Seeking to fend off a hostile takeover bid by Sanofi-Aventis, the biotechnolgy company Genzyme argued strenuously on Friday that it was worth far more than the $18.5 billion that the French drug maker is offering.
As asserted in the last article titled Sanofi-Aventis in a desperate attempt to acquire Genzyme the offer price was $69 per share which Genzyme executives rejected for being far too low. Genzyme told investors that its earnings next year would be much higher than Wall Street expected and that it was developing a potential blockbuster drug for multiple sclerosis. Genzyme said its earnings for 2011 should be $4.30 to $4.60 a share. That is more than double the expected $1.85 to $1.90 a share for this year and 20 percent higher than analysts had been estimating for next year.
Sanofi’s $69-a-share offer, first made in July, was valued at 20 times the consensus 2011 earnings estimates at that time of $3.45 a share. Using the same multiple but on the new earnings estimate, Sanofi should now be willing to pay $89 a share. Driving the higher earnings is that Genzyme is recovering from manufacturing problems that led to severe shortages of two of its biggest products, the drugs Cerezyme and Fabrazyme, which are used to treat rare inherited diseases.
The 31 percent premium that Sanofi offered over Genzyme’s stock price when it made the bid was far below the 73 percent median premium for recent deals in which large pharmaceutical companies acquired biotechnology companies, such as Eli Lilly’s purchase of ImClone Systems and AstraZeneca’s purchase of MedImmune.
Genzyme expectes its earnings per share to grow at a 35 percent compounded annual rate from 2008 to 2013. A key to that is alemtuzumab, a drug that the company is developing to treat multiple sclerosis and which it expects can reach peak annual sales of about $3 billion. The drug, which the company already sells to treat cancer under the name Campath, has shown remarkable efficacy in treating multiple sclerosis in a mid-stage clinical trial. But alemtuzumab also has some potentially serious side effects, which Genzyme executives argued Friday were manageable. The drug is only now undergoing the late-stage clinical trials and Genzyme is aiming for government approval in 2012.
Genzyme also said that its board had authorized management and outside consultants to search for alternatives ways to increase shareholder value. This could include entertaining offers from other suitors. Genzyme’s shares have been trading above Sanofi’s $69-a-share offer because investors are expecting Sanofi to raise its bid. Most analysts have been expecting the deal to get done at a price ranging from about $73 to a bit over $80.
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