Evaluación De Riesgos Genzyme/Geltex

GENZYME/GELTEX PHARMACEUTICALS JOINT VENTURE

Objective

In early 1997, Greg Phelps, the Executive Vice President of Genzyme Corporation, has to develop proposed terms of a joint ventureagreement with GelTex Pharmaceuticals. Before coming to an agreement, the three issues that need to be solved are the following:
1. What percent of the venture should Genzyme control?
2. What is theexpected enterprise value of the Genzyme/GelTex Joint Venture?
3. What should the maximum cost be to Genzyme?
4.
Why the Joint Venture?
GelTex wants Genzyme as a partner so that Genzyme wouldcontribute cash and marketing expertise to sell RenaGel. Genzyme looks to form a joint venture with GelTex because this gives them the real option to market GelTex’s second product, CholestaGel.

WhatPercent of the Venture should Genzyme Control?
With CholestaGel, Genzyme can tap into a multibillion dollar market. Thus, because the joint venture will allow Genzyme to share in profits, this option isextremely valuable. The first issue listed under the Objective comes into play here. The larger the controlling share Genzyme possesses, the larger the percentage of profits that will belong toGenzyme.

What is the Expected Enterprise Value of the Genzyme/GelTex Joint Venture?
Greg Phelps will first have to determine the enterprise value of the joint venture. The decision on whether toproceed with the proposed joint venture will depend on whether or not the combined entity has a greater value than the sum of the two separate stand alone entities. Therefore, he will first have todetermine the value of Genzyme and GelTex as separate entities. In order to determine the value of the joint venture, the following aspects are crucial to the analysis:

1. Forecast of Income StatementGreg Phelps will have to devise income statements for three scenarios: best case, base case and worst case. Exhibit 3 most probably outlines the base case scenario. In order to forecast the income...