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Strategies & Market Trends : Speculating in Takeover Targets -- Ignore unavailable to you. Want to Upgrade?

To: richardred who wrote (2309)	7/30/2010 5:47:39 PM
From: richardred	Read Replies (1) \| Respond to of 7252

DEALTALK-White knight could be elusive for Genzyme BOSTON, July 30 (Reuters) - Chances are, every big pharmaceutical company is running the numbers and weighing the pros and cons of acquiring Genzyme Corp (GENZ.O). French drugmaker Sanofi-Aventis (SASY.PA) is poised to make a bid for the biotechnology company, according to people close to the matter, but if its offer proved unattractive, Genzyme could cast around for an alternative bidder. [ID:nN28227807] In theory, Genzyme, which makes high-priced drugs for rare diseases, could prove attractive to almost all the big drug makers, most of whom are facing patent expirations on drugs that have fueled their growth for years. But no one bidder has an overwhelming strategic case for stepping in. Genzyme is a unique company that makes proteins for rare diseases. Pharmaceutical companies mostly make pills for diseases that affect large patient populations. That means there is little opportunity to cut overlapping costs. "It will be more motivated by who needs them the most," said one healthcare banker. "There's not one perfect partner." Pfizer Inc (PFE.N) is seeking to expand into niche markets, and. like others, will no doubt be taking a close look at Genzyme. In December it said it would acquire worldwide rights to Protalix BioTherapeutics Inc's (PLX.A) experimental Gaucher disease drug, which if approved would compete with Genzyme's market-leading treatment for the disease. [ID:nBNG262250] But Pfizer is digesting its $67 billion acquisition of Wyeth, which could deter it from another big purchase. Likewise, Merck & Co (MRK.N) is absorbing its $41 billion acquisition of Schering-Plough, and Roche Holding AG (ROG.VX) paid $47 billion for Genentech's shares only last year. Some analysts have speculated that GlaxoSmithKline Plc (GSK.L) could bid since it has not completed a major deal recently, but Glaxo already has access to a rare disease portfolio through its stake in Japan's JCR Pharmaceuticals (4552.OS) and industry insiders say it is unlikely to pursue Genzyme. AstraZeneca Plc (AZN.L), which acquired biotech company MedImmune in 2007 for $15.6 billion, has said large-scale mergers and acquisitions are not part of its strategy. And Novartis AG (NOVN.VX) is embroiled in a battle to acquire the minority stake in Alcon Inc (ACL.N). Johnson & Johnson (JNJ.N) is tied up with a major manufacturing crisis, which could deter it from linking up with Genzyme since Genzyme is emerging from a manufacturing crisis of its own. And a deal of this size would be out of character. "This would be much larger than most of the deals J&J has ever done," said Matt Miksic, an analyst with Piper Jaffray. "That makes it, in my opinion, a relatively low probability." Bristol-Myers Squibb Co (BMY.N) has focused on small acquisitions that it can easily absorb, and Eli Lilly & Co (LLY.N) Chief Executive John Lechleiter has said he is not interested in mega-mergers of the kind conducted by Pfizer and Merck. There are wild cards, though, including big Japanese drugmakers which have been making greater forays into the U.S. drug and biotech market; and though their deals have been smaller, one could potentially emerge to bid for Genzyme.[ID:nSP378987] Astellas Pharma Inc (4503.T) recently acquired U.S. biotech company OSI Pharmaceuticals, and last year, Dainippon Sumitomo Pharma Co Ltd (4506.T) acquired Sepracor Inc for $2.6 billion. In 2008, Takeda Pharmaceutical Co (4502.T) acquired biotechnology company Millennium Pharmaceuticals for $8.9 billion; Daiichi Sankyo Co Ltd (4568.T) acquired Ranbaxy for $5 billion; and Eisai Co Ltd (4523.T) acquired MGI Pharma for $3.9 billion. Whether one of those would willing to jump into a fluid situation to bid against Sanofi is questionable, according to some. "The Japanese tend to be very deliberative about what they're going to do," said Kevin Gorman, managing partner at Putnam Associates," a pharmaceutical and biotech consulting firm. Still, an acquisition of Genzyme, which has a market value of $18 billion, would not be unmanageable for most big drugmakers, and the magnitude of the patent cliff facing the pharmaceutical sector could cause existing strategies to shift. For several years, drugmakers in general have talked about sticking to smaller acquisitions. But Pfizer's acquisition of Wyeth and Merck's of Schering-Plough suggest that big acquisitions are back in vogue. "What you've seen as we've started to get closer to the patent cliff in 2011 and 2012, is that those smaller acquisitions haven't had as much of an impact of insulating revenue as people had hoped, so in the last year and a half there's been a shift back to large-scale acquisitions" said Scott Harrison, an analyst at Argent Capital. "All of a sudden folks are looking around and there are not many assets that can have a big impact right away." (Additional reporting by Ben Hirschler, Jessica Hall and Ransdell Pierson, editing by Gerald E. McCormick reuters.com