Sanofi-Aventis goes hostile in battle for Genzyme

French drugmaker Sanofi-Aventis has launched an $18.5bn (£11.7bn) hostile takeover offer for Genzyme, in an increasingly bitter battle for control of the US biotech firm. Sanofi-Aventis announced the $69-a-share bid one month after Genzyme, which is developing treatments for multiple sclerosis, cholesterol and less common health problems, turned down an approach at the same price, believing it to be undervaluing the company. However, Sanofi said it had been left with no choice by Genzyme's board and directors. "While Sanofi-Aventis's strong preference is to engage in constructive discussions with Genzyme, Genzyme's board and management team's continued refusal to do so has led Sanofi-Aventis to commence the tender offer," said Sanofi. It is the biggest hostile takeover attempt in the pharmaceutical industry since Roche's acquisition of Genentech for $47bn in 2008, according to Dealogic, which analyses mergers and acquisitions. Genzyme, based in Cambridge, Massachusetts, specialises in ultra-expensive treatments for rare genetic disorders. It also has a promising medicine for multiple sclerosis, Campath, which could reach the market in 2012, plus a cholesterol lowering treatment, Mipomersen, which is in late-stage trials. In May the company received US approval for its drug for Pompe disease, a debilitating muscle condition which can affect children and adults. Sanofi-Aventis's chief executive, Chris Viehbacher, wrote a letter to his Genzyme counterpart, Henri Termeer, published with the offer today,. Viehbacher said the two had an "unproductive" meeting on 20 September. He said he had met Genzyme shareholders who owned more than 50% of the business and claimed they had expressed frustration at Genzyme's reluctance to pursue serious discussions. "Our recent meetings with Genzyme shareholders demonstrate that they support a transaction and are frustrated by Genzyme's unwillingness to engage in constructive discussions with us," said Viehbacher. "This has left us with no choice but to present the offer directly to Genzyme's shareholders." Last week Termeer said a fairer value for Genzyme shares would be closer to $80, its price before the financial crisis and the company's subsequent manufacturing problems. The biotech firm reported a sharp drop in second-quarter profits because of charges and falling sales linked to those problems. Sales of two key drugs – Cerezyme and Fabrazyme – slumped after viral contamination at a Genzyme facility in Allston, Massachusetts, forced the company to halt production and led to inventory shortfalls. The Sanofi-Aventis bid expires on 10 December and represents a premium of 38% over Genzyme's share price of $49.86 on 1 July. Genzyme argues that its share price does not reflect strong financial prospects from divestments and new drugs in development. Sanofi-Aventis needs to replenish its pipeline of new medicines as a number of its blockbuster drugs come off patent over the next few years, leaving them open to cheap, generic competition. The group went to court recently to try to extend the patent for Lovenox, a blood thinner that accounts for 10% of its global revenue, while Plavix, its cholesterol drug produced with Bristol-Myers Squibb, is set to lose patent protection in the US in two years. "We ultimately expect to see an enhancing deal concluded, even if at a higher level than the $69 currently on offer," said analysts at Jefferies International. They calculate that "anywhere in the mooted $70-$80 per Genzyme share range would provide double digit earnings accretion over the midterm" for Sanofi-Aventis.