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Genzyme Chief’s Sanofi Deal Payout as Much as $221.2 Million

Genzyme CEO Henri Termeer
Genzyme Chief Executive Officer Henri Termeer. Photographer: Stephen Yang/Bloomberg

Genzyme Corp. Chief Executive Officer Henri Termeer will receive $158.4 million in the sale of his Cambridge, Massachusetts-based biotechnology company to French drugmaker Sanofi-Aventis SA, according to a filing.

Termeer, 65, will get $145.9 million in cash from his shares, stock options and restricted stock units, the filing with the U.S. Securities and Exchange Commission today said. He will also receive a $12.5 million change-of-control payment if his employment is terminated when the deal closes. Termeer said Feb. 16 when the companies announced the $20.1 billion agreement that he planned to leave after a transition period.

The CEO, who held that position at Genzyme since 1985, also stands to gain as much as an additional $62.8 million in so-called contingent value rights tied to Genzyme’s experimental multiple sclerosis drug, Lemtrada. If Genzyme meets each milestone, the CVR would be worth $14 a share. Adjusted for the probability of reaching each goal, the CVR’s “intrinsic value” is $5.58, Genzyme said in the filing.

“We had valued it closer to $2.50 to $3 per share using much less optimistic probabilities,” said Mark Schoenebaum, an analyst with ISI Group Inc. in New York, in a report today. The CVR will be publicly traded on the Nasdaq Stock Market.

Shares Rise

Genzyme rose 22 cents to $75.87 at 4 p.m. New York time in Nasdaq Stock Market composite trading. Sanofi, based in Paris, agreed to buy the biotech for $74 a share plus potential CVR payments in February after a nine-month pursuit.

The value the market places on the CVR is near the difference between Sanofi’s cash offer price and where the shares are currently trading, Schoenebaum said. That would price them at less than $2. “We continue to think the CVR looks undervalued,” he said. Genzyme holders will receive one CVR for each share.

Sanofi will pay $1 per CVR if Genzyme meets production targets this year for two rare-disease medicines, Cerezyme and Fabrazyme, which had supplies restricted by a plant contamination. The CVR will pay another $1 if Lemtrada wins U.S. approval for multiple sclerosis. CVR owners will receive $2 if Lemtrada sales exceed $400 million within specified periods per territory, $3 if sales exceed $1.8 billion, $4 if they surpass $2.3 billion and $3 if they top $2.8 billion.

CVR Probability

Genzyme today projected a 70 percent probability of reaching the production milestone, expected to be in the fourth quarter; and ascribed a 90 percent likelihood Lemtrada will be approved, estimated to be in the third quarter of 2012. The company gave an 80 percent probability of the drug reaching $400 million in revenue, expected in the third quarter of 2013; and a 16 percent chance Lemtrada will top $2.8 billion in sales, projected in the third quarter of 2016.

“Henri had been extremely eloquent in convincing me of the value of Lemtrada,” Sanofi Chief Executive Officer Chris Viehbacher said at a press conference at Genzyme’s headquarters when the deal was announced. “I said to him, ‘The way this deal is structured, that if we do get to $2.8 billion on Lemtrada sales, and we will certainly be incented to do it, I am going to bring a check personally to Henri, and also with his favorite wine.”

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