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Genzyme Agrees to Acquire SangStat

The buyer would pay $600 million and get a thriving transplant drug in the latest biotech deal.

August 05, 2003|Elizabeth Douglass | Times Staff Writer

The consolidation in the biotechnology industry continued Monday as Genzyme Corp. agreed to pay $600 million in cash to acquire a Bay Area company, SangStat Medical Corp., and its lucrative drug to treat organ-transplant patients.

Genzyme, based in Cambridge, Mass., offered $22.50 a share, or a 45% premium over SangStat's closing price Friday. Shares in Fremont, Calif.-based SangStat jumped $6.76, or 44%, on news of the deal, closing Monday at $22.23 on Nasdaq. Genzyme investors were less enthusiastic, sending the biotech firm's stock down $1.66, or 3%, to $47.62, also on Nasdaq.

The Genzyme-SangStat announcement came six weeks after Idec Pharmaceuticals Corp. agreed to spend $6.4 billion to acquire rival Biogen Inc. Idec, based in San Diego, and Cambridge-based Biogen said their deal grew out of an agreement to collaborate on three cancer-related treatments from Biogen's pipeline of early-stage drugs. In February, pharmaceutical giant Johnson & Johnson agreed to buy another Bay Area biotech firm, Scios Inc., for $2.4 billion to get its coveted arthritis drug.

"Consolidation happens when and where it fits," said John McCamant, editor of the Medical Technology Stock Letter in Berkeley.

Some analysts expect consolidation to pick up as biotech companies grapple with faltering sales growth for existing drugs while having to spend heavily to develop new treatments. The pressure is acute for smaller companies that hope to compete with the industry's two largest biotech companies, Amgen Inc., and Genentech Inc.

With SangStat, Genzyme would get its flagship drug, Thymoglobulin, which is used to help transplant patients fend off the body's impulse to reject a donor kidney. The drug accounted for most of SangStat's $120 million in revenue last year.

Genzyme said it hoped the market for Thymoglobulin would grow once the drug was approved for different types of transplants.

The Cambridge company already markets a drug, Renagel, to combat kidney disease, and analysts said the company would be able to market a variety of kidney-related medicines.

RBC Capital Markets analyst Jennifer Chao said the deal was a good fit for both companies. "Genzyme is hoping that with the acquisition they can broaden [Thymoglobulin's] use to bone marrow transplants and [preemptive] therapy," she said.

A profitable company with more than 300 employees, Genzyme doesn't expect the deal to trigger major layoffs or a restructuring of the company, spokesman Bill Martin said.

Martin said that the firm's nearly 200-employee manufacturing plant in Lyon, France, would continue as usual and that its chief executive, Richard Murdock, would stay on at least through a transition period.

Martin said SangStat entertained buyout offers from "multiple interested parties." "Genzyme came out on top, both because of its cash offering and because there are several synergies between the renal-related businesses."

SangStat's second-quarter profit was $1.8 million, or 7 cents a share, on 8% higher sales of $33.4 million. The companies' boards have approved the deal, which is expected to close in September after an antitrust review by federal regulators.

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Times wire services were used in compiling this report.

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