Genzyme is just the booster that Sanofi Aventis needs now

Sanofi-Aventis may have made small acquisitions in the last two years, ranging from Kendrick of Mexico and Medley of Brazil to Shantha Biotech in India, but going by the market buzz, the French company is set to make a decisive move into biotechnology with a big-bucks acquisition of Cambridge-based Genzyme Corporation.

Genzyme figures among very highly specialised companies, which make “orphan drugs,” or drugs that are used for treatment of diseases affecting a very small fraction of the world population. Founded in 1981, it has truly been an innovative company having developed products like Cerezyme and Myozyme for genetic diseases and Campath for cancer patients. In 2009, Genzyme recorded sales of $4.5 billion.

Sections of the international media have reported that Sanofi-Aventis has made an informal pitch to acquire Genzyme and may even go hostile if the Genzyme board is unwilling to sell out.

It is still not very clear how the talks are progressing between the two companies, but it is important to understand the growing importance of making a sizeable acquisition for Sanofi-Aventis.

From acquiring large companies to bolstering presence in select therapy areas, the top heap of companies has been busy over the last two years while Sanofi-Aventis has been far more selective in its strategy.

Sanofi’s global chief had said a few years ago that he would not look at big-ticket buys but weigh the advantages that an acquisition can bring for the company. That statement may have been relevant at that time, but today, Sanofi-Aventis needs strength in its future pipeline and it may work better to clinch a deal with Genzyme.

Rare disease drugs or orphan drugs are becoming an attractive proposition for multinational companies. Having seen Genzyme’s success in getting fast-track approvals and its rapid-paced launch programmes, GlaxoSmithKline and Pfizer announced earlier this year that they would dedicate separate research units for work on rare diseases.

It may, therefore, have become obvious for Sanofi-Aventis to look at a smarter way and get a readymade pipeline of drugs being developed by Genzyme.

A look at Genzyme’s top products explains why big deal moves could be headed its way. In 2009, Cerezyme, meant to treat Gaucher disease, fetched revenues of $793 million; Sevelamer, its product for renal disease, had sales of $707 million; and Synvisc, its knee osteoarthritis drug, had sales of $329 million.

Genzyme’s pipeline has products like alemtuzumab, mipmersen and one more drug for the treatment of Gaucher disease. Like a hardcore biotech company, Genzyme has consistently worked on collaborative research with renowned institutes and medical universities.

At a time when most big companies are struggling to gain approvals for new drugs, Genzyme is a good example of creation of a healthy pipeline.

But the company did have its share of bad news, having faced the wrath of the US Food and Drug Administration earlier this year on manufacturing standards.

That, however, is seen as a minor blip and efforts are already underway to find a solution.

Again, if at all the rumours of a deal between Sanofi-Aventis and Genzyme come true, there could be major cultural integration issues. Can Genzyme scientists work under a larger Big Pharma umbrella?

Not very long ago, there was widespread speculation about how Genentech scientists may find it difficult to integrate into the Roche culture. But Roche created an example of letting Genentech scientists work as independently as possible.

The need for Sanofi-Aventis to make a play for Genzyme was further catalysed last week after the US FDA allowed Sandoz to market copies of one of its key drugs, Lovenox, which had sales of over $4 billion. Paris-based Sanofi-Aventis may take the unexpected loss of monopoly rights of a blockbuster very seriously.

The situation looks very fluid at present. None of the companies has commented on the speculation, but clearly, Big Pharma has no option but to bolster its pipelines through acquisitions. Whoever said bigger was better?

Pillman is an executive closely linked to the global pharma industry.