News of the Sanofi-Aventis/Genzyme agreement was all the more intriguing because of the contingent value rights, those payouts to be made when Genzyme meets certain conditions. Topping that list of conditions is meeting production levels for the Fabrazyme and Cerezyme treatments, which fall under the FDA consent decree that Genzyme entered into last May.
For Genzyme investors, all bets are covered for that $1 CVR per share if the big biotech continues to deliver on consent decree mandates. It's off to a good start, beating an end-of-November deadline for moving the fill/finish operations of some drugs from its Boston-area plant.
Consent decree compliance is no minor detail, says Charley Beever, head of the pharmaceutical practice at consultancy Booz & Co, in a phone interview. It can run into "hundreds of millions of dollars on spending beyond plant remediation." He recalls the 2002 Schering Plough consent decree. "They had folks crawling over that plant, retraining employees, rewriting policies and procedures.... It was a significant amount of cost."
Genzyme's restructuring last year of its operations and quality leadership teams should be reassuring to Sanofi. And it should provide some degree of protection for operations staff when it comes time for post-acquisition job cuts.
"Sanofi doesn't have biotech experts ready to parachute in," says Beever. Remediation aside, bioprocessing itself is "a capability that Sanofi didn't have."
And Genzyme is in the process of bringing two plants online, fortifying its need for biotech ops expertise that Sanofi currently lacks. One plant is being built west of Boston--in Framingham--and is expected to come online later this year. The other is in Belgium--expected to begin commercial approvals in late 2014.
- see the joint announcement