France's Sanofi-Aventis and U.S. biotech Genzyme kept investors in suspense about their $20 billion transatlantic pharmaceuticals merger on Monday, as sources predicted a deal within days.
Talks about a possible takeover by the world's sixth-largest drugmaker continued into the week despite earlier expectations that the two sides would hammer out a reconciliation at the weekend, following a testy courtship drawn out over months.
Shares in Sanofi rose at the opening of Paris trading, indicating investors remained confident a deal would go ahead.
We should not over-interpret what's happening, said Justin Smith, analyst at UK brokerage MF Global. In the end this is a complicated negotiation; it's a large transaction and they should take their time and be thoughtful about it.
Sanofi rose about 1 percent in early trading, outperforming a slightly firmer market. At 0840 GMT the French company's shares were up 0.9 percent at 50.73 euros.
Genzyme shares closed at $73.40 a share on Friday.
Buying Genzyme would add rare diseases as a new growth area for Sanofi, which under Chief Executive Chris Viehbacher has been diversifying to reduce exposure to cheaper generic drugs.
Until recently Cambridge, Massachusetts-based Genzyme -- founded in 1981 and one of the first entrants into the young biotechnology sector, which develops drugs from living cells -- had been unwilling to enter negotiations with Sanofi, which responded by launching a hostile $69-a-share bid in October.
Sources familiar with the situation said on Sunday that Sanofi could raise its cash offer to roughly $74 per share or $19.2 billion based on 258.99 million shares outstanding and add a fee tied to the performance of a drug 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 tradable security that offers a payout to shareholders over time and in this case would be based on the future performance of Lemtrada, designed to treat multiple sclerosis. If the drug fails, the option would be worth nothing.
Sanofi is due to report its annual results on Wednesday.
Buying Genzyme would be Viehbacher's biggest deal since he took office in December 2008 and Sanofi's biggest since it bought Aventis in 2004. That merger created a powerhouse with blockbusters such as anti-clotting drug Plavix, the world's second best-selling prescribed medicine. But with drugs losing patent protection, Sanofi is being forced to expand.
It is not illogical that they should be able to reach an agreement 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.
Genzyme is recovering from a manufacturing crisis that led to shortages of two of its life-saving drugs, forcing patients to skip or take less of their medication.
It was founded by Henry Blair, an enzymologist who had been collaborating with the National Institutes of Health to develop a treatment for Gaucher disease.
Genzyme's current CEO Termeer, a Dutchman, joined the fledgling company in 1983 after 10-years at healthcare company Baxter, known for producing successful young entrepreneurs.
(Additional reporting by Noelle Mennella, Jessica Hall, Editing by Tim Hepher and Will Waterman)