Hardly any Genzyme Corp. shareholders tendered their shares to hostile bidder Sanofi-Aventis SA ahead of the original Dec. 10 deadline, but the French drug maker is staying firm on its $69-per-share offer to buy out the biotech. Sanofi announced Dec. 13 that it had extended its tender offer unchanged to Jan. 21.

By gaining more time, Sanofi could potentially hammer out some kind of negotiation with Genzyme, though now it appears the protracted battle will wage well into 2011.

Despite ongoing manufacturing difficulties that chipped away at its share price over the previous 18 months, Genzyme steadfastly has insisted that Sanofi's offer severely undercuts the biotech's worth, a position clearly supported thus far by most Genzyme shareholders. Sanofi reported that as of Dec. 10, slightly more than 2.2 million shares had been tendered to its offer, comprising only about 0.9% of Genzyme's outstanding stock.

In its own statement Dec. 13, Genzyme reiterated its position, stating that its board of directors, which includes several shareholder activists viewed as eager to sell, unanimously rejected the Sanofi offer. "The results of the tender offer reported today demonstrate that our shareholders strongly support the view of the board that the Sanofi offer substantially undervalues Genzyme," said Genzyme CEO Henri Termeer.

In dueling press releases and media leaks, the two companies have waged a war of opinion in recent months, with Genzyme laying out a basis for why $89-per-share is a fair price over Sanofi's "opportunistic" offer. More recently, the option of negotiating a deal including contingent value rights linked to Genzyme's key pipeline drug alemtuzumab for multiple sclerosis has emerged as one possibility to get the two sides to a more even ground.

Genzyme has indicated that it might consider such a structure, where Sanofi would pay an upfront price plus future payments tied to the success of Phase III candidate alemtuzumab in multiple sclerosis, as long as Sanofi also ups its bid (Also see "Genzyme Jumps First Consent Decree Hurdle" - Pink Sheet, 24 November, 2010.).

As with the overall value of the company, Genzyme and Sanofi diverge greatly on the earning potential for alemtuzumab, already approved by FDA as Campath for B-cell chronic lymphocytic leukemia. Genzyme told investors in October the drug could earn peak sales of $3 billion annually, but Sanofi dismissed that projection as unrealistic.

In a Dec. 13 note, Robert W. Baird & Co. analyst Christopher Raymond called Sanofi's decision to extend the tender unsurprising and rated Genzyme stock "neutral," citing significant downside risk should Sanofi pull its offer.

"With less than 1% of Genzyme shares tendered, it is clear both parties remain far apart on valuation," Raymond wrote.

Shareholders Await Bid Of At Least $77-Per-Share

Anticipating Sanofi's decision to extend but not change its offer in a Dec. 10 note, ISI Group analyst Mark Schoenebaum released a survey of 121 investors which he said indicated about 80% would tender their shares at a price of $77 per share.

"We suspect that Sanofi thinks they have time and that no other bidders will show up for Genzyme," Schoenebaum wrote. "In addition, Genzyme's shareholder 'PR' efforts aimed at boosting the share price have largely failed, and we think this has likely emboldened Sanofi to wait and let Genzyme sweat a bit. Our best guess is that a "bump" occurs in [the first quarter of next year]."

Schoenebaum sees little chance for a CVR proposal to become a game-changer. CVRs make the most sense when attached to a "black and white binary event," he said. No such event is forthcoming for alemtuzumab, with positive Phase III data widely anticipated next year. "Thus, a CVR would have to be linked to sales thresholds, which would likely take many years to achieve," he said.

-Joseph Haas (j.haas@elsevier.com)

Sanofi Extends $69-Per-Share Tender Offer For Genzyme To Jan. 21

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