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Sanofi-Aventis SA is unwilling to pay more than $70 a share for Genzyme Corp. and may consider alternative takeover targets should the transaction fail, according to three people with knowledge of the matter.

Sanofi’s board supports an offer of up to $70 a share and is unlikely to go beyond that range, the people said. The Paris- based company, which has offered $69 a share, or about $17.6 billion, for Genzyme is concerned about manufacturing setbacks at the U.S. company, said five people, who asked not to be identified as the talks are private. Sanofi is still in friendly talks with Genzyme.

“Sanofi doesn’t want to overpay and is being very reasonable,” said Jerome Forneris, who helps manage about $8.2 billion, including Sanofi shares, at Banque Martin Maurel in Marseille, in a phone interview today. “There are real issues tied to Genzyme. They want to pay a fair price. It’s good management.”

Genzyme rose 19 cents to $67.58 at 4 p.m. New York time in Nasdaq Stock Market composite trading. Sanofi declined 15 cents, or 0.3 percent, to 44.60 euros at the close of Paris trading.

Activist Directors

Sanofi may have to pay at least $80 a share, or $20.4 billion, to buy Genzyme as activist directors seek to drive up the price, investors in the Cambridge, Massachusetts-based biotechnology company said this month. The French drugmaker isn’t willing to pay such a price at this stage, said two of the people. Sanofi’s board would have to reconvene to approve a price higher than $70 a share for Genzyme, another person said.

Genzyme, the world’s largest maker of medicines for rare genetic disorders, said earlier this month it may take as long as four years to make production changes required by U.S. regulators after contamination at its Allston Landing factory in Boston caused drug shortages.

Genzyme’s manufacturing issues may take more than four years to fix, justifying a price of no more than about $70 a share, one person said. Sanofi also could have difficulties integrating the U.S. company, another person said.

Sanofi may consider other targets, including Bausch & Lomb Inc., Allergan Inc. and Celgene Corp., should a deal with Genzyme fail, said three people. Sanofi has previously said it plans to expand in the eye-care business. Allergan stock fell 14 cents, or 0.2 percent, to $62.97 in New York Stock Exchange composite trading. Celgene shares added 47 cents, or 0.9 percent, to $51.52 in Nasdaq Stock Market trading. Bausch & Lomb is owned by private-equity firm Warburg Pincus LLC.

Counting on Acquisitions

Sanofi is counting on acquisitions to help replace revenue the company is losing as its medicines face competition from lower-priced generic drugs. The drugmaker has spent about $17 billion on 25 acquisitions since Viehbacher joined the company in 2008, according to data compiled by Bloomberg. Sanofi cut its 2010 earnings forecast last month after U.S. regulators approved a generic rival to the Lovenox blood thinner.

Genzyme’s products are less likely to face generic competitors because the treatments, made from living cells, are harder to copy than traditional pills made from chemical compounds. The therapies are designated as orphan drugs by the FDA because they are for diseases without other treatment options, giving them added patent protection.

Viehbacher, 50, said on July 29 Sanofi was seeking deals valued at as much as $20 billion to help bolster earnings. The company will remain “disciplined” on acquisitions, he said.

Hostile Bid Possible

Sanofi hasn’t ruled out the possibility of a hostile bid for Genzyme, with no competing offers for the U.S. company so far, said one person. The French company hasn’t started a so-called due diligence review of Genzyme, the person said.

“Sanofi isn’t going away,” said Sven Borho, a partner with OrbiMed Advisors in New York. OrbiMed holds about 2.5 million Genzyme shares. “They aren’t going to look at Allergan or Celgene. They’re trying to create uncertainty.”

According to calculations by Mark Schoenebaum, an analyst at ISI Group in London, Sanofi could spend as much as $82 a share for Genzyme, while remaining within the $20 billion limit. The calculations are based on assumptions that include the possibility of Sanofi selling Genzyme’s genetic and diagnostics business for about $1 billion after its purchase of the company.

“Sanofi could buy Genzyme for approximately $79 to $82 per share without spending ‘a penny more’ than $20 billion,” Schoenebaum wrote in a note to clients earlier this month.

Marisol Peron, a spokeswoman for Sanofi-Aventis in Paris, declined to comment. Bo Piela, a spokesman for Genzyme, also declined to comment.

“Everyone’s coming back from the beach now,” OrbiMed’s Borho said. “In September, we may see someone else step in and then the dynamics will change. But I don’t think anything happens until September.”

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