Genzyme Corp , which is fighting off a hostile $18.5 billion bid from Sanofi-Aventis SA , is taking another stab at persuading investors that its experimental multiple sclerosis drug is worth more than Sanofi's projections.

Genzyme, a U.S.-based biotech company that makes drugs for rare diseases, maintains that its Campath drug could generate peak annual sales of $3.5 billion. It aims to strengthen that argument at an investor meeting in New York on Monday.

France's Sanofi sees peak annual sales closer to $700 million. The discrepancy is central to Genzyme's argument that it is worth more than the $69 a share being offered by Sanofi.

To break the deadlock, Genzyme and Sanofi advisers have discussed using contingent value rights (CVR) in a potential deal structure. The rights would give Genzyme investors an extra payout if the drug reached certain targets.

I think that's the way it's going to go, said William Tanner, an analyst at Lazard Capital Markets, I imagine there will be a figure in the low $70s with an earn-out based on how this drug actually does.

The two companies are expected to continue discussions on a CVR ahead of a January 21 expiry of Sanofi's hostile tender offer. Sanofi had extended that deadline earlier this month to buy time for an agreement, though it has not ruled out more aggressive options, including a proxy battle for Genzyme.

Few analysts believe that Campath, which is already sold as a cancer treatment and known generically as alemtuzumab, will generate the kind of sales projected by Genzyme. Independent market research group BioMedTracker has forecast Campath sales of about $1.6 billion in 2019.

Nonetheless, the company is expected to cite conclusions from a consulting firm which canvassed hundreds of physicians and payors worldwide who estimated the drug could generate sales of about $3 billion.

Genzyme shares were nearly flat at $69.78 on Monday.


Genzyme first presented its argument for a higher value at an investor event in New York two months ago. At the time, it forecast 2011 earnings of $4.30 to $4.60 a share and said Sanofi's offer was not based on up-to-date information.

Analysts had on average been expecting 2011 earnings of $3.57 a share. Sanofi's offer represented a multiple of just over 19 times that estimate.

Applying the same multiple to its own forecast, Genzyme said Sanofi would need to pay $89 a share -- a figure Sanofi dismissed as totally unrealistic.

Investors and analysts had said a deal could be reached within a range of $75 to $80 per share.

But executing a deal involving CVR would be complicated and time-consuming. Shareholders would be unlikely to accept it unless Sanofi also increased its cash offer.

They have to sweeten the underlying price, said Geoffrey Porges, an analyst at Sanford Bernstein. If they sweeten the current price, a CVR could be a little extra to get a deal over the line.

Even if a CVR price were agreed, investors would likely discount it to a greater or lesser extent.

Everyone would have to figure out a present value for that option, and until you have all the details it's hard, said Michael Obuchowski, chief investment officer at First Empire Asset Management, a Genzyme shareholder.

Genzyme must also convince investors that it can command a premium price for Campath in MS. It is currently used to treat B-cell chronic lymphocytic leukemia, but generated less than $150 million in sales in 2009.

Most MS drugs, such as Biogen Idec Inc's Tysabri, cost more than $40,000 a year. A new oral drug made by Novartis AG called Gilenya costs roughly $50,000 a year.

Campath sells for a fraction of that. As a result, Genzyme has to persuade governments and insurance companies to pay a higher price for the drug as a treatment for multiple sclerosis than it does as a treatment for cancer.

Genzyme says it is confident it can find a way to do it -- possibly by withdrawing the drug from the market as a cancer treatment and providing it for nothing.

(Reporting by Toni Clarke, editing by Matthew Lewis)