UPDATE 6-Sanofi extends $18.5 bln Genzyme offer to Jan. 21

* Extended offer unchanged at $69 a share

* Expires at end of day, New York time, on Jan. 21

* 0.9 percent of Genzyme shares tendered

* Sanofi still wants to enter talks with Genzyme-spokesman

* Genzyme shares up 0.8 pct (Rewrites first paragraph; adds details in paragraph 5-7)

By Caroline Jacobs

PARIS, Dec 13 (Reuters) - Sanofi-Aventis (SASY.PA) has extended its snubbed $18.5 billion cash bid for U.S. biotech company Genzyme Corp GENZ.O by six weeks, buying the French drugmaker time to persuade its reluctant target to talk, and potentially to persuade Sanofi to raise its offer.

Only 0.9 percent of shares were tendered by a Friday deadline, Sanofi said on Monday. Genzyme has rejected the $69 a share bid, arguing it should be higher as the company rectifies a manufacturing crisis and awaits results on its experimental Campath drug for multiple sclerosis.

Sanofi Chief Executive Chris Viehbacher has said he would consider a higher offer if Genzyme provided a closer look at its business to justify more money.

Genzyme CEO Henri Termeer said the meager response to Sanofi's offer shows shareholders "strongly support the view of the board" that the bid substantially undervalues Genzyme. Genzyme's top shareholders include activist investors Carl Icahn and Ralph Whitworth.

Investors and analysts say an offer price of $75 per share to $80 per share would be more likely to attract shareholders, and the stock has traded above the offer, which Sanofi took hostile in October. On Monday, Genzyme shares rose 0.8 percent to $70.37.

A spokesman for Sanofi said the company still wanted to enter talks with Genzyme. Advisers from the two companies have met, but Genzyme has not disclosed any confidential information or opened its financial records to Sanofi, Genzyme said in a filing with the U.S. Securities and Exchange Commission.

The talks have focused on using milestone payments called contingent value rights related to the success of Campath, the filing said.

Genzyme wants a higher overall price and compensation for Campath, for which it forecast peak year sales of $3.5 billion. Sanofi expects the drug's sales to be about $700 million per year.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For Genzyme deal calculator: r.reuters.com/het92n

For graphic on drugs sector: r.reuters.com/xaw97p

For other stories on Genzyme bid battle: [ID:nLDE69R0ZX]

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

TALKS BEHIND THE SCENES

Raymond James analyst Eric Le Berrigaud said Sanofi's decision to extend its offer "gives time to pursue discussions behind the scenes."

He added: "They will try to determine at what price Genzyme will decide to partially open the door."

The idea of contingent value rights (CVRs) is favored by the Genzyme camp. Through CVRs, Sanofi could end up paying more if Campath proved to be the success Genzyme expects.

"I find it surprising that they haven't raised their offer. If they are extending their offer, it's probably to negotiate a CVR," CM-CIC analyst Arsene Guekam said. "I don't expect them to raise the offer very significantly, maybe one or two euros."

Sanofi's efforts to buy Genzyme could continue until May, when Genzyme holds its annual meeting, giving Sanofi a chance to try to overturn Genzyme's board. [ID:nN13277731]

The company said on Monday its offer would now run until Jan. 21, "unless it is further extended."

Long takeover battles are not uncommon. U.S. industrial gases company Air Products and Chemicals Inc (APD.N) has been trying to buy Airgas Inc (ARG.N) since February, while in the drug sector, it took about eight months before Roche Holding (ROG.VX) could buy the part of Genentech it did not already own.

Termeer raised the possibility of negotiating a CVR last month as a way to break the stalemate between him and Sanofi's Viehbacher. [ID:nLDE6AP0GV]

Sanofi's finance head, Jerome Contamine, called it "an interesting idea in principle" to resolve value disputes. [ID:nLDE6B01WV]

Termeer has said he is prepared to sell the Cambridge, Massachusetts-based biotech he built up over 25 years, but not at $69 a share. Genzyme, the world's leading maker of drugs for rare genetic diseases, made sales in 2009 of $4.5 billion.

Genzyme became a takeover target when viral contamination at its plant in Boston led to a manufacturing crisis that caused severe shortages of two of its biggest selling drugs.

Genzyme shares fell from a peak of almost $84 before the manufacturing crisis in 2008 to $45.39 in May, their lowest level since July 2004. Since Sanofi's interest emerged, the stock has been trading above $69 and as high as $73.23.

Buying Genzyme would give Sanofi a new and high-margin growth area as mounting generic competition could take out roughly a third of its 2008 sales base by 2013. ($1=.7580 Euro) (Additional reporting by Noelle Mennella, Michele Gershberg and Jessica Hall; Editing by John Wallace and Gerald E. McCormick)