Replies to post #83897 on Biotech Values

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Astra may face takeover after Solvay bid

http://www.thisismoney.co.uk/markets/article.html?in_article_id=491249

Ian Lyall, 28 September 2009, 8:30pm

The £4bn takeover of Belgian chemical giant Solvay's pharmaceutical business could light the fuse under another wave of consolidation in the sector, with AstraZeneca touted as the next bid target.

Ambitious Novartis, which recently recruited former AZ finance director Jonathan Symonds to the same role, is seen as a would-be buyer of the UK pharma group.
But the Swiss maker of Lamisil and Exlax would require incredibly deep pockets to bag Zeneca, up 77p at 2829p, and currently valued at £40bn. 'This is not some bitesized deal,' one analyst said.

Sparking the speculation was yesterday's confirmation that America's Abbott Labs has agreed to buy the Solvay drugs business. This was swiftly followed by the news that acquisitive healthcare specialist Johnson & Johnson has taken an 18pc stake in the biotechnology firm Crucell for £277m.

All of this of course pales in comparison with the deal cut by Pfizer, the world's largest drugmaker and inventor of Viagra, which in January agreed to pay £40bn for US rival Wyeth.

This was swiftly followed by the 'shotgun marriage' of Merck and Schering Plough, which turned two sub-scale pill poppers into a company worth an estimated £25bn.

The need to cut costs has been behind the seismic changes in the sector as governments and insurers have shown unwillingness to pay exorbitant prices for the latest pills and potions.

Barack Obama's root-andbranch reforms of the Medicare system in the States promises to place more pressure on the global players.

The only big firm to publicly eschew the merger mania sweeping the sector is Glaxo-SmithKline (up 24p at 1252p).

Yesterday it lined up an innovative deal in China, but coupled the announcement with news it is canning one its new generation of drugs. The product in question, known as Rezonic or Zunrisa, was created to combat nausea caused by chemotherapy.

The US authorities were happy to approve the compound for sale, but only after more safety tests were carried out. GSK decided not to bother.

With estimated annual sales of just £30m, Rezonic's contribution to Glaxo's financial wellbeing was never going to be great. But it took the edge off what should have been a very positive day for the group.

Glaxo signed a deal to take the energy drink Lucozade to China - a huge market, second only to the US in size.

Its partner is Uni-President China Holdings, one of the largest drinks firms in the People's Republic.

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some analysts have speculated that Genzyme, also based in Cambridge, could be a takeover target if it fails to get under control recent production problems at its Allston plant,

Icahn considering proxy battle at Genzyme: source

By Toni Clarke January 7, 2010, 12:51 pm EST

http://finance.yahoo.com/news/Icahn-considering-proxy-rb-3713608107.html?x=0&.v=1

BOSTON (Reuters) - Billionaire investor Carl Icahn, who last year forced board changes at biotechnology company Biogen Idec Inc (NasdaqGS:BIIB - News), may take aim at cross-town rival Genzyme Corp (NasdaqGS:GENZ - News), according to a source familiar with the situation.

Icahn bought 1.5 million Genzyme shares in the third quarter, and some observers expect him to increase that stake as he considers a proxy assault on the biotech powerhouse.

On Thursday, however, Genzyme launched a pre-emptive strike against Icahn by announcing it had entered into a collaborative agreement with another activist investor, Ralph Whitworth.

The agreement gives Whitworth, who runs Relational Investors LLC and is one of Genzyme's top shareholders, the right to join Genzyme's board. In return, Whitworth has pledged to publicly support and recommend each of Genzyme's board nominees at the company's shareholder meetings.

"They are a very constructive firm," Genzyme Chief Executive Henri Termeer said in an interview, in reference to Relational. "They have a philosophy of helping in a constructive way, not a destructive way."

Icahn was not immediately available for a comment.

Genzyme, which built itself into one of the world's biggest biotech companies by selling drugs for rare diseases, is struggling to emerge from its worst year ever after a manufacturing crisis led to shortages of two of its life-saving drugs.

The company's shares are trading at their lowest level in five years and investor dissatisfaction is such that Icahn, if he decides to launch an attack, could find some support.

"I think shareholders would be willing to listen if there was talk of a change of management," said Derek Taner, who runs the $1 billion AIM Global Health Care Fund and owns an undisclosed number of Genzyme shares. "There have been a lot of management missteps that candidly shouldn't have been made."

Last year, Icahn succeeded in placing two directors on the board of Biogen. Some see a similar scenario at Genzyme.

"I wouldn't be surprised to see a proxy fight at Genzyme," said Bill Tanner, an analyst at Lazard Capital Markets. "People are pretty upset."

Icahn's battle with Biogen took two years. But in December the company replaced its chairman, and on Monday, CEO James Mullen announced he would retire.

Tough though the Biogen fight was, a run at Genzyme, whose headquarters are barely a mile from Biogen's in Cambridge, Massachusetts, could be tougher.

For one thing, Genzyme is a more diverse company with many moving parts.

And unlike Mullen, who ran Biogen but was not defined by it, Termeer, who has been CEO of Genzyme for nearly 25 years, stands at the helm of the company like the captain of an ocean liner. He is likely to fight harder than Mullen, and he has a tightly knit board.

"Henri, as much as anyone, has created Genzyme," said Phil Nadeau, an analyst at Cowen & Co. "Shareholders and board members are likely to keep that in mind should a proxy fight occur."

On the other hand, Genzyme's missteps are more glaring than they were at Biogen, giving Icahn more concrete material to work with when trying to prove management failure.

Not only was the company forced to close its Allston Landing plant in Boston because of a viral contamination, but vials of its drugs were found to contain metal fragments and non-latex rubber -- debris shed by antiquated equipment.

Most compellingly, the company's shares have clearly underperformed the market. Last year, Genzyme's shares fell 26 percent, while the NYSE Arca Biotech Index rose 46 percent.

"In my opinion, and the opinion of Wall Street, Henri has failed to execute well over the past few years," said one portfolio manager who holds about 500,000 Genzyme shares but is only authorized to talk about his top 10 holdings, of which Genzyme is not one. "I think there are certain investors who would welcome a management shake-up."

Termeer concedes that the company is vulnerable to investor activism, and says he has been "watching the situation next door" at Biogen. But he says Genzyme has a much broader pipeline of new drugs than Biogen, which he says is "in play."