GENZ in Deal for Sale of Diag Biz - Analyst Blog

Genzyme Corporation (GENZ) recently announced that it has entered into an agreement with Japanese company, Sekisui Chemical Co., Ltd. for the sale of its diagnostic products business. Sekisui will acquire Genzyme's diagnostic products business for $265 million cash. The diagnostics business delivered $167 million in revenues in 2009. The deal is scheduled to close by year-end.

Sale Will Help Genzyme Focus on Core Business

Genzyme had initially announced its intention to divest its genetic testing, diagnostic products and pharmaceutical intermediates businesses in May. In Sep, Genzyme entered into an agreement with Laboratory Corporation of America Holdings (LH) for the sale of its genetic testing business for $925 million.

Meanwhile, Genzyme's plan to divest its pharmaceutical intermediates business by year end remains on track. The company could utilize the proceeds from the sale of these businesses to fund its $2 billion share buyback program.

With the divestment of these non-core businesses, Genzyme is looking to focus on key areas of growth like pipeline development and its rare diseases segment.

Neutral on Genzyme

We currently have a Neutral recommendation on Genzyme, which is supported by a Zacks #3 Rank (short-term “Hold” rating). Genzyme has been in the news lately due to the takeover bid launched by French giant, Sanofi-Aventis (SNY). On August 30, 2010, Sanofi-Aventis had extended an offer to acquire Genzyme for $69 per share. However, Genzyme's board of directors rejected the offer calling it unrealistic.

On Oct 4, Sanofi launched a tender offer for all outstanding shares of Genzyme – the offer is scheduled to expire on Dec 10. Sanofi's offer price stands at $69 per share with the entire deal being valued at $18.5 billion. Genzyme has asked its shareholders to refrain from taking any action.

 
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