Genzyme warms to talks

After months of playing hardball with Sanofi-Aventis SA, Genzyme Corp. is displaying a new willingness to talk about price and other issues that have held up a deal, people familiar with the matter said. End Quote

(1888PressRelease) December 24, 2010 - It's still unclear whether the parties can reach an agreement. But after Genzyme refused for months to talk to France's Sanofi about its $18.5 billion hostile offer, there appears to be some hope that the two sides can overcome their differences, these people said.

Genzyme's attitude change came after it reached out to third parties, such as Pfizer Inc., Johnson & Johnson and Merck & Co. Inc., to see if they were interested in acquiring all or part of Genzyme, these people added. So far, no compelling offer has emerged, prompting a fresh attempt to break the stalemate with Sanofi, people familiar with the matter said.

Advisers for the companies are having discussions about the price and a deal structure known as a contingent value right, or CVR for short. The structure is typically used when buyers and sellers can't agree on a purchase price, and often kicks in after an acquired company meets sales or regulatory targets.

In Genzyme's case, the CVR would be largely tied to the performance of Campath, a Genzyme drug that is used to treat leukemia but also is being tested for use on multiple sclerosis, the people familiar with the matter said. Both Genzyme and Sanofi declined to comment.

Genzyme hasn't invited Sanofi in to conduct due diligence yet, but that could be the next step if talks around the CVR and price move ahead, the people familiar with the matter said.

Genzyme's chairman and chief executive, Henri Termeer, is still unlikely to agree to any deal at the $69 a share that Sanofi has offered, even if a CVR structure is added on top of that price, the people familiar with the matter said. Sanofi doesn't plan on immediately raising its offer, but company officials know they will have to eventually increase their bid to get a deal done, people familiar with the matter said.

Sanofi has said Genzyme is too optimistic in its projection for Campath's use on multiple sclerosis. The French company projects the drug's MS revenue will register about $700 million a year. Genzyme, meanwhile, projects that sales for MS will reach $3.5 billion in 2017.

On Monday, Genzyme met with some of its investors to tout the potential of Campath.

If Sanofi and Genzyme agree to a CVR, Genzyme's shareholders would stand to get an additional payment once the Cambridge, Mass.-based company hits a benchmark tied to sales of Campath, according to the people familiar with the matter.

Sanofi had been trying to court Genzyme for months until it went hostile with its offer in October. Earlier this month, Sanofi extended the tender offer for Genzyme, which was set to expire on Dec. 10, to Jan. 21.

Genzyme has a market capitalization of about $18.1 billion.

Its shares rose by $1.85, or 2.7%, to $71.50 in 4 p.m. trading Tuesday on the Nasdaq Stock Market.

Copyright ©2010 Dow Jones & Company, Inc. All Rights Reserved

###

space

Other Related Press Releases