Sanofi-Aventis SA said it saw no need to raise its hostile $18.5 billion bid for U.S. biotechnology company Genzyme Corp. after the French drugmaker posted stronger-than-expected earnings and raised its profit target for the year.
Genzyme last week began a series of meetings to show it is worth more than the $69 a share Sanofi has offered. The company for the first time gave a forecast for 2011, which, based on the multiple implied in Sanofi's current offer, would value Genzyme as high as $89 a share.
But Sanofi Chief Executive Chris Viehbacher said on Thursday that Genzyme's forecasts were excessively "rosy" and some were "unrealistic."
He said Sanofi would stay "patient and disciplined" and keep all options open while still wishing to discuss with Genzyme's board the company's value.
"We didn't hear anything of substance that would cause us to change our $69 per share offer," Viehbacher said.
A key point of contention is over the value of Genzyme's experimental multiple sclerosis drug Campath, which is approved to treat cancer but generated less that $150 million in sales in 2009.
Sanofi expects peak sales of the drug in multiple sclerosis of $700 million, in line with some Wall Street estimates. Genzyme estimates peak sales in 2017 of $3.5 billion and said an independent research house commissioned by Genzyme pegged peak sales of the drug at $3 billion in 2016.
Mark Enyedy, head of Genzyme's genetics, oncology and multiple sclerosis business, said in an interview that Sanofi does not believe Campath will be able to command a higher price in multiple sclerosis in Europe than it does in cancer.
"I can safely say, through the payor research we've undertaken, that we will obtain value-based pricing in Europe," he said. "If Sanofi is not giving us any credit in Europe that would account for a significant difference in our estimates for the product."
Sanofi said it has proposed a "working group" to discuss Campath with Genzyme to more precisely ascertain its value, but Genzyme on Thursday dismissed the idea.
"We do not think the working group is necessary," said Genzyme spokesman Bo Piela.
Cambridge, Massachusetts-based Genzyme is recovering from a manufacturing crisis that led to shortages of two of its biggest-selling products and sent its shares plummeting from a pre-crisis level of nearly $84 a share.
Viehbacher said on a conference call with analysts to discuss its earnings that while Genzyme is making progress in its recovery, its outlook is too optimistic and that the company had a track record of missing its financial forecasts.
Analysts and investors widely expect Sanofi will need to raise its offer, which expires on Dec. 10, to get its hands on Genzyme, but Viehbacher said a higher offer should not be counted on.
"It's not obvious at all," he said, noting that Genzyme's shares had barely reacted to its latest forecasts.
While Sanofi says there is no compelling reason to raise its bid, Genzyme shares have risen above $72 and Wall Street analysts have started to raise their 2011 earnings forecasts for the U.S. company, to $4.05 a share, on average according to Thomson Reuters I/B/E/S. On that basis Sanofi's offer represents a multiple of 17 times earnings.
Genzyme rose 0.1 percent to $72.15 on Nasdaq shortly before the close of trading.
Meanwhile, Sanofi's third-quarter earnings topped analysts' expectations, helped by its consumer healthcare, vaccines and diabetes businesses, as well as a favorable exchange rate.
Net income, excluding amortization and one-time items, rose 8.9 percent to 2.47 billion euros ($3.4 billion), but fell 2.2 percent at constant exchange rates, compared with an average estimate from analysts polled by Thomson Reuters of 2.31 billion euros.
Sales rose 5.7 percent to 7.82 billion euros, topping estimates, but fell 1.7 percent at constant exchange rates as generic competition mounted.
The company's shares rose 0.34 percent to 49.70 euros.
Sanofi raised its guidance for the year, saying it expects earnings per share excluding one-time items to grow 0 to 2 percent at constant exchange rates. Previously it forecast a drop of as much as 4 percent.
The new forecast takes into account generic competition in the United States for sleeping pill Ambien CR, as well as the possible launch of cheaper copies of cancer drug Taxotere and further erosion of sales of blood-thinner Lovenox, Sanofi said.
Lovenox sales fell 26 percent at constant currencies to 589 million euros.
Rival AstraZeneca also reported improved its earnings outlook for the year.
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