Biogen 'for sale' sign turns spotlight on Genzyme

BOSTON (Reuters) - Biogen Idec Inc's (BIIB.O) decision to put itself up for sale has cast the spotlight on cross-town rival Genzyme Corp (GENZ.O), whose shares rose as much as 7 percent on Monday amid speculation it will be the next to be acquired.

Genzyme is the world's fourth-biggest biotechnology company, whose drugs to treat rare genetic disorders are some of the most expensive ever made. Biogen is the fifth-largest biotech, and a dominant maker of drugs to treat multiple sclerosis.

Both companies are based in Cambridge, Massachusetts and have similar market values at close to $20 billion. Genzyme is expected to generate 2007 sales of $3.7 billion, Biogen is expected to draw in $3.1 billion.

Big drugmakers are desperate for new products to replace those that are losing patent protection, and they are looking to the more innovative biotechnology sector to replenish their pipeline.

"It's not surprising to me that investors are moving on to Genzyme because what seems to be the asset du jour for pharmaceuticals companies is biologic capability," said Phil Nadeau, an analyst at Cowen & Co.

But Genzyme and Biogen are two different animals.

Biogen's success has been built around a small number of products - the multiple sclerosis drug Avonex and the cancer drug Rituxan, which it shares with Genentech Inc DNA.N. Its big hope for the future is its multiple sclerosis drug Tysabri, which was temporarily withdrawn from the market after being linked with a potentially deadly brain infection.

Genzyme, by contrast, is diversified. Roughly 55 percent of its revenue comes from its biologics business, which include such drugs as Cerezyme for Gaucher disease, a condition that causes enlargement of certain organs.

But the company also makes diagnostic tests, injectable products to treat osteoarthritis of the knee, kidney disease drugs, a leukemia drug called Campath that is now showing promise in multiple sclerosis, and products involved in organ transplant.

"Unless you can find somebody that wants to go into these specialty niche markets, I don't see Genzyme addressing Big Pharma's need for a fix," said John McCamant, editor of the Medical Technology Stock Letter.

According to McCamant, much of the rise in Genzyme's share price on Monday reflects positive three-year results from a trial of Campath in multiple sclerosis. The results of the trial, released on Sunday, also boosted shares of Genzyme's German partner Bayer AG BAYG.DE.

"I think the share gain reflects both these things," said Christopher Raymond, an analyst at Robert W. Baird & Co., who said the Campath data is "very, very impressive."

Genzyme's shares closed up $3.06, or 4.3 percent, to $74.77, having risen as high as $76.90 earlier on Monday.

The proposed sale of Biogen, and speculation over a sale of Genzyme, follows a $14.9 billion acquisition of MedImmune, maker of the nasal flu vaccine FluMist, by AstraZeneca Plc (AZN.L), and reflects a shift at the top of the biotechnology food chain.

Small biotech companies have been eaten by big drug companies and big biotech companies alike. Now, the big biotech companies are becoming prey.

But Genzyme's structure may keep it independent, at least for now.

"Theirs is more of a conglomerate model," said Nadeau. "It's hard to see many acquirers that would have synergies with all parts of Genzyme's business, or be interested in them."

(Additional reporting by Bill Berkrot in New York)