July 26, 2010 / 12:39 PM / 9 years ago

UPDATE 1-Genzyme seen more attractive to Sanofi than Glaxo

* Glaxo CEO Witty not likely to chase Genzyme in bid battle

* Glaxo already has rare disease presence via JCR deal

* Sanofi seen in greater need of earnings-boosting M&A

* Sanofi shares up 0.9 pct, Glaxo down 1.9 pct

* Genzyme stock up another 6 pct in premarket trade

(Adds industry executive on firms looking at Genzyme in past, background on other biotech deals)

By Ben Hirschler, European Pharmaceuticals Correspondent

LONDON, July 26 (Reuters) - Of two potential suitors for biotech Genzyme GENZ.O, industry insiders say Sanofi-Aventis (SASY.PA) is a far more likely buyer than GlaxoSmithKline (GSK.L), which already has a presence in rare diseases.

Sources familiar with the matter said on Friday that Sanofi was sounding out Genzyme as the French drugmaker hunts for a large acquisition, prompting a 15 percent jump in the U.S. biotech company’s market value to $16.7 billion. [ID:nN23155324]

Genzyme shares were up a further 6 percent in premarket trading on Monday.

The Wall Street Journal said Britain’s Glaxo had also recently made “a very casual approach”, but industry insiders and analysts said Glaxo Chief Executive Andrew Witty, with a reputation for caution on M&A, was unlikely to chase the asset.

One of Genzyme’s main appeals is its strength in rare diseases, a high-margin sector that is winning fans in Big Pharma. Yet Glaxo already has access to a rare diseases portfolio after becoming the biggest shareholder in Japan’s JCR Pharmaceuticals 4552.OS in March, with a 17 percent stake.

The British company also has less strategic need for a large acquisition than its French counterpart, since it has already put many of its big drug patent losses behind it.

BIOTECH BOOST

“Glaxo is less likely to enter a competitive process,” said UBS analyst Gbola Amusa.

“In Glaxo’s case they are post the generics cliff, they are just emerging from that, so Glaxo doesn’t quite fit the profile to do a large deal for the sake of earnings growth,” he said.

“The question is: who wants Genzyme the most? Our view is that Sanofi is likely to emerge, simply because they are relatively deficient in biotech capabilities versus their peers, and they need to better globally diversify their R&D engine.”

Officials at Glaxo and Sanofi declined to comment.

Industry insiders said many companies had sized up Genzyme in the past, along with other large U.S. biotech companies such as Biogen Idec (BIIB.O) and Celgene (CELG.O).

“As far as the history of Genzyme goes, most companies who could buy them have looked at them,” said one industry executive.

The sale of Genzyme would parallel other recent deals, such as AstraZeneca’s (AZN.L) buying MedImmune and Eli Lilly (LLY.N) acquiring ImClone.

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BreakingViews comment on Sanofi-Genzyme [ID:nLDE66P0L1]

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Genzyme is beginning to emerge from a manufacturing crisis that caused shortages of two of its biggest-selling drugs, leaving it relatively cheaply priced and potentially vulnerable to a takeover.

Sanofi, meanwhile, is facing patent expirations on some its top products. Late on Friday, the company lowered its view for 2010 earnings per share — although it kept its 2013 guidance — after U.S. regulators approved a generic form of the Lovenox blood thinner, its No. 2 product last year. [ID:nN23123382]

SANOFI SHARES STEADY, GLAXO SLIPS

Sanofi shares, which had fallen more than 4 percent on Friday, had gained 0.9 percent by 1150 GMT, outperforming a 1.5 percent decline in the European drugs sector .SXDP, as analysts saw the logic in a bid for Genzyme and investors took comfort from the company sticking to its 2013 outlook.

Andrew Baum, an analyst at Morgan Stanley, said a move on Genzyme was “potentially positive for the stock”, since it would be a good fit and would reduce the risk of Sanofi buying higher-multiple assets that might offer lower returns.

Baum and other analysts at Deutsche Bank and Jefferies also noted that the arrival of generic Lovenox had cleared a long-anticipated “overhang” for the French drugmaker’s shares.

GlaxoSmithKline shares, however, fell 1.9 percent on fears that CEO Witty might get sucked into an expensive bidding war for Genzyme against Sanofi and other potential cash-rich acquirers, such as Johnson & Johnson (JNJ.N). (Additional reporting by Kate Kelland; editing by Erica Billingham and Will Waterman)

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