Sanofi sticks to Genzyme offer as raises FY goal

By Caroline Jacobs

PARIS (BestGrowthStock) – Sanofi-Aventis (SASY.PA: ) said it was “not obvious at all” it would need to lift its hostile $18.5 billion bid for Genzyme as quarterly earnings beat forecasts and let the French drugmaker lift its profit target for the year.

Genzyme (GENZ.O: ) executives last week began a quest to show the U.S. biotech group is worth more than the $69 a share Sanofi has offered, saying based on their new 2011 earnings forecast its value could be as much as $89 a share.

But Sanofi Chief Executive Chris Viehbacher didn’t buy into what he called Genzyme’s “rosy” forecasts, saying on Thursday Sanofi would stay “patient and disciplined” and keep all options open while still wishing to discuss with Genzyme’s board the company’s value.

“Some of it (the Genzyme presentations) confirmed our assumptions … and some of it seems quite unrealistic. The bottom line is, we didn’t hear anything of substance that would cause us to change our $69 per share offer,” Viehbacher said.

“While it is encouraging to see the company is making progress on some fronts, as expected, we … think some of Genzyme’s financial targets ignore the realities of the market and the company’s current situation,” he told a conference call.

He referred to Genzyme’s recovery from a manufacturing crisis that had led to the shortage of two key drugs and earlier this year dogged its shares, but also said the company had a track record of missing its financial forecasts.

Sanofi shares rose as much as 2 percent and were up 1.5 percent at 50.26 euros by 0835 GMT, outperforming the wider drug index (.SXDP: ). Sanofi’s competitor

AstraZeneca (AZN.L: ) also on Thursday improved its earnings outlook for the year.

Analysts and investors widely expect Sanofi will need to raise its offer, which expires on December 10, to get its hands on Genzyme, but Viehbacher wouldn’t hear of it.

“It’s not obvious at all,” he said, pointing out that Genzyme shares had barely reacted to the U.S. biotech’s latest forecasts. Genzyme shares closed at $72.07 on Wednesday.

“Obviously Genzyme are pushing the bull case, but Sanofi are not biting,” Navid Malik, Matrix Corporate Capital analyst said.

“I think they (Sanofi) should stay firm with the price. They might eventually raise it to $71 (a share) but I don’t see them raising it much higher than that.”

Genzyme’s rare diseases would add a new growth area for Sanofi, speed up the rebuilding of its drug pipeline, boost its U.S. presence and steer it through to 2013 when copycat drugs will erode about a third of Sanofi’s 2008 sales base.


Still, cost control and a good performance by growth platforms, emerging markets in particular, allowed Sanofi to raise its guidance for the year. Emerging markets account for nearly 30 percent of group sales and grew to 2.3 billion euros.

Sanofi expects earnings per share (excluding amortization and certain one-off items) to grow 0 to 2 percent at constant exchange rates instead of its earlier forecast of a drop of as much as 4 percent.

The new goal takes into account generic competition in the United States for sleeping pill Ambien CR, as well as the possible launch of cheaper copies of cancer drug Taxotere and further erosion of sales of bloodthinner Lovenox, Sanofi said.

Third-quarter earnings beat the Reuters poll on all fronts, helped by an increasing contribution from its growth platforms including consumer healthcare, vaccines and diabetes, as well as a favorable exchange rate.

Net income excluding amortization and one-offs rose 8.9 percent to 2.47 billion euros ($3.4 billion), but fell 2.2 percent at constant exchange rates, compared with an average outcome of a Reuters poll for 2.31 billion.

Sales rose 5.7 percent to 7.82 billion euros against a forecast 7.63 billion, but fell 1.7 percent at constant exchange rates as generic competition mounted.

“The results are a bit better than expected thanks to vaccines which have allowed to make up for slightly disappointing pharmaceutical sales,” said Eric le Berrigaud, analyst at Raymond James. Vaccine sales rose 9 percent.

Lovenox, Sanofi’s second-biggest selling drug last year, became the latest to face generics. Bloodthinner Plavix and cancer drug Eloxatin already face limited generic rivalry.

Lovenox sales fell 26 percent at constant currencies to 589 million euros after Sandoz’s (NOVN.VX: ) and Momenta’s (MNTA.O: ) cheaper biosimilars exceeded expectations in the third quarter.

Next in line facing copycats is Taxotere, which targets several cancer forms like lung and prostate cancer. Hospira (HSP.N: ) expects to launch an injectable generic this year.

Analysts and Genzyme investors polled in August showed expectations for a deal to be done at an average $78 a share.

Sanofi expected cost savings this year to exceed 1.2 billion euros at constant exchange rates from its 2008 cost base.

(Additional reporting by Noelle Mennella and Ben Hirschler, Editing by David Holmes and Michael Shields)

($1=.7261 Euro)

Sanofi sticks to Genzyme offer as raises FY goal