Sanofi says still reviewing Genzyme's books

France's Sanofi-Aventis said it was still conducting due diligence on takeover target Genzyme and may extend a tender offer for the company a third time, disappointing some investors who thought a deal of more than USD 19 billion could be sealed by Wednesday.

Sanofi also predicted 5% to 10% lower earnings in 2011, underscoring its need to find new sources of revenue growth as top-selling drugs lose patent protection in the coming years.

Chief Executive Chris Viehbacher told analysts that talks with Genzyme were progressing as it analyzes the US biotech company's records. The two companies said 10 days ago they had entered into a confidentiality agreement, and Sanofi has said its review of Genzyme could take about two weeks.

"This is a company that's present in 80 markets and has 14 manufacturing facilities, so getting through due diligence needs the appropriate amount of time to do that," Viehbacher told the New York Times.

Viehbacher told the newspaper that Sanofi may seek another extension of its tender offer to acquire Genzyme, though it has not yet decided to do so. The current offer expires on February 15, a day before nominations can be made for Genzyme's board.

Sources close to the talks had said last week that an agreement could be unveiled by Wednesday, when Sanofi released its 2010 financial results. But as the discussions continued over the weekend, people familiar with the situation said they could well linger into this week.

Genzyme shares fell 1.3% to USD 72.97, while Sanofi's US-listed shares  fell 1%.

"There's some softness (in Genzyme) today because some people had hoped a deal would be announced today" and were holding short-term positions in the stock, said one arbitrageur who declined to be named because he was not authorized to speak to the media.

After seeing its initial overtures rejected last year, Sanofi is widely expected to sweeten its original USD 18.5 billion, or USD 69 per share, cash offer and add a fee tied to the performance of Lemtrada, a drug Genzyme is developing for multiple sclerosis.

People familiar with the matter have said recently the two sides are close to a deal at a price of about USD 74 per share in cash, plus the right to future milestone payments.

At a conference with analysts, Viehbacher berated unnamed sources for telling the media that a deal was imminent. "Some people should not be talking to the press," he said. "Due diligence is not something you should take lightly."

Genzyme could defy generic's bite 

Cambridge, Massachusetts-based Genzyme, founded in 1981 and one of the first entrants into the young biotech sector, has become all the more compelling now that Sanofi has suffered setbacks with two of its promising treatments.

US and EU health regulators are examining whether heart drug Multaq may have caused liver damage in some patients. And, unexpectedly, breast cancer drug iniparib, seen as one of Sanofi's future key treatments, failed to meet its main goal in a late-stage clinical trial.

Genzyme's drugs help patients with rare diseases and the prices they command are among the highest in the world.

For 2011, Sanofi predicted 5% to 10% lower "business" earnings per share, at constant exchange rates. It said this did not include any benefit from a Genzyme deal, nor the damaging effects of a return of generic copies to cancer drug Eloxatin.

The drop equates to EPS in 2011 of 6.35-6.71 euros, against a consensus of 6.63 euros compiled by Thomson Reuters I/B/E/S.

Sanofi's fourth-quarter earnings beat analyst expectations, due to a lower tax rate and cost cuts. It expects to save 2 billion euros this year instead of in 2013 and proposed raising its dividend to 2.50 euros a share from 2.40 euros.

Business EPS, which excludes items like amortisation and legal costs, were flat at 1.41 euros in the fourth quarter, above a Reuters poll which suggested 1.35 euros.

Quarterly sales fell short of expectations, edging up to 7.395 billion euros compared with a consensus for 7.501 billion, as generic competition hit for several products, notably blood-thinner Lovenox in the United States.

US and European drugmakers, such as Novartis, AstraZeneca and Sanofi's US partner Bristol-Myers Squibb, have also given cautious forecasts for 2011 as higher costs from US healthcare reform will hurt a sector grappling with patent expirations and pressure to curb prices.

Sanofi estimated US healthcare reforms to affect sales by USD 290 million this year and public spending cuts in Europe to dent sales by more than 200 million euros.