After months of negotiations, Sanofi-Aventis (SNY) and Genzyme Corporation (GENZ) finally entered into a definitive agreement for the acquisition of Genzyme. Per the terms of the agreement, Genzyme shareholders will receive $74 per share in cash (or $20.1 billion) in addition to a contingent value right (CVR) for each share.
The CVR will allow each shareholder to receive additional payments related to Lemtrada (alemtuzumab for multiple sclerosis) and the achievement of specified production volumes in 2011 for Cerezyme and Fabrazyme.
The final offer price of $74 is above Sanofi’s initial offer price of $69. Sanofi had initially approached Genzyme with its $69 per share offer on July 29, 2010.
Impact on Sanofi’s Earnings
With this acquisition, Sanofi is looking to create a new source of growth. Sanofi has a high exposure to generic risk on many of its leading franchises. The company suffered a blow with the entry of a generic version of its anti-coagulant Lovenox, which was a major contributor to the top-line.
In addition to Lovenox, we see generic risk to other products as well. In such a scenario, it is imperative for Sanofi to successfully develop and launch new products in order to make up for the loss of revenues once major products lose exclusivity and start facing generic competition. The acquisition of Genzyme will boost Sanofi’s revenues as well as its pipeline.
Sanofi will also get the chance to expand its presence in biotechnology. Sanofi expects the deal to be accretive to its business net EPS in the first year after closing. By 2013, the company expects the deal to be accretive by €0.75 – €1.00. The deal is scheduled to close early in the second quarter of 2011.
Genzyme will be reporting fourth quarter and fiscal 2010 results on Feb 16. Earlier this year, Genzyme presented preliminary results and expects to deliver fourth quarter earnings in the range of 80-85 cents per share, below its guidance of 90 – 95 cents. Preliminary earnings were below the company’s guidance mainly due to lower than expected Cerezyme revenue and gross margins which were impacted by manufacturing costs.


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