Put your money where your mouth is

FEW can deny the rationale behind Sanofi-Aventis’ bid for US-based Genzyme. The French pharma giant is losing patents on its blockbuster drugs more quickly than it can replace them, and it has to act fast. That’s why Genzyme is such an attractive proposition.

It specialises in niche high-margin treatments for rare genetic diseases, which are less vulnerable to competition from generic insurgents. Meanwhile, Genzyme, bedevilled by production problems and a tetchy relationship with regulators, could benefit from Sanofi’s scale. In a sense, the two are a perfect match.

Although the two firms can see the strategic benefit, they disagree on price. Genzyme thinks Sanofi’s $18.5bn (£12bn) offer is derisory, because it doesn’t take into account future sales of experimental drugs like multiple sclerosis treatment Campath.

Genzyme says Campath could bring in $3.5bn-a-year at the height of its powers; Sanofi, along with plenty of others in the industry, disagrees, largely because a promising competitor has emerged in the form of Novartis’ Gilenya.

Now Genzyme is offering to put its money where its mouth is, to a fashion. It is suggesting the deal is designed differently, using a structure known as contingent value right.

If Sanofi agrees, it would stump up a certain amount to acquire Genzyme at first, but then pay more to its shareholders if Campath hits a series of targets. That would remove the dispute over Campath, leaving the pair to argue over price.