that it would add 300 jobs and invest $65 million to expand its research operations in Cambridge in the coming years. Those numbers might seem trivial now in light of the huge piece of Boston’s biotech pie that it’s buying through the Genzyme acquisition, but they show that the company understands the value of the brainpower in the area.
“This transaction represents a new beginning for Genzyme,” Termeer said in Sanofi’s press release today. “Sanofi-Aventis believes in what we do, in our people and in our potential. We look forward to building a sustainable future together.”