Monday, January 10, 2011

Sanofi-Aventis Looking to Acquire Genzyme and Alemtuzumab

Genzyme (Nasdaq:GENZ) a biotechnology company known for developing therapies for rare disorders is being courted by Sanofi-Aventis (Nasdaq:SNY).  An earlier offer of $69/share was considered too low by GENZ.  GENZ is currently trading in the $71 range.  The two companies are discussing a contigent value right (CVR) that could increase the offer to $80/share.[WSJ] Carl Icahn has a representative on GENZ's board  and is trying to grab more seats on the board so expect GENZ to be a very tough negotiator.

Sanofi's interest in acquiring Genzyme revolves around the monoclonal antibody, alemtuzumab (Campath).  Alemtuzumab is currently FDA approved for B-cell chronic lymhocytic leukemia (B-CLL) [PI] and is being investigated as a possible treatment for multiple sclerosis (MS).  SNY and GENZ disagree over the potential revenue stream generated by Campath.  SNY believes the annual sales could rise to $700 million, but GENZ believes the sales figures could rise to the level of $3.6 billion because of its superiority over other treatment options.  The likely sales figure is somewhere in the middle, around $1.2-1.6 billion range.

The sales figure can rise if Campath is approved for multiple sclerosis, an autoimmune disorder that affects the central nervous system.  There are about 2.5 million MS patients worldwide. [National MS Society]

A phase II trial enrolled 334 MS patients to compare two different doses of alemtuzumab to high dose therapy with beta interferon 1a.  Alemtuzumab was given as yearly courses (1st treatment was daily infusion for 5 days; 2nd and 3rd courses were daily infusion for 3 days; 3rd course was planned but safety concerns arose and not all patients received this course).  Beta interferon 1a was administered thrice weekly by a subcutaneous injection. 

Patients designated to either alemtuzumab group had superior outcomes to patients in the beta interferon 1a group.  At the 3 year mark,the percent of patients who had not experienced a relapse was as follows: 77% of patients in the low dose alemtuzumab; 84% of patients in the high dose alemtuzumab group; and 52% of patients assigned beta interferon 1a.  Sustained disability risk was reduced by 71% in the alemtuzumab groups compared to the beta interferon 1a group.

Three percent of participants experienced low blood platelets, which may lead to increased bleeding.  This condition is serious, but treatable.  The phase II trial was suspended after a fatal cure of the disorder.  Low platelets remains a significant concern and expect the FDA to heavily inquire safety results during review.  Side effects relating to the thyroid gland were common (22.6%), but can be treated with thyroid medications.  Immune suppression is another concern of alemtuzumab therapy. [NEJM]

CARE-MS1 and CARE-MS2 are phase III trials comparing low dose alemtuzumab and beta interferon 1 in treatment naive and patients with breakthrough disease, respectively.  The results of the trials should be available sometime this or next year.  [Medscape]

It should a good time to be a stockholder in GENZ especially if a merger deal is reached.  Icahn has tried to force several companies to be bought by others in the past such as Yahoo! and it may be the same in this case.  SNY's offer of $69 expires on Jan. 21 and is unlikely to be accepted by GENZ.  A favorable price would be $75-80/share which would be about 5-13% higher than the current trading price.  Even if a deal is not reached, Campath has a bright outlook to be increasingly used for  B-CLL and should be approved for treatment of MS for which it can be the first line drug.

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