Sanofi-Aventis SA and Genzyme Corp. are likely to approve a takeover of the U.S. biotechnology company today and are discussing a price of about $74 a share plus potential additional payments tied to the performance of a Genzyme drug, said four people with knowledge of the plan.
A so-called contingent value right, a tradeable contract tied to Genzyme’s experimental multiple sclerosis drug Lemtrada, may be valued at about $3 when it begins trading and have a higher nominal value, said three people, who declined to be identified because the process is confidential.
The companies’ boards are scheduled to vote on the deal today and may make an announcement on Feb. 7, said the people. Sanofi is still working on its review of Genzyme’s business, an agreement hasn’t been reached, and terms could still change, the people said.
“As we have previously said, we’ve signed a confidentiality agreement with Genzyme and are continuing to review non-public information,” Jean-Marc Podvin, a spokesman for Paris-based Sanofi, said in a telephone interview. “Those talks continue to progress. We have no further comment.”
Bo Piela, a spokesman for Cambridge, Massachusetts-based Genzyme, declined to comment.
Excluding the CVR, a deal may value Genzyme at about $19.2 billion. Genzyme rose 14 cents, or 0.2 percent, to $73.40 in Nasdaq Stock Market trading on Feb. 4. Sanofi gained 30 cents, or 0.6 percent, to 50.30 euros in Paris.
Acquiring Genzyme, the world’s largest maker of medicines for rare genetic disorders, would help Sanofi Chief Executive Officer Chris Viehbacher offset revenue losses as some of Sanofi’s biggest-selling products face competition from generic versions. Sanofi would gain treatments for Fabry, Gaucher and Pompe diseases.
“Genzyme is a good deal for Sanofi,” Frederic Aubel, a sales trader at Global Equities in Paris, said in a telephone interview. “It seems as if they will be paying a good price, and the CVR will protect them from potential bad surprises.”
Genzyme has projected peak annual sales of as much as $3.5 billion for Lemtrada, known as Campath when used for blood cancer. Sanofi said in October that analysts’ estimates of about $700 million were a valuation “probably closer to the reality of the product.” Lemtrada is in the final stages of testing and Genzyme expects data from those trials this year.
The acquisition would be the biggest industry takeover since Merck & Co. bought rival Schering-Plough Corp. for about $47 billion in November 2009, according to Bloomberg data.
Viehbacher began pursuing Genzyme last year when the U.S. company was focused on fixing manufacturing snags that cut into sales of its biggest products after a virus contamination at a Boston-area factory. Shire Plc took market share from Genzyme, and Genzyme’s stock sank as much as 43 percent from a 2008 high, causing unrest among shareholders.
The Sanofi chief told Genzyme CEO Henri Termeer, 64, of his interest in acquiring Genzyme in a May 23 conversation, according to a filing with the Securities and Exchange Commission last year. Sanofi announced a $69-a-share, $18.5 billion cash bid on Aug. 29 after Termeer refused to negotiate. The French company went directly to shareholders with a hostile tender offer on Oct. 4 after Genzyme continued to spurn the offer as too low.
Sanofi said the offer allowed Genzyme shareholders to cash out after “quite a lengthy period” when the stock underperformed. Genzyme fired back that the offer was “inadequate and opportunistic.” The company already had been targeted by activist investors Ralph Whitworth of Relational Investors LLC and Carl C. Icahn, who gained four of 13 board seats last year in compromises brokered with Genzyme to avoid a proxy battle.
The companies later began negotiations over the proposal and said Jan. 31 that they had started due diligence. Genzyme said it would provide data such as profit margins and customer lists, which Sanofi agreed not to divulge. The $69-a-share tender offer is set to expire Feb. 15.
Genzyme’s top-selling medicine, which garnered $722 million in sales in 2010, is Cerezyme, a mass-produced version of a human enzyme missing in patients with the inherited illness Gaucher disease. The medicine had sales of more than $1 billion in 2007 and 2008 before shortages caused by the plant contamination.
Fabrazyme, used to treat the genetic illness Fabry disease, and Myozyme and Lumizyme for Pompe disease, similarly provide patients with enzymes their bodies fail to make or produce adequately on their own.
Unlike the pills produced by traditional drug companies, Genzyme’s medicines are made using biological processes and can’t be readily copied by generic-drug makers. Genzyme garners premium prices from insurers and government payers because the therapies provide life-saving benefits.
Genzyme, founded in 1981, has about 10,000 employees and 12 manufacturing facilities worldwide, according to the company’s website. Its products are available in almost 100 countries.
Genzyme is being advised by Credit Suisse Group AG and Goldman Sachs Group Inc. Sanofi is advised by Evercore Partners Inc., JPMorgan Chase & Co. and Morgan Stanley.