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Suitor says it has started talks with Genzyme

By Robert Weisman
Globe Staff / January 10, 2011

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The French drug maker Sanofi-Aventis SA’s six-month quest to buy Cambridge-based Genzyme Corp. advanced yesterday as Sanofi confirmed for the first time that the parties are engaged in face-to-face talks.

Sanofi’s statement did not address the value of its offer before a so-called contingent value right was added, but The Wall Street Journal quoted unnamed sources over the weekend as suggesting that it could be raised to about $80 a share.

Until now, Sanofi has offered $69 a share for the Cambridge biotechnology company. Genzyme’s board has formally rejected the offer twice, saying it substantially undervalues the company.

“There remain significant differences on the terms and conditions of the potential CVR and the value of our offer, and there is no guarantee that the parties will come to an agreement,’’ Sanofi’s statement said.

Sanofi officials declined to elaborate yesterday. A Genzyme spokesman would not confirm that the companies are engaged in discussions.

The discussions, which began with investment advisers for both parties, now include representatives of the two companies, according to a statement issued by Sanofi’s headquarters in Paris.

Sanofi said the talks center around how to structure a takeover deal using a mechanism called a contingent value right, which would give Genzyme investors milestone payments down the road if an experimental multiple sclerosis drug in Genzyme’s pipeline meets certain sales thresholds.

Genzyme has previously said it is open to a deal at a much higher price and would not begin negotiations until Sanofi significantly boosted its offer.

The acknowledgment of direct talks comes as senior executives from both companies, including Genzyme’s chief executive, Henri A. Termeer; and Sanofi’s chief executive, Christopher A. Viehbacher, converge in San Francisco for this week’s J.P. Morgan Healthcare Conference, the premier annual gathering of life-sciences companies and investors. Termeer and Viehbacher are scheduled to address the conference tomorrow in back-to-back presentations that are being eagerly anticipated by investors.

Shareholders of Genzyme, the largest biotech in Massachusetts, thus far have withheld their shares from Sanofi despite its $18.5 billion tender offer, which seeks to bypass Genzyme’s management and board.

Sanofi, however, has extended the offer to Jan. 21 without publicly raising the price, so investors are keen to hear tomorrow’s presentations for clues to the status of a potential blockbuster acquisition deal.

Genzyme’s board has suggested that any offer for the company should take into account the potential for alemtuzumab, an experimental drug to treat multiple sclerosis that has yet to be approved by regulators. By structuring the deal to include milestone payments, Sanofi could be making an alliance more appealing to Genzyme investors.

Robert Weisman can be reached at weisman@globe.com.