France's Sanofi-Aventis and US biotech Genzyme are closing in on a major transatlantic drugs merger, but a deal is taking longer than expected, sources close to the matter said today.
Following a testy nine-month courtship by Sanofi, the boards of both firms had been expected to meet separately at the weekend to put finishing touches to a takeover worth over $19 billion.
Buying Genzyme would add rare diseases as a new growth area for the world's sixth biggest drugmaker which has been diversifying to reduce its exposure to cheaper generic drugs.
Until recently Massachusets-based Genzyme had been unwilling to enter negotiations with Sanofi, which responded by launching a hostile $69-a-share public bid in October.
Sources familar with the situation said yesterday that Sanofi could raise its cash offer to roughly $74 per share or $19.2 billion and add a special conditional fee tied to the performance of a key drug that Genzyme is developing. The fee, called a contingent value right or CVR, would have an effective value of $5 to $6 a share.
The CVR would be a tradeable instrument which promises a payout to shareholders over time and in this case would be based on the future performance of Lemtrada, a Genzyme drug designed to treat multiple sclerosis.
Sanofi shares closed on Friday at €50.30, valuing the European drugs giant at €65 billion. Genzyme closed at $73.40 a share. The sources said the two sides aimed to reach a deal in the next few days.
Sanofi is due to report its annual results on Wednesday.
"It is not illogical that they should be able to reach an agreeent around the price levels which are being indicated," said Jean-Jacques Le Fur, analyst at Oddo Securities."I have always estimated the transaction would happen between $69 and $75 a share in cash. The CVR should be worth $6 to $8 a share. The operation could be announced the day of Sanofi's results."
Sanofi declined to comment.
Reuters
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