Sanofi-Aventis SA CEO Christopher Viehbacher held firm on the French drug maker's $69-per-share hostile bid for Genzyme Corp. during the company's third quarter sales and earnings call Oct. 28, brushing off the show Genzyme's management put on for investors last week to convince them the biotech is worth significantly more.

"The bottom line is we didn't hear anything of substance that would cause us to change our offer," Viehbacher said during the call.

"We think some of the information presented by Genzyme ignores the realities of the market and the company's current situation," he said. "It also demonstrates a lack of realism in management's forecasts."

During the Oct. 22 investor meeting, Genzyme released financial guidance significantly higher than analyst consensus estimates. Based on Genzyme's 2011 earnings-per-share guidance of $4.30 to $4.60 per share, and the 20 times earnings multiple that Sanofi has said it is using for valuing the company, the value of Genzyme would be more like $89-per-share, the company told shareholders (Also see "Genzyme To Sanofi: How About $89-Per-Share? Answer: "Very Unrealistic"" - Pink Sheet, 22 October, 2010.).

The projections hinge largely on the company fixing its manufacturing issues and being able to fully supply the market for its enzyme replacement therapies, Cerezyme (imiglucerase) and Fabrazyme (agalsidase). The company's longer-term expectations include a successful launch of alemtuzumab in multiple sclerosis, which Genzyme said it expects to generate sales of $500 million to $600 million in sales in 2013, the first full year of its launch, and more than $3 billion in peak sales. Alemtuzumab currently is marketed as Campath for B-cell chronic lymphocytic leukemia, but the multiple sclerosis indication is Genzyme's biggest pipeline asset.

Viehbacher responded to Genzyme's financial guidance by playing up management's lack of credibility with investors. "Keep in mind that Genzyme has lowered its EPS guidance numerous times over the last two years," Viehbacher said. "On the heels of missing 2010 consensus estimates and fine tuning its 2010 EPS guidance to the lower end of its previous range, the company is projecting results for 2011 and beyond that are dramatically higher than those expected."

He pointed to Genzyme's forecasts for alemtuzumab in multiple sclerosis as an example of management's lack of foresight. "The sales forecast for Campath stretches the bounds of reality in anyone's mind," Viehbacher said. "In the first year, this is expected to sell more than twice the sales of [Novartis'] Gilenya, and even [Roche's] Avastin didn't achieve the first year sales that were projected."

Viehbacher advised Genzyme investors to take a cautious view of the manufacturing situation. "Keep in mind that six of 12 key upcoming milestones listed by the company directly depend on its manufacturing issues being fully resolved. Companies under consent decrees have often taken longer than expected to resolve the issues," he said.

The takeover saga that began months ago doesn't seem likely to draw to a close anytime soon. After hitting a brick wall in buyout negotiations with management, Sanofi went hostile with its $18.5 billion offer Oct. 4 (Also see "Sanofi/Genzyme Saga: War Before Peace?" - Pink Sheet, 11 October, 2010.).

Lovenox Generics Reality Hits Home

But despite Viehbacher's tough talk, Sanofi is in a vulnerable position, hard hit by generic competition to many of its key drugs, and an acquisition could help ease the company more gently over the impending cliff. The reality of Sanofi's situation was clear in the third quarter financial results, which were negatively impacted by the launch of generic Lovenox (enoxaparin) by Momenta/Sandoz. Generic versions of the blood thinner, Sanofi's second best-selling drug behind the insulin Lantus, launched in the U.S. in late July (Also see "Sandoz Launches Generic Lovenox" - Pink Sheet, 27 July, 2010.).

Third-quarter sales of Lovenox were €589 million, down 26.1% over the prior-year period, reflecting the launch of generics in the U.S. Sales fell by 47.3% in the U.S. to €255 million.

Sanofi also is facing substantial losses from other key sellers too, including Plavix (clopidogrel) in Europe and the chemotherapy Taxotere (docetaxel), which is expected to face generics for the first time in November. Consolidated third-quarter sales were up 5.7% to €7.82 billion on a favorable currency tailwind, but at constant exchange rates and including changes in structure (primarily the consolidation of Chattem), net sales decreased 1.7%.

The launch of Jevtana (cabazitaxel) in the U.S. is off to an apparently strong start. The second-generation chemotherapy was approved for patients with metastatic hormone-refractory prostate cancer previously treated with taxotere in June and launched July 19. In less then three months on the market, it generated sales of €41 million, which is better than some other recent launches in larger indications. Sanofi's anti-arrhythmic Multaq (dronedarone), which launched last year in the U.S., generated €46 million in the third quarter, in comparison, including some initial sales in ex-U.S. markets.

Sanofi's near-term pipeline is thin, and the company mainly is counting on its diabetes franchise and diversification in emerging markets, consumer health care and animal health care for near-term growth. Emerging markets now represent 29.6% of Sanofi's sales, totaling a significant 2.3 billion, Viehbacher said.

In line with its diversification strategy, Sanofi announced the same day that it will buy the Chinese consumer health care company BMP Sunstone Corporation for $10-per-share, or $520.6 million, reflecting a 30% premium over BMP Sunstone's closing share price Oct. 27. The acquisition will strengthen Sanofi's position in consumer health care in China with a presence in vitamins and supplements and cough and cold, the firm said. In addition, it will leverage Sanofi's consumer health care business in China but also offer access to new distribution channels for pharmaceuticals, Viehbacher said in a statement.

-Jessica Merrill (j.merrill@elsevier.com)

Sanofi Holds Its Ground On Genzyme Bid

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