Sanofi-aventis to acquire Genzyme


The $20.1 billion acquisition of Genzyme by Sanofi-aventis will allow Sanotif-aventis to expand its footprint in biotechnology and give it an edge in the market for drugs for rare diseases, according to experts.

The $20.1 billion acquisition of Genzyme by Sanofi-aventis will allow Sanofi-aventis to expand its footprint in biotechnology and give it an edge in the market for drugs for rare diseases, according to experts.

“Genzyme is strongly positioned in a number of niche markets, which are very lucrative despite low patient numbers,” said Sarah Terry, president, global managing director, Life Science Analytics, a Datamonitor company. “Furthermore, a number of key brands in its portfolio have been granted orphan drug status thereby providing a period of market exclusivity-7 years in the United States and 10 years in the European Union.”

Drugs that are currently in Genzyme’s rare disease pipeline include Genz-112638 oral therapy for Gaucher disease; Ataluren for Duchenne and Becker muscular dystrophy; Acid Sphingomyelinase for Neimann-Pick Type B; gene therapy for Parkinson’s disease; and Neo-GAA for next-generation Pompe disease treatment. Last May, Genzyme won FDA approval for alglucosidase alfa (Lumizyme), for the treatment of late-onset Pompe disease.

“Cerezyme [for treatment of Gaucher disease], Fabrazyme [for Fabry disease], and Myozyme/Lumizyme [for Pompe disease] are the key growth drivers-all for rare genetic disorders,” Terry said. “And, in the pipeline, highlights include products for innovative therapies in oncology [Mozobil] and cardiovascular [Mipomersen].”

The pharmaceutical companies have a high interest in replacing revenues that are lost when drugs go off patent, added Adam Berger, managing director, head of mergers and acquisitions at Leerink Swann, a healthcare investment bank, in New York. “This need, combined with insufficient drug discovery from internal R&D efforts, has been the driver of the very high levels of merger and acquisition activity in the biopharma industry the past few years. Biotech and orphan drugs, because they are less susceptible to generic competition, are of particular interest to pharmaceutical companies who are facing patent expirations, and Genzyme represents an attractive company because of its biotech and orphan drug focus.”

This acquisition highlights an ongoing trend of diversification on the part of big pharma into specialty markets [ie, outside of primary care] and rare/orphan diseases. “Specialty and niche markets are areas of high unmet need with little to no competition, and with orphan status, longer periods of exclusivity,” said Terry. “All of these mean greater growth prospects for pharma whose growth has been stalled by patent expiries and generic incursion.”

Biologics are one of the top growth areas, experiencing growth of 8% to 10% per year, according to Terry. In 2002, small molecules comprised 91% of pharmaceutical sales, in 2014 they will only account for 71% while biologics will have grown to 22%.

Merger and acquisition activity remains at very high levels in the pharmaceutical and biotech industry, agreed Berger. “The last few years have seen a record amount of biopharma M&A activity, and [this] transaction suggests that trend continues.”

This acquisition also means other things, according to Terry. “Based on some of the manufacturing issues Genzyme has faced in the past, providers can have greater confidence in the safety and sourcing of their products and the reputation and standards that Sanofi-aventis brings to the table,” she said. “And, with the financial backing of Sanofi-aventis, faster development of products is possible, or, more simply, bringing products to the market faster to the patients who need them the most.”

The fallout from Genzyme's manufacturing issues-lowering the company's share price-coupled with an impressive sales growth projection, has made Genzyme a prime acquisition target and could make it the largest buyout since Roche’s acquisition of Genentech, added Terry.

“This agreement with Genzyme is both consistent with our long-term strategy and creates significant long-term value for our shareholders,” Sanofi-aventis CEO Christopher A. Viehbacher, said in a company statement. “This transaction will create a meaningful new growth platform for Sanofi-aventis while expanding our footprint in biotechnology.”In the same company statement, Henri A Termeer, Genzyme chairman of the board, president, and CEO, called the transaction “a new beginning” for Genzyme and believes in “building a sustainable future together” with Sanofi-aventis.

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