Sanofi Deal Brings Risk, Opportunity To Genzyme Partners
February 16 2011 - 3:01PM
Dow Jones News
Following Genzyme Corp's (GENZ) planned takeover by
Sanofi-Aventis SA (SNY, SAN.FR), the biotech company leaves several
smaller partners in danger of losing a major collaborator, and
brings an opportunity for long-time partner BioMarin Pharmaceutical
Inc. (BMRN).
Both Osiris Therapeutics Inc. (OSIR) and Isis Pharmaceuticals
Inc. (ISIS) are in the process of developing new products with
Genzyme, which provides funding and support for the development of
the drugs. BioMarin already sells Aldurazyme with Genzyme, but the
change in control will give it the option of acquiring full
ownership of the drug, something that would likely be
profitable.
"We will certainly be looking at those," Sanofi Chief Executive
Christopher Viehbacher said Wednesday, noting that it is "early
days" to be commenting on the partnerships.
Shares of BioMarin rose 51 cents, or 1.9%, to $27.45, while Isis
rose 11 cents to $8.80, and Osiris is up 10 cents to $7.06.
In terms of the partnerships, Viehbacher said he isn't going to
"second-guess everything" at Genzyme but stressed that $20 billion
is "an awful lot of money and you only spend that if you see huge
value."
"You really want to make the most out of that, so that is what
we are going to do and that includes the partnerships," he
said.
The most interesting impact of the Genzyme deal involves
BioMarin's opportunity for Aldurazyme, a rare-disease treatment
that had $167 million in global sales last year.
Under their agreement, BioMarin can terminate the partnership
and name a price it is willing to pay for the full rights to
Aldurazyme. The decision is complex, because Sanofi--as Genzyme's
new owner--would then decide whether to accept the offer or pay the
same price for BioMarin's stake.
Acquiring all of Aldurazyme could be a good move for BioMarin
because it manufactures the drug but receives only 40% to 50% of
sales, meaning that the increased revenue would almost directly
boost its net income.
However, proposing to buy the full rights opens BioMarin to
losing the treatment entirely. The agreement allows for the
termination and a blind offer, but the companies could negotiate a
deal to remove uncertainty and maximize the value for both,
something that BioMarin would prefer.
"If it comes down to it, obviously we are very interested in the
asset," BioMarin spokesman Bob Purcell said. "It is early to
speculate, but I think we will want to enter into discussions with
Sanofi to find something that works for both companies."
"We would rather have a discussion than a shootout on this kind
of thing," he said, but stressed that "all options are on the
table."
Sanofi wouldn't receive as much of a benefit from acquiring
Aldurazyme because it already collects more than half of the drug's
sales and would have to assume manufacturing of the drug. Such a
move comes as Sanofi is aiming to make sure Genzyme can keep
turning around its own complicated manufacturing problems.
Robert Baird analyst Christopher Raymond said BioMarin's
financial structure is sensitive enough that it could pay a
lot--for example, $700 million--and still boost profits.
The fact that BioMarin could grab all the rights to Aldurazyme
isn't a secret; the stock is up 41% since Sanofi's interest in
Genzyme became public last July. Raymond said investors expect
BioMarin to acquire Aldurazyme and the stock could drop if a deal
doesn't happen.
Wells Fargo analyst Brian Abrahams said BioMarin may try to gain
only the marketing rights--allowing it to steer strategy--along
with a bigger cut of sales. He said such a move would be
"incrementally positive" but wouldn't provide the same earnings
benefit as full ownership.
In terms of other Genzyme partners, Osiris Therapeutics is
developing two stem-cell related products with Genzyme, which can
terminate the collaborations at any time, according to regulatory
filings.
JMP Securities analyst Charles Duncan said the Osiris platform
could be attractive to Sanofi, but the collaboration is in danger
of being severed if Osiris doesn't make regulatory progress in the
coming months. Such a move presents a risk for Osiris shareholders
because it removes an important source of funding.
An Osiris spokesman declined to comment on the issue.
For Isis, Genzyme has highlighted mipomersen as a key product
for its future, but its importance to Sanofi is unclear. The drug
lowers cholesterol in patients with extremely high levels because
of rare genetic disorders, but there are lingering concerns about
the drug's effects on the liver. Isis recently said it may not file
its first marketing application until the second half of 2011.
Needham & Co. analyst Mark Monane said a Genzyme takeover
creates some risk because Isis isn't positioned to commercialize
the drug, but that mipomersen's late-stage development makes it an
attractive asset for others. Isis declined to comment.
-By Thomas Gryta, Dow Jones Newswires; 212-416-2169;
thomas.gryta@dowjones.com
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