Drug giant pays £20bn for biotech

French pharma giant Sanofi-Aventis is buying US biotech group Genzyme, the world's top manufacturer of medicines for rare genetic disorders. After nine months of negotiations, the firms settled on a price tag of $20bn, a 48% premium to Genzyme's pre-bid price. Sanofi will make additional cash payments to Genzyme if the latter hits certain drug development targets. The deal is the second-biggest in biotech history.

What the commentators said

Sanofi, like all drug majors, is facing a decline in revenue as patents on its major sellers expire. Last week it warned sales would fall 10% this year. Genzyme generated sales of $4.5bn in 2009. That's enough to replace around a third of the sales Sanofi is likely to lose over the next three years owing to generic competition, said Reuters.com. Plus the market for rare diseases is growing fast.

Genzyme's share price had fallen amid manufacturing problems. But biotech drugs, unlike traditional pharma's, are hard for generic manufacturers to copy. Still, the price tag is "rich", says pharma industry blog Invivo. Genzyme's products are "mature and facing competition from upstarts" capitalising on the manufacturing missteps. It will be some time before we know whether this is a good deal not just for Genzyme but for Sanofi too.

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SAN €51.50; 12m change -6%

GENZ $74.30; 12m change 33%