Genzyme adamant that Sanofi offer undervalues it

Outlines its accelerating financial recovery to analysts

Genzyme has reported details of its ‘accelerating financial recovery and other factors underpinning its value’ to investors and securities analysts in New York, with the aim of outlining why the US$69 a share offer made by Sanofi-aventis at the end of August undervalues the firm.

The US biotech has issued earnings guidance of $4.30–$4.60 per share, with revenues predicted to increase to $5.0–$5.1bn in 2011, up from an expected $4.1bn in the current financial year.

Genzyme’s chief executive Henri Termeer said the board of directors was unanimous in the view that the Sanofi-aventis offer does not ‘reflect our financial recovery, the achievement of manufacturing and product-supply milestones, and the increasingly recognized commercial potential for alemtuzumab’.

Termeer said the company’s manufacturing and supply recovery is on track for Cerezyme (imiglucerase for injection) and Fabrazyme (agalsidase beta), and it expects to be able fully to supply the global market during the first half of 2011.

Genzyme is also on schedule to meet the deadlines for ceasing fill/finish at its Allston plant for products sold in the US. A significant portion of this work has been transferred to Waterford, Ireland, and the remainder is being transferred to a third-party manufacturer.

Engineering runs are ongoing at the newly expanded fill/finish operations in Waterford, and regulatory approval is expected in 2011.

The company’s new Framingham cell culture facility is operational with Fabrazyme engineering runs underway, and approval is anticipated in late 2011.

The company’s leading independent director Bob Carpenter said the Sanofi-aventis offer substantially undervalues the company and its timing (based on a 1 July stock price) deprives shareholders of the opportunity to benefit fully from the company’s manufacturing recovery.

The French drugmaker has said that the $69 share offer represents a multiple of 20 times consensus earnings estimates.

Carpenter said the offer does not recognise the value of Genzyme’s products and pipeline and fails to recognise the firm’s improving financial performance. Its pipeline includes three late-stage drugs scheduled for launch by 2013.

Termeer said the company’s financial recovery started to take effect in the third quarter and he expects it to continue into the fourth quarter.

‘We are also implementing measures to reduce our operating costs, while remaining focused on the priorities of transforming our manufacturing operations, strengthening our core genetic disease business, and advancing key pipeline programmes to ensure sustainable long-term growth,’ he said.

Third-quarter revenue was US$1bn, compared with $923.8m in the same period last year.

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