This Takeover's Going Nowhere Fast

sanofi-aventis (NYSE: SNY  ) released earnings today, but Genzyme's (Nasdaq: GENZ  ) investors were more interested in comments about Sanofi's $69-per-share bid for Genzyme than how sales of Lantus and Lovenox were doing.

Investors got their information, but it wasn't anything to get excited about. Sanofi CEO Chris Viehbacher has proposed a "working group" made up of Genzyme's and Sanofi's management, according to The Wall Street Journal. There was no mention of raising the $69 offer, which Genzyme has insisted is a condition for sitting down at the table.

Even if the two did sit down, they're so far apart -- Genzyme thinks it's potentially worth $89 per share -- that I have a hard time seeing how the limited due diligence Viehbacher is proposing will get them close enough to get a deal done.

Time is on Genzyme's side. As long as it keeps executing, every quarter that goes by puts Genzyme closer to being back on track. Remember, this was an $80 stock back in 2008. I don't see how it's worth that much now, but it's heading in that direction.

In addition to resolving its manufacturing woes, a standstill also gives Genzyme time to develop its pipeline. The company is working on expanding its blood-cancer drug Campath as a treatment for multiple sclerosis. That market is huge; from top-selling Copaxone from Teva Pharmaceutical (Nasdaq: TEVA  ) down to relative newcomer Tysabri sold by Biogen Idec (Nasdaq: BIIB  ) and Elan (NYSE: ELN  ) , they're all blockbusters.

Genzyme may be in a better position than Sanofi, but that doesn't necessarily make it a good bet at $72 per share. And bet, rather than investment, is a good choice of words. There's just no way to know if Sanofi will up its bid or just lose interest and move on. The French drugmaker clearly needs to make some kind of move to shore up its revenue ahead of its pending patent cliff, but there are plenty of other drugmakers in the sea.

This soap opera is far from over, Fools. I'm not sure we're even to the first commercial yet.

Looking for more drama? Check out these drugmakers expecting FDA decisions this week.

Elan is a Motley Fool Rule Breakers pick. The Fool owns shares of Teva Pharmaceutical. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.


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  • Report this Comment On October 28, 2010, at 4:17 PM, gabbigirl wrote:

    Sanofi's tender offer of $69 expires on 12/11/10. I'm not sure if they can raise their bid before then, but not a good move SNY to do so since they decided to go hostile & it sends a bullhorn signal that they know they undervalued GENZ. That will happen anyway when the tender fails. Also, SNY just announced today that they're buying BMP Sunstone for $526M to get a piece of China market. Fascinating to watch these guys do the "paso duble"! Not as much fun as DWTS though;) I'm holding onto GENZ for now just looking at it's pipeline and SNY needs them and has publicly stated they want them. Buyaluminum - long $200 is possible for GENZ but I like generics for short and mid-term. TEVA is my bet!

    Thanks Brian for a good article!

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