Biotechnology company Genzyme Corp. is weighing an informal takeover approach from France's Sanofi-Aventis, but has no current interest in selling the company, a source familiar with the situation said Monday.
Genzyme had already been studying the sale of three non-core businesses - genetic testing, diagnostic products and pharmaceutical materials - but is not interested in selling the company as a whole, said one source, who declined to be identified because he was not authorized to speak with media.
Sources told Reuters on Friday that Sanofi had approached Genzyme two weeks earlier with an informal bid to buy the company and was awaiting a response.
Bloomberg reported earlier Monday that Genzyme had rebuffed Sanofi's overture.
Genzyme, however, has not responded to Sanofi or rejected the French company, a second source familiar with the situation told Reuters. Sanofi and Genzyme declined comment.
Shares in the biotech company rose nearly 8 per cent to $67.43 (U.S.) on hopes of a hefty premium for Genzyme's portfolio of treatments for rare disorders and experimental drugs, on top of a 15 per cent gain when Sanofi's interest first emerged.
Some company watchers say Genzyme shareholders may be willing to accept a price in the range of $70 to $80 per share, particularly newer investors who were drawn to the company as it was targeted by activist investor Carl Icahn.
They might be willing to accept a narrower premium than long-standing investors, said Sam Isaly, managing partner at OrbiMed Advisors LLC. OrbiMed is a long-standing investor and holds about 0.9 per cent of Genzyme, according to a March 31 filing.
"I suspect a figure in the $70 range will be enough," he told Reuters in an interview.
Analysts see Sanofi in need of a major acquisition as some of its key drugs face generic competition. On the same day as news of its interest in Genzyme surfaced, U.S. regulators approved a generic version of Sanofi's blood thinner Lovenox and the French drug maker cut its 2010 profit view.
While other major drug makers, including Britain's GlaxoSmithKline PLC and New Jersey-based Johnson & Johnson, have been suggested as possible suitors, industry experts question the extent of their appetite.
RBC Capital Markets analyst Glenn Novarro said he doubted J&J would make a play for Genzyme, saying that it would be an uncharacteristically large transaction for the diversified health care products maker, which currently has a strong pipeline of experimental drugs and medical devices.
"J&J historically has gone for deals below $1-billion; they buy small assets and grow them through J&J's distribution system," Mr. Novarro said.
Glaxo is less likely to end up with Genzyme than Sanofi, according to industry insiders who argue that the French company has a much greater need for an earnings boosting acquisition.
"Glaxo is less likely to enter a competitive process," said UBS analyst Gbola Amusa. Glaxo has weathered some significant patent expirations of important products, he said, so it "doesn't quite fit the profile to do a large deal for the sake of earnings growth."
For Genzyme, an offer at the right price may attract investors who have seen the shares plunge since a viral contamination at its Boston plant lead to shortages of two of its biggest-selling drugs.
The manufacturing crisis also led to Genzyme agreeing to pay a large penalty and to a consent decree under which it placed drug making operations under third-party control.
It had also been fending off two activist investors, including Mr. Icahn, who had been agitating for operational and top management changes at the company.
The company avoided a proxy fight by putting two Icahn representatives on the Genzyme board, as well as giving the other activist investor, Ralph Whitworth of Relational Investors LLC, a seat on the board.