Court Ruling Increases Pressure on Sanofi to Buy Genzyme

Includes: SNY
by: The Burrill Report

By Michael Fitzhugh

Sanofi-Aventis (NYSE:SNY) has lost a legal battle intended to fend off generic competition for Taxotere, a cancer medicine that generated more than 8 percent of its net pharmaceutical sales in 2009. The U.S. District Court ruling invalidates two patents that would have protected Taxotere from generic competition until 2013. Hospira and Apotex, two companies planning to market generic versions of the drug, will be happy to get rolling sooner than that. But for Sanofi, the ruling could have larger implications. Accelerated competition for Taxotere could erode revenue sooner than expected, ratcheting up the pressure to replace it by acquiring Genzyme (GENZ).

Genzyme's board rebuffed Sanofi's August offer of $69 per share as too meagerly priced. But already rumors of Sanofi's intentions to raise that bid have surfaced. Sanofi's board could meet within days to approve a higher bid for Genzyme, according to Dow Jones Newswires. A higher bid could prompt Genzyme to allow Sanofi access to confidential financial information on its books and conduct due diligence on the company.

A thorough review, crucial to any deal, may be especially important in convincing Sanofi's board that Genzyme's pipeline of experimental drugs holds long-term value not reflected in its most recent quarterly results. Genzyme has lost millions in revenue and market capitalization following manufacturing troubles that have stunted the supply of some of its best-selling medicines.

Taxotere, which is used to treat certain types of breast, lung, prostate, stomach, and head and neck cancers, isn't Sanofi's only drug facing imminent loss of patent protection. Eloxatin, for treating advanced colon and rectal cancer, was only protected in the United States until August 2010 and Plavix has already begun to face fierce generic competition in Western Europe, though it is protected in the United States until 2012.