Genzyme weighs Sanofi approach: source

Biotechnology company Genzyme Corp is weighing an informal takeover approach from France's Sanofi-Aventis but is not looking to sell the company, a source familiar with the situation said on Monday.

Bloomberg reported earlier on Monday that Genzyme had rebuffed Sanofi's overture. Genzyme, however, has not responded to Sanofi or rejected the French company, a second source familiar with the situation told Reuters.

Sanofi and Genzyme declined to comment, but Genzyme shares rose another 7.8 percent on Monday and reached a level during the trading day not seen since February 2009.

Reports that Sanofi was making a run at Genzyme surfaced on Friday, sending the U.S. company's shares up more than 15 percent as investors figured the company would garner a hefty premium for its unique portfolio of expensive treatments for rare genetic disorders and pipeline of drugs in development.

Sources told Reuters that Sanofi had approached Genzyme two weeks earlier with an informal bid to buy the company and was awaiting a response.

Some company watchers say Genzyme shareholders may be willing to accept a price of $70 to $80 per share, particularly newer investors who were drawn to the company as it was targeted by activist investor Carl Icahn.

They might be willing to accept a narrower premium than long-standing investors, said Sam Isaly, managing partner at OrbiMed Advisors LLC.

I suspect a figure in the $70 range will be enough, he told Reuters in an interview.

OrbiMed is a long-standing investor and holds about 0.9 percent of Genzyme, according to a March 31 filing.

For a graphic on Genzyme's share performance, see: http://link.reuters.com/wev59m

SANOFI'S NEED

Analysts see Sanofi in greater need of a major acquisition than some of its rivals as it girds for generic competition for some of its key products. On the same day that news of its interest in Genzyme surfaced, U.S. regulators approved a generic version of Sanofi's blood thinner Lovenox and the French drugmaker cut its 2010 profit outlook.

While other major drugmakers, including Britain's GlaxoSmithKline and New Jersey-based Johnson & Johnson , have been suggested as possible suitors, industry experts questioned the extent of their appetite.

RBC Capital Markets analyst Glenn Novarro said he doubted J&J would make a play for Genzyme, because it would be an uncharacteristically large transaction for the diversified healthcare maker, which currently has a strong pipeline of experimental drugs and medical devices.

J&J historically has gone for deals below $1 billion. They buy small assets and grow them through J&J's distribution system, Novarro said.

Glaxo is also less likely to end up with Genzyme than Sanofi, according to industry insiders who argue that the French company has a much greater need for an earnings-boosting acquisition.

Glaxo is less likely to enter a competitive process, said UBS analyst Gbola Amusa. Glaxo has weathered some significant patent expirations of important products, he said, so it doesn't quite fit the profile to do a large deal for the sake of earnings growth.

For Genzyme, an offer at the right price may attract investors who had seen the shares plunge since a viral contamination at its Boston plant led to shortages of two of its biggest-selling drugs and put the company in a particularly vulnerable position.

The manufacturing crisis also led to Genzyme agreeing to pay a large penalty and to a consent decree under which it placed drugmaking operations under third-party control.

It has fended off two activist investors, including Icahn, who had been agitating for operational and top management changes at Genzyme.

The company avoided a proxy fight by putting two Icahn representatives on the Genzyme board, as well as giving the other activist investor, Ralph Whitworth of Relational Investors LLC, a seat on the board.

The moves appeared to save the job of Chief Executive Henri Termeer, who also appeased critics in May by agreeing to explore the sale of three non-core businesses -- genetic testing, diagnostic products and pharmaceutical materials.

But Termeer is not looking to sell the company, a source who declined to be identified because he was not authorized to speak with media, told Reuters.

Genzyme shares closed up $4.86 at $67.38 on the Nasdaq after climbing as high as $67.85.

(Additional reporting by Toni Clarke in Boston, Ben Hirschler in London, Ransdell Pierson in New York; Editing by Gunna Dickson, Steve Orlofsky, Gary Hill)