NEW YORK — French drug giant Sanofi-Aventis SA on Sunday publicly launched its $18.5 billion cash bid for American biotech firm Genzyme Corp. — a move that follows months of rumored interest and failed attempts to bring Genzyme's management to the table.
Under terms of the proposed acquisition, Genzyme shareholders would receive $69 per share, representing a 38 percent premium over Genzyme's closing stock price of $49.86 on July 1. That's the day before speculation began to swirl that Sanofi was looking to buy an American drugmaker, possibly Genzyme, in a bid to help replace revenue being lost to mounting generic competition. Since then, the French company unexpectedly was faced with generic competition for its blockbuster injected anticlotting drug, Lovenox, which brought Sanofi $3.9 billion last year. Its blood thinner Plavix, the world's second-bestselling drug, has patent protection only until 2012.
Genzyme is considered attractive because it has promising drugs for high cholesterol and other disorders in late development and it already sells some lucrative drugs for rare genetic disorders. That's a hot niche as big pharmaceutical companies diversify beyond blockbuster pills that get slammed by cheaper generic rivals after several years. The Cambridge, Mass., company just received U.S. approval in late May for a new drug for Pompe disease, and its experimental biologic drug for multiple sclerosis is getting expedited review by the Food and Drug Administration.
Sanofi-Aventis is taking the bid public to rally shareholders after what it calls "several unsuccessful attempts" to engage Genzyme's management in talks. Sanofi-Aventis said it sent a detailed proposal on July 29 to management, which was flatly rejected on Aug. 11. The companies' financial advisers met last Tuesday, but Genzyme wasn't willing to start discussions, Sanofi-Aventis said.
In Sunday's letter to Genzyme Chairman, President and CEO Henri A. Termeer, Sanofi-Aventis CEO Christopher A. Viehbacher wrote that the company "was left with no other choice but to take our compelling proposal directly to your shareholders by making the terms public."
Genzyme officials couldn't be immediately reached for comment on Sunday. Analyst Steve Brozak of WBB Securities said Sunday that the bid is "just an opening salvo," and the deal certainly isn't going to "happen overnight."
Termeer "isn't going to go quietly," he added.
While Sanofi prefers to work with the board instead of launching a hostile bid, Viehbacher said on a conference call Sunday that "we are also prepared to consider all alternatives to complete this transaction." When asked whether Sanofi-Aventis would be prepared to raise the offer, Viehbacher called the current bid "compelling" and said the company doesn't see any need to "contemplate the next step" at this point.
"Sanofi-Aventis believes strongly in this acquisition and its strategic and financial benefits," Viehbacher said. "We remain focused on entering into constructive discussions with Genzyme in order to complete this transaction."
It's less certain how excited Sanofi-Aventis' investors are about the deal. Sanofi shares peaked in January at $41.59 but have been on a steady decline since the spring. The company's interest in Genzyme seemingly hasn't helped the stock, which dropped last week near its 52-week low of $28.01.
Viehbacher said Sanofi's global reach and resources would allow Genzyme to accelerate investment in new treatments, enhance penetration in existing marketing and expand further into emerging markets. It could also help counter Genzyme's well-documented manufacturing challenges.
"We could get them back on track," Viehbacher said.
Genzyme last month reported a sharp drop in second-quarter profit because of falling sales and charges partly linked to its manufacturing problems. Sales of two key drugs — Cerezyme and Fabrazyme — plunged because of viral contamination at a Genzyme facility in Allston, Mass., causing the company to halt production and leading to inventory shortfalls. Genzyme announced this past May that it had agreed to pay a $175 million penalty to federal regulators and is mapping out a plan for overhauling the plant. In the meantime, it has switched production to other plants.
Genzyme shares, which traded in the $80 range just prior to the 2008 market meltdown, have tumbled over the last two years amid the weak economy and its manufacturing problems. The stock bottomed in May at $45.39 but has been partly revived by deal talk and closed Friday at $67.62. Genzyme has said that Cerezyme production is back to normal levels and it plans to start increasing shipments of the drug this month. Shipments of Fabrazyme are expected to increase in the fourth quarter as well.
Like other major international pharmaceutical companies, Sanofi has increasingly been making deals to acquire small companies or rights to promising experimental drugs. The moves are aimed at offsetting inadequate progress from internal research programs and looming revenue declines as blockbuster drugs face generic competition.
Since he became Sanofi's CEO in December 2008, Viehbacher has arranged dozens of mostly mid-sized acquisitions. Those include a $1.9 billion March deal in which the company bought Tennessee-based Chattem Inc., maker of Gold Bond skin products and Icy Hot pain relief packs, in a strategy to expand its U.S. health care business.
Paris-based Sanofi-Aventis is the world's fourth-biggest pharmaceutical company, with 2009 revenue of about $35.5 billion. Genzyme booked 2009 net income of $422.3 million on revenue of $4.52 billion.
AP Business Writer Linda A. Johnson contributed to this report.