CVRs make Genzyme a bargain, Bloomberg says

As the week comes to a close, and sources close to the Genzyme/Sanofi-Aventis deal predict success as soon as Monday, Bloomberg assesses the leaked prices--and finds that Sanofi may well get a bargain. The news service quotes sources on a $71 cash payment, plus $5 to $6 per share in pay-for-performance rights linked to Genzyme's multiple sclerosis drug prospect Lemtrada. If those numbers stand up, Sanofi would nab Genzyme at a 52 percent discount compared with other recent deals.

Bloomberg looked at five acquisitions--from Genentech to MedImmune--and found a median purchase price of 36.6 times earnings. If Sanofi pays $71 per share in cash up front--or $18.4 billion--that would amount to 17.6 times Genzyme's earnings, based on analyst estimates of $4.035 per share for 2010.

It's the CVR that does the trick. Those rights protect Sanofi "against the uncertainty of their drug performance in case things don't go well," investment manager Michael Holland told Bloomberg. "If all goes well, everyone comes out a winner." In other words, if Lemtrada doesn't pan out, then Sanofi still got a good deal.

- see the Bloomberg story