Sanofi Courts Genzyme as Rival Suitors Circle; Encouraging Cancer Trials Lift Two Stocks

July 26, 2010
Terri Cullen

So the rumors were true: French drug giant approached Genzyme about a possible acquisition, sparking rumors the company will attract rival suitors in the U.S. Meanwhile, shares of Onyx Pharmaceuticals and Oncolytics Biotech rose on upbeat reports on clinical trials of their cancer treatments.

So the rumors were true: French pharmaceutical giant Sanofi-Aventis SA (NYSE: SNY) approached U.S. drug maker Genzyme Corp. (NASDAQ: GENZ) to talk about a possible acquisition, according to a report in the Wall Street Journal. Bloomberg News initially reported that Sanofi was poised to make a $20 billion acquisition of a large U.S. biotech, and shares of Genzyme, Biogen Idec Inc. (NASDAQ: BIIB) and Allergan Inc. (NYSE: AGN) had surged over the last week on speculation.

Now, speculation has turned to the prospect of rival suitors for Genzyme. Media reports are eyein Johnson & Johnson Inc. (NYSE: JNJ) and GlaxoSmithKline PLC (NYSE: GSK) as leading candidates, with the WSJ reporting that Glaxo has already informally approached Genzyme about a potential buyout.

Genzyme’s shares jumped 15 percent Friday on the Sanofi report. In early trading Monday, Genzyme’s shares were up another 6 percent at $66.18; J&J shares were at $57.71; Glaxo’s American despositary shares were at $36.28 and Sanofi’s ADS’s were at $29.40.

Takeover reports drowned out news that the FDA approved a generic version of Lovenox, Sanofi’s best-selling blood thinner. The generic rival to Lovenox is made by Novartis AG (NYSE: NVS) and Momenta Pharmaceuticals Inc. (NASDAQ: MNTA). Competition of a lower-cost drug to Sanofi’s second-best selling drug, and a slew of new generics soon coming up against Sanofi’s other products, is one reason why the French giant is seeking a U.S. company to expand its product line, analysts say.

Biogen Idec’s shares were hit by word that it was passed over for consideration by Sanofi, ending Friday down 5 percent, but its shares quickly bounced back. Last week, Biogen reported its earnings more than doubled on strong sales gains for its multiple-sclerosis treatment Tysabri, which is sold with Ireland’s Elan Corp. Biogen also raised its current-year earnings estimate by 15 cents to at least $4.70 a share. The sales gains come despite the risks of a rare and serious brain infection that’s been linked to Tysabri -- the U.S. Food and Drug Administration contends the drug's benefits outweigh risks. In early trading Monday, Biogen’s shares were at $54.82.

In other Big Pharma news this week, shares of Roche Holding AG (NYSE: ROG) lost ground after a U.S. Food and Drug Administration panel advised the agency to revoke the company’s right to market Avastin as a treatment for metastatic breast cancer, citing trial data that indicated the safety risks may outweigh drug’s benefits. Investment analysts said pulling Avastin from the market could sink global sales by as much as $1 billion. Its shares were at $134.40.

Meanwhile, Pfizer Inc. (NYSE: PFE) said the FDA requested it halt its trial of the experimental drug tanezumab, designed to treat chronic low back pain and diabetic peripheral neuropathy. The FDA was concerned about adverse events reported in osteoarthritis patients. Pfizer said it plans to continue to work with the FDA to move forward with a continued clinical trial of tanezumab. Pfizer’s shares were at $14.76.

Elsewhere, there was encouraging news this week for the treatment of certain cancers. Onyx Pharmaceuticals (NASDAQ:ONXX) jumped early Monday after it reported results from its Phase II(b) study of its experimental drug carfilzomib, a treatment for patients with relapsed and refractory multiple myeloma. According to the study, carfilzomib resulted in significantly smaller tumors in 24 percent of patients -- and that the effect lasted a median of 7.4 months. The company said the results were encouraging enough for it to apply for accelerated approval by the FDA. Onyx shares were at $23.92 in early trading.

Oncolytics Biotech Inc. (NASDAQ: ONCY) said it has started enrollment in Phase III trials for patients with advanced head and neck cancers using a combination of chemotherapy and its Reolysin. The drug "has the potential to revolutionize cancer therapy," according to a recent report by Paradigm Capital’s Alan Ridgeway. Earlier this month, Paradigm initiated coverage of Oncolytics with a “buy” investment rating. The Canadian drug developer’s shares were at $2.81.