Think zebras, not horses

16 February 2011 By Robert Cyran Follow @rob_cyran

The contingent value rights structured for Sanofi’s purchase of Genzyme helped seal the $20 bln deal. It shows how financial engineering can sometimes bridge divides. But the complexity of CVRs and their unpopularity among investors should limit their use to very special cases.

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SanofiAventis, the French drugmaker, said on Feb. 16 it had agreed to buy Genzyme with a sweetened $20.1 billion cash offer plus payments linked mostly to the success of the U.S. biotech group's multiple sclerosis drug Lemtrada.

Sanofi will pay $74 a share in cash for Genzyme. The French group also will pay up to $14 a share in contingent value rights, depending on the revenue booked over the years on Lemtrada and two other drugs. Genzyme said it expects peak annual sales of $3.5 billion from Lemtrada. Most analysts expect between $750 million and $1 billion.

The CVRs will trade on Nasdaq.

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