3 Puzzles in the Sanofi-Genzyme Takeover Battle: the Price, the Board and the Drug

As Sanofi-Aventis' (SNY) bid for Genzyme (GENZ) becomes increasingly hostile, three issues will come to the fore:

What share price does Genzyme CEO Henri Termeer believe his company is worth? He has so far refused to say.
Is the Genzyme board of directors as united in opposition to Sanofi's $69-a-share offer as Termeer says it is?
What does Sanofi CEO Chris Viehbacher know about Campath (alemtuzumab), Genzyme's star candidate for multiple sclerosis, the drug on which the future value of Genzyme hinges? Viehbacher used to work at Wellcome in the 1990s when the drug was one of that company's assets.

The strangest part of this deal is Termeer's passive-aggressive approach to negotiating a price for his company. His SEC filing describing the two companies' interactions says Sanofi offered to discuss a range of $69 to $80 a share, but that Termeer declined to even agree to that. Instead, he repeatedly says that $69 does not reflect "the intrinsic value of the Company." What does that even mean? Genzyme is being advised by Goldman Sachs and Credit Suisse, and neither of those banks' fairness opinions, attached as appendices to the SEC filing, give a number either. That's the opposite of what happened in the Roche-Genentech takeover, which Termeer's disclosure indicates this deal might be similar to. In that deal, Goldman (bizarrely) convinced Genentech it was worth $115 a share before settling for $95.

If Termeer doesn't know what number is acceptable, neither does anyone else. Here's the current range of guesses, all over the map:

Sanofi: $69
RBC Capital: $75-80 a share
Piper Jaffray: $85 a share
Genzyme: Sky is the limit

As far as the board is concerned, the Deal Journal blog notes an interesting use of language in Genzyme's "unanimous" rejection of Sanofi's offer. It says, "because your opportunistic takeover proposal does not begin to recognize the significant progress underway ..." blah blah blah:

The "because" statement is almost certainly a compromise in a divided board. Two of the directors were appointed by Carl Icahn as a result of the settlement of a proxy fight. Another was appointed as a result of an earlier tussle with Relational Investors. My bet is those three directors are not up for a fight to the death to keep Genzyme independent. Instead, they want the highest price. It will be interesting to see if Genzyme directors immediately start to shop the company -- and if not, whether that decision is unanimous.

Lastly, I previously noted that acquiring Genzyme's Campath would give Sanofi a much stronger expertise in M.S., for which the company has its own candidate, teriflunomide. But did you know that Viehbacher is more familiar with Campath than he may be letting on? Viehbacher worked at Wellcome in the 1990s, according to Reuters, and at that time Campath was a Wellcome development drug:

Originally the fruit of research at Cambridge University, England -- the name is derived from Cambridge Pathology -- it was on the books at drugmaker Wellcome in the 1990s when Viehbacher worked at the company.

At the time, the concern over Campath was its dreadful side effect profile, including blood disorders and infections. Now Campath is on the market for blood cancer, so Viehbacher knows it can pass muster at the FDA. He also knows that doses for MS would be much lower than those needed for chronic lymphocytic leukemia, which may make its side effect profile easier.

The good news for investors is that not doing the deal makes no sense for either company. Genzyme's stock just isn't worth $69 or more without an acquirer, and Sanofi needs new products to replace those going off patent. A fifth of Sanofi's revenues are threatened by patent expiries through 2013, Genzyme noted in its SEC filing.

Related:

Image by Flickr user gfoster67, CC.

More from CBS News