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Genzyme, Sanofi chiefs offer few details

Termeer, Viehbacher don’t plan to meet about offer at industry event

Genzyme’s Henri Termeer (left) and Sanofi Aventis’s Christopher Viehbacher both attended a conference yesterday. Genzyme’s Henri Termeer (left) and Sanofi Aventis’s Christopher Viehbacher both attended a conference yesterday.
By Robert Weisman
Globe Staff / January 12, 2011

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SAN FRANCISCO — The top executives of Genzyme Corp. and its French suitor circled each other like a pair of caged lions at a major biotechnology investors conference here yesterday, but never appeared on the same podium, even though they have acknowledged their companies are talking about a merger.

Genzyme chief executive Henri A. Termeer sat at the back of the grand ballroom at the Westin St. Francis hotel and listened while his Sanofi-Aventis SA counterpart, Christopher A. Viehbacher, told an audience at the J.P. Morgan Healthcare Conference that purchasing the Cambridge biotechnology company would help Sanofi rebuild its franchise. He said Sanofi tumbled off a “patent cliff’’ when some of its best-selling drugs lost their patent protection in recent years and started competing with low-cost generic versions.

“We’re interested in creating a platform, not only in biotechnology but in rare diseases,’’ Viehbacher said, suggesting he saw Genzyme as that platform. “We will do a deal if it creates value for both Genzyme shareholders and Sanofi shareholders.’’

Earlier, in the same room, Termeer reassured investors that Genzyme was pressing forward with its recovery from serious manufacturing problems at its Allston Landing plant, though he extended his estimate of when the company would fully resume supplying its Fabrazyme drug from the first half of 2011 to the second half of the year. As a result, Termeer revised Genzyme’s profit projections for this year to between $4.10 and $4.30 a share, down from the $4.30 to $4.60 previously anticipated.

“There’s a lot at stake here, and we want to make sure that we’re as realistic as possible,’’ he said. Termeer also said it planned to sell a small-cell therapy unit with operations in Cambridge, Denmark, and Australia.

But in his half-hour presentation, during which he estimated Genzyme would enjoy compounded annual growth of 35 percent over the next five years, Termeer did not mention Sanofi. Taking questions from investors in a subsequent breakout session, he fended off queries about the talks with Sanofi and whether the French company had sweetened its $18.5 billion offer through a so-called contingent value right mechanism. The provision that could reward invest ors if Lemtrada, its experimental drug for multiple sclerosis, proved successful.

“I don’t want to get into discussion of CVRs, or value, or do I like Chris [Viehbacher] or don’t I like Chris,’’ Termeer said with a smile. “It’s not very helpful to the discussions.’’

Viehbacher, for his part, said he had no plans to meet directly with Termeer at the conference. “There are 6,000 people here,’’ the Sanofi chief said. “I haven’t actually seen him physically. We have a very good relationship. I don’t have to come to San Francisco to have a conversation with him.’’

Both said their lieutenants and investment advisers are engaged in discussions, however, focusing first on the contingent value right before tackling the final sale price. While they have met and talked in the past, Termeer and Viehbacher are not currently negotiating face-to-face.

In an interview, Termeer conceded that Genzyme, the largest biotechnology company in Massachusetts, could be sold. But he reiterated that Sanofi would have to offer more than $69 a share, as well as include the contingent value right, which would give investors milestone payments based on Lemtrada meeting certain sales thresholds. Genzyme projects that the drug — which is expected to be approved late next year — could produce revenue of $3 billion to $3.5 billion annually later in the decade. Sanofi has been skeptical of that estimate.

“I’m proud of what we’ve done with this company,’’ Termeer said. “I’m proud that Sanofi, which is a large global company, looks at us as a way to change its future. If the [Genzyme] shareholders decide that a transaction is in the best interest of Genzyme, I can accept that. I’m a shareholder myself.’’

Viehbacher told investors that he planned to be disciplined in negotiations with Genzyme and did not intend to overpay. “We’re an industry that has done a miserable job at creating value for our shareholders through mergers and acquisitions,’’ he said. “We are way too quick to pay more than we should.’’

Lemtrada will be key to the negotiations. Much of Termeer’s presentation yesterday centered on his belief that it would emerge as a leading treatment for patients with multiple sclerosis.

“It is a $14 billion market when we get there,’’ Termeer said. Lemtrada, he added, “is not a pill on the shelf. It is a therapy that changes the prospects of people with that disease.’’

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