Genzyme Continues to Pitch for Higher Price from Sanofi

10/22/2010

Genzyme Continues to Pitch for Higher Price from Sanofi

Genzyme went on the PR offensive this week with anaysts and its shareholders in conjunction with its earnings announcements for Qtr 3. In doing so, a primary message it delivered repeatedly was that Sanofi's tender of $69 per share is too low. See WSJ.

Genzyme made its case for a higher valuation thusly (See GZ earnings call in Seeking Alpha):

Reported earnings in the 3rd quarter that beat estimates
Raised projected earnings estimates in 2011 to $4.30-$4.60 per share vs the current Wall Street smart guys estimates of $3.56 per share
Reported that Cerezyme and Fabrazyme manufacturing issues were nearly fixed. Cerezyme shipments are back to normal. Fabrazyme remains on line for mid-year 2011 to reach normal.
Reminded everyone that it improved shareholder value by selling the genetics business to LabCorp for $925 M in cash
Stated the divestiture of the diagnostics and pharmaceutical intermediate businesses remain on track for end of year 2010
Executed on first half of the $2 B stock buy back plan
Continue to see good clinical results on alemtuzumab (Campath) for MS
Saw strong sales of new drug Lumizyme in Qtr 3 after Q2 launch
Reported cash position of $1.2 B

Further, Genzyme reminded analysts that Sanofi justified its valuation of Genzyme based on 36 times analysts projected 2010 EPS and 20 times 2011 EPS. Based on Genzyme management's new estimate of EPS in 2011, Sanofi's bid would need to increase to $89 per share using their methodology. Further, GZ said that an analysis of large pharma all-cash deals for biotechs revealed a median premium of 73% but Sanofi offered only 38% on an artificially depressed (GZ's view) stock price in July.

Therefore, Genzyme says the offer is undervalued, and that Sanofi is not adequately accounting for value in the existing business, success of recovery plans, and new pipeline drugs. So -- pay up if you want us Chris V. Otherwise, we believe we'll deliver at least $69 per share as a standalone company.