Sanofi-Aventis reported progress in talks to buy US biotech Genzyme and predicted 5-10 per cent lower earnings in 2011, underscoring the French drugmaker's need to find new sources of revenue growth.
Shares in the company fell 1.2 per cent as chief executive Chris Viehbacher gave very little away about talks to complete a takeover deal expected to be worth approximately $20 billion, designed to rejuvenate the company's product line.
"As we announced about 10 days ago, we have signed a confidentiality agreement with Genzyme," Mr Viehbacher said in a media conference call today.
"We continue to review non-public information. Talks are progressing and we'll keep you updated," he added.
Genzyme shares were quoted down 0.9 per cent in Germany.
Sanofi and Genzyme, which specialises in medications for rare diseases, have been locked in takeover talks for days after the US company finally agreed to open its books.
After seeing its initial overtures rejected last year, Sanofi is widely expected to sweeten its original $18.5 billion cash offer while adding a fee tied to the performance of Lemtrada, a drug Genzyme is developing for multiple sclerosis.
The two sides are reported to be close to a deal, which many investors had expected to be announced in time for Sanofi's annual earnings which were announced today. Mr Viebacher reiterated all options remained open.
"It's not all that surprising. Large scale transactions like these do take time and they can't be rushed," said Helva analyst Karl Heinz Koch. "But there's an element of disappointment in the sense that the uncertainty does not go away."
Navid Malik of Matrix Corporate Capital said he still expected a deal to be announced "pretty soon".
Massachusetts-based Genzyme, founded in 1981 and one of the first entrants into the young biotechnology sector, has become all the more compelling now that Sanofi has suffered setbacks with two of its promising treatments.
US and EU health regulators are examining whether heart drug Multaq may have caused liver damage in some patients. And, unexpectedly, breast cancer drug iniparib, seen as one of Sanofi's future key treatments, failed to meet its main goals in end-stage clinical trials.
Genzyme's drugs are among the most costly ones. They help patients with uncommon or "orphan" diseases, which helps to curb marketing costs, and they generally are reimbursed, making them less exposed to government healthcare spending cuts.
For 2011, Sanofi predicted 5-10 per cent lower 2011 business earnings per share, at constant exchange rates. It said this did not include any benefit from a Genzyme deal, nor the damaging effects of a return of generic copies to cancer drug Eloxatin.
Sanofi's fourth-quarter earnings exceeded analyst expectations, helped by cost cuts. The company now expects to achieve €2 billion in savings this year instead of in 2013.
Sanofi said it would propose increasing its annual dividend to €2.50 a share from €2.40. Business earning per share, excluding items like amortisation and legal costs, were flat at €1.41 in the fourth quarter: above a Reuters poll which suggested €1.35.
Quarterly sales, however, undershot expectations, edging up to €7.395 billion compared with a Reuters poll consensus for €7.501 billion. Sanofi posted a business operating income of €2.515 billion, or higher than the forecast €2.474 billion.
Reuters
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