* $18.5 bln bid expires Friday, likely extended by 50 days
* Two sides mull milestone idea for Campath to break impasse
* Genzyme stock still trading above $69/share Sanofi offer
By Ben Hirschler
LONDON, Dec 10 (Reuters) - Sanofi-Aventis SA's $18.5 billion cash offer for Genzyme Corp looks set to be extended as a midnight deadline looms on Friday with no sign of victory, pointing to a fight that will drag on into 2011.
With just hours to go, Genzyme shares were still trading above Sanofi's $69 offer price in Europe after closing on Nasdaq at $69.99.
Prolonging Sanofi's tender by 50 days at the same price would give extra time to seek a compromise, with one scenario including a scheme linking Genzyme's value to future performance of its key experimental multiple sclerosis drug Campath, people familiar with the situation said earlier this week.
The idea of contingent value rights (CVRs) is favoured by the Genzyme camp.
Markus Manns, a fund manager at Union Investment in Frankfurt and a top-20 investor in Sanofi, believes this could be a workable solution to the impasse.
"We have seen it with other deals already, like Fresenius when they bought APP. It certainly makes sense, particularly if companies don't agree on the sales potential of an individual drug, like Campath," he said.
"It's likely that Sanofi will prolong the offer period just to buy some time and maybe get easier access to management and convince them to start negotiations," Manns added.
Through CVRs, Sanofi could end up paying Genzyme investors more if Campath proves to be the success Genzyme expects.
"Genzyme is pushing hard on this concept, but Sanofi hasn't necessarily bought into this," said one source, who declined to be named because he was not authorised to speak to the media.
Termeer said last month he was open to a CVR for Campath and Sanofi's finance chief, Jerome Contamine, told Reuters last week that using such a mechanism to bridge valuation disputes was interesting in principle.
Sanofi has dismissed Genzyme's $3.5 billion sales estimate for Campath as "unrealistic" and has pulled together analyst forecasts giving a $700 million sales average.
STATEMENT BY MONDAY
The odds are that hardly any Genzyme investors will have handed their shares this weekend to Sanofi for $69 each while they have been trading at more than $70, on average, since July 23, when stories broke of Sanofi's interest in the group.
Sanofi launched its hostile bid on Oct. 4, frustrated by the refusal of Genzyme's board even to sit down and talk.
The French drugmaker's tender offer for Genzyme ends at 11:59 p.m. New York time on Friday. Sanofi, which people close to the matter expect to extend the offer by 50 days, must make a statement before the U.S. stock markets open on Monday.
Viehbacher and Genzyme's Henri Termeer have met only once, on Sept. 20, to discuss the situation, but the two may bump into each other again next month in Davos, when they are both expected to attend the annual World Economic Forum.
Whether they have anything to discuss will depend on progress in behind-the-scenes talks between their advisers.
Buying Genzyme would give Sanofi a new area for growth, the high-margin business of rare diseases, as it seeks to diversify to make up for patent losses that will take out roughly a third of its 2008 sales base through to 2013.
It has secured cheap loans for the deal and Deutsche Bank analysts estimate the acquisition could boost its earnings by more than 10 percent, helped by "ultra-low" financing costs.
The exact size of the boost, of course, will depend on the final price paid and industry experts agree that, one way or another, Sanofi will eventually have to put more on the table.
"In general, you never get an asset for the first offer in negotiations, so I think it's clear that they will have to increase it," said Union Investment's Manns. "But from what I know of Viehbacher and the way they have done past acquisitions, I would expect them to be careful and not to increase it too much." (Additional reporting by Jessica Hall in Philadelphia; Editing by David Holmes) ($1=.7576 Euro)