Sanofi confident it can win Medivation shareholders support

Reuters News
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Posted: Apr 29, 2016 1:46 AM

By Matthias Blamont

PARIS (Reuters) - Sanofi <SASY.PA>, which reported higher quarterly profit on Friday boosted by its Genzyme division, is confident Medivation <MDVN.O> shareholders will back its proposed takeover of the U.S. cancer drug company.

The French drugmaker went public on Thursday with a $9.3 billion offer to buy Medivation after it stonewalled its takeover approach, setting up what could be a lengthy battle.

"We are confident that Medivation shareholders will ultimately share our strong belief that our offer ... would provide significant and immediate cash value," Sanofi Chief Executive Olivier Brandicourt said on a conference call.

Chief Financial Officer Jerome Contamine declined to say whether Sanofi was ready to engage in a bidding war and raise its offer, as many investors expect it to do.

Medivation, which markets prostate cancer drug Xtandi, said in a statement that its board would meet to discuss Sanofi's proposal and provide an update "promptly". The U.S. company said shareholders should take no action at this time.

Shares in Sanofi fell more than 3 percent, with traders blaming the decline in part on worries about Sanofi getting sucked into a costly and lengthy takeover battle.

Industry analysts and healthcare bankers expect Sanofi would need to sweeten its opening offer.

"I imagine you’ll see a fair bit of movement," said one banker not directly involved in the situation. "It’s fairly typical to see an average 10 percent premium to the original offer - I think this is going to get much higher."

CVRs, or contingent value rights, might also be deployed, the banker said, as happened when Sanofi bought Genzyme for $20 billion in 2011 after a similar unsolicited approach.

CVRs, which pay out in specific circumstances, are sometimes used in biotech to compensate shareholders in a target company if, for example, a drug sells particularly well.

There is also potential for other companies to get involved, including Japan's Astellas Pharma <4503.T>, Medivation's partner on Xtandi, or Britain's AstraZeneca <AZN.L>, which has a big focus on cancer.

AstraZeneca Chief Executive Pascal Soriot declined to comment on Medivation in a post-results call with reporters on Friday but said he had a high bar for acquisitions, since his company's drug pipeline was now full. Officials at Astellas have also declined comment.

Sanofi said first-quarter business net profit grew 3.5 percent at constant exchange rates to 1.72 billion euros ($1.96 billion), equivalent to a 0.2 percent drop on a reported basis.

Sales rose 0.7 percent at constant exchange rates to 8.54 billion euros, down 1.9 percent on a reported basis, Sanofi said, adding that it was confirming its full-year forecasts.

Analysts polled by Reuters had on average expected business net profit of 1.7 billion euros and net sales of 8.73 billion.

Revenue at biotech arm Genzyme rose 20.5 percent, with a 134 percent rise in proceeds from multiple sclerosis treatment Lemtrada. Diabetes sales fell 4.5 percent, reflecting the trend of weaker revenue from blockbuster Lantus in the United States.

Sanofi's "main diabetes franchise remains in flux, with the company lowering estimates twice for this business over the last 18 months", Bernstein analyst Tim Anderson said in a note.

"(Sanofi's) research and development track record is not great, and it is guiding for no meaningful earnings per share growth in 2016/2017," said Anderson, who downgraded the stock to market-perform in November.

(Additional reporting by Freya Berry and Ben Hirschler; Editing by David Clarke and Elaine Hardcastle)