As reported in the WSJ, Genzyme's profits in Q3 quadrupled to 26 cents per share ($69 M) up from 6 cents per share ($16 M) a year ago. Up to now, Genzyme has insisted that Sanofi's bid at $69 per share to purchase the company is too low and that the bid should be closer to $80 per share - this earnings report may help bolster their case.
Paradoxically, the earning report may also get them closer to being purchased as the increased earnings may well aid Sanofi in trying to convince its largest shareholders that a bid for Genzyme in the area of $75 per share is reasonable. Then Sanofi will also be able to take such an offer to Genzyme's big shareholders too to pressure for a sale.
Fierce Biotech reports this morning that Sanofi had no trouble raising $15 B in loans to serve as a war chest to provide flexibility in deal making for a Genzyme deal. Additionally, Sanofi told Reuters the Hart-Scott Rodino antitrust waiting period had expired and a Genzyme purchase is in the clear from a regulator's point of view. Genzyme's report that it may soon be fully back on line with Cerezyme and Fabrazyme - its two biggest revenue products - also will help Sanofi's confidence. And, Genzyme's promising phase II results for Campath in the treatment of MS, where it might generate $1-2 B in annual sales doesn't hurt the cause either.
On balance, the good Genzyme earnings report, if viewed as a case of turning the corner, just makes it all the more attractive as an acquisition candidate for Sanofi and should bolster Sanofi's confidence in upping the bid to get the deal done.
Posted by Bruce Lehr October 20th 2010.