Genzyme in Sanofi's Control - Analyst Blog

Sanofi-Aventis (SNY) recently announced the successful completion of its exchange offer for all outstanding shares of common stock of Genzyme Corporation (GENZ). With 224,528,469 shares of Genzyme being validly tendered, Sanofi now holds about 84.6% of Genzyme common stock (77% on a fully-diluted basis).

The remaining shareholders of Genzyme have time until April 7, 2011 (6:00 p.m., New York City time) to tender their shares. Meanwhile, the contingent value rights (CVRs), which were a part of the deal, started trading on NASDAQ under the ticker symbol “GCVRZ”.

As a reminder, per the terms of the deal announced in Feb 2011, Genzyme shareholders will receive $74 per share in cash (or $20.1 billion) in addition to a 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 Cerezymeand Fabrazyme.

Acquisition to Create New Source of Growth at Sanofi

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. At the time of announcing the acquisition, Sanofi said that it 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.