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Reports: Sanofi to acquire Genzyme for $19 billion

WASHINGTON – Shares of Genzyme climbed Tuesday on reports that the biotech drugmaker has agreed to be acquired by French pharmaceutical company Sanofi-Aventis for roughly $19 billion, after nearly nine months of back-and-forth between the two companies.

Genzyme investors would receive $74 per share plus the right to additional payments if the company meets certain sales goals, according to people familiar with the deal cited by Reuters.

The deal is expected to be announced Wednesday morning, when Genzyme reports its quarterly earnings. The expected announcement would come a day after Sanofi's $18.5 billion offer to acquire the company expires. Genzyme has repeatedly rejected that offer as too low.

Spokesmen for both companies declined to comment on reports of an agreement Tuesday.

Shares of Genzyme Corp. rose $2.53, or 3.5 percent, to $74.30. After hours, the stock gained another 40 cents to $74.40.

Paris-based Sanofi is the world's fourth-largest pharmaceutical company and has seen its sales decline as patents on some of its top drugs expire. The patent on its bloodthinner Plavix, the world's second best-selling medication, expires in May 2012. Sanofi co-markets the drug with Bristol-Myers Squibb.

Cambridge, Mass.-based Genzyme has built a multibillion-dollar business around high-priced treatments for rare diseases like Gaucher disease. But the company made a series of stumbles that left it vulnerable for a takeover, beginning with a viral contamination issue in June 2009. The problem forced Genzyme to close down its Allston, Mass-based plant for three months, slowing production of its two best-selling products. Five months later the company was cited by federal inspectors who found tiny bits of trash in some of its injectable drugs.

In August, Sanofi made its formal offer to acquire the company for $69 per share. Genzyme's board rejected the offer, saying it didn't take into account the company's recovery and its pipeline of potential medicines.

The companies have disagreed about both Genzyme's overall value and the value of Genzyme's alemtuzumab, a biologic drug approved for treating leukemia under the brand name Campath. It's now in late-stage testing for treating multiple sclerosis, and if approved would have the brand name Lemtrada.

According to people familiar with the deal, Genzyme investors will receive a conditional right to additional payments, tied to the performance of Lemtrada.

Pharmaceutical industry consultant Jim Prutow notes that so-called contingent value rights are becoming a more common tool to facilitate drug company mergers.

"It's becoming increasingly difficult to predict if a drug is going to get FDA approval, so with that in mind I think parties are more hesitant," said Prutow, a consultant with PRTM Management.

The agreements help protect buyers from overpaying for unsuccessful drugs, while offering shareholders the potential for future payments if drugs meet sales targets.

Genzyme's best-seller Cerezyme treats Gaucher disease, an enzyme disorder that can result in liver and neurological problems. Its second-best seller, Fabrazyme, treats an inherited disorder known as Fabry disease, which is caused by the buildup of a particular type of fat in the body's cells.