PREVIEW-Sanofi seen prolonging Genzyme bid to mull CVRs

* Extension may be used to agree on contingent value rights

* Milestone agreement linked to Campath seen challenging

* CEOs may bump into each other at Davos meeting in January

By Caroline Jacobs and Noelle Mennella

PARIS, Dec 7 (BestGrowthStock) – Sanofi-Aventis (SASY.PA: ) will
likely buy time by extending its $18.5 billion cash offer for
Genzyme (GENZ.O: ) this weekend and try to hammer out a deal that
involves a higher pay-out if the U.S. biotech meets milestones.

The odds are that hardly any Genzyme investors will have
handed their shares this weekend to Sanofi for $69 each while
they have been trading at $70.24, on average, since July 23,
when stories broke of Sanofi’s interest in the group.

The French drugmaker’s tender offer for Genzyme ends at
midnight New York time on Friday.

It launched the offer on Oct. 4, frustrated by encountering
what Sanofi’s Chief Executive Christopher Viehbacher has called
a brick wall in the Genzyme board’s refusal even to just sit
down and talk.

Prolonging the tender would give both companies room to
reach a deal that links Genzyme’s value to the future
performance of its key experimental multiple sclerosis drug
Campath, people familiar with the situation said.

“Such a scenario is not absurd,” said one source close to
the matter, who declined to be identified because he was not
authorised to speak to the media.

Through contingent value rights (CVRs) Sanofi could end up
paying Genzyme investors more if Campath proves to be the
success that Genzyme expects. But investors will need patience.

“Extending the offer as it stands seems somewhat futile but
extending it to bide time and negotiate a CVR and then increase
the offer could be a strategy,” Collins Stewart analyst Emmanuel
Papadakis said. “Sanofi would likely rather base a higher offer
on a CVR than increase it just to get talks going.”

Sanofi has dismissed Genzyme’s $3.5 billion sales estimate
for Campath as “unrealistic” and has pulled together analyst
forecasts giving a $700 million sales average. Since Genzyme
showcased its growth prospects, its shares have lost 2.4

Genzyme Chief Executive Henri Termeer said last month he was
open to a CVR for Campath and Sanofi’s finance chief Jerome
Contamine told Reuters last week that using such a mechanism to
bridge valuation disputes was interesting “in principle”.

Viehbacher and Termeer have met only once, on Sept. 20, to
discuss the situation, but the two men may well bump into each
other again next month in Davos, when they are both expected to
attend the annual World Economic Forum, from Jan. 26 to 30.

Whether they have anything to discuss will depend on any
progress in behind-the-scenes talks between their advisers.

Another source familiar with the situation said Dec. 10 was
not a hard deadline for Sanofi but just one point in a process,
and Sanofi did not feel under pressure to raise its bid at the


For Genzyme deal calculator:

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For other stories on Genzyme bid battle: [ID:nN20244039]



Viehbacher has repeatedly said he is in no rush and that the
Genzyme situation would not distract from other issues. On
Monday, he became chairman of the main U.S. pharmaceutical
industry group after Jeff Kindler resigned as CEO of Pfizer
(PFE.N: ). [ID:nN06225072]

Analysts agree a CVR could help break the deadlock, though
negotiating the terms will be challenging. But with no rival
bidders for Genzyme, despite attempts by Genzyme to woo others,
Sanofi can take its time to try and get to a deal.

“It will be hard for Sanofi to prove to Genzyme shareholders
that it did its utmost to maximise the value of Campath. After
all, Sanofi needs to try and maximise the value of its entire
multiple sclerosis franchise and not just of one product,” said
a Frankfurt-based analyst who asked not to be named.

Sanofi sells Copaxone and is developing teriflunomide.

When Fresenius (FREG_p.DE: ) bought infusion drugmaker APP in
2008 its takeover price had a tradeable CVR attached that could
deliver an extra payment of up to $6 if APP exceeded core
earnings targets. In fact, the rights (APCVZ.O: ) now trade at
just 4 cents.

At any rate, analysts are convinced Sanofi will ultimately
need to increase its bid if it wants to bag Genzyme. Genzyme
shareholder and board member Ralph Whitworth said early this
month the ingredients for a deal were there but that the current
offer was “not even a good starting point”. [ID:nN02273530]

Buying Genzyme would provide Sanofi with a new area for
growth, the high-margin business of rare diseases, as it seeks
to diversify its business to make up for patent losses that will
take out roughly a third of its 2008 sales base through to 2013.

Sanofi shares have dropped 11 percent this year compared
with a 4.5 percent rise in the European sector (.SXDP: ). Trading
at 6.9 times their expected earnings per share, they are the
cheapest among big European pharma stocks.

(Additional reporting by Julien Ponthus and Blaise Robinson
in Paris, Ben Hirschler in London and Jessica Hall in
Philadelphia; Editing by David Cowell)

PREVIEW-Sanofi seen prolonging Genzyme bid to mull CVRs