Sanofi-Genzyme. Pipeline war..

From FT news..

Sanofi-Aventis’ all but hostile $18.5bn bid for Genzyme elicited the usual rejection drivel. The troubled US biotech believes it is undervalued by the French drugmaker. Unusual, though, was the accusation that the bid is “opportunistic”. But why not? Genzyme has been through hell and (some of the way) back since a viral infection was found in one of its plants last year. Earnings were smashed and chief executives of every large pharmaceutical company were obliged to have a look.

It is difficult to value Genzyme, since the manufacturing problems make standard sales and earnings multiples misleading. Citi says a sum-of-the-parts mash-up gives a share price of $76, a 10th higher than the $69 on offer. The theoretical value would rise further if Henri Termeer, Genzyme’s chief executive, could clear up his company’s manufacturing and reputational problems, and if the company’s two new drugs worked as planned. But those two ifs explain why the shares hovered around $55 all this year, until Sanofi came around.

Genzyme’s directors do have one good reason to be wary of becoming too friendly with any bidder. Suppose a suitor walked away from the due diligence of the company’s private records without providing a public explanation. For a company already under a cloud, that would be a crushing blow.

Still, Genzyme cannot afford to be too choosy. While Sanofi could go after Bausch & Lomb, Allergen or Celgene, Genzyme has precious few alternatives. Shareholders may prefer to sell out now rather than wait for Mr Termeer to persuade the market that his touted inherent value is higher than Sanofi’s offer. They have been patient for a year. Unless they have stacks more in reserve, they should pressure the board to keep discussions alive. An opportunistic sale may also not be a bad thing.

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