Genzyme argued that its experimental multiple sclerosis treatment will garner far higher sales than Sanofi-Aventis is projecting, as it aims to wrest a significantly higher bid than the $18.5 billion offered by the French drugmaker.

Genzyme, a U.S.-based biotech company that makes drugs for rare diseases, maintains that its Campath drug could generate peak annual sales of $3.5 billion and made its case to investors at a meeting in New York on Monday.

"This is a unique therapy. It is not a pill from a shelf," Genzyme Chief Executive Henri Termeer told investors. "It is a therapy that changes the care for these patients and gives the promise of completely changing this field."

He said the drug has the potential to become the most efficacious, cost-effective and the easiest for patient compliance of any MS treatment.

"The market is very large, a $14 billion market when we get there," Termeer said.

An independent market research analysis completed in September found the drug could grab a 5% share of the MS market in its first year, 10% in its second and third years, and rise to an 18 to 20 percent share in year five and beyond, Genzyme said.

Sanofi sees peak annual sales closer to $700 million. The discrepancy is central to Genzyme's argument that it is worth more than the $69-a-share being offered by Sanofi. To break the deadlock, Genzyme and Sanofi advisers have discussed using contingent value rights (CVR) in a potential deal structure. The rights would give Genzyme investors an extra payout if the drug reached certain revenue targets.

"I think that's the way it's going to go," said William Tanner, an analyst at Lazard Capital Markets, "I imagine there will be a figure in the low $70s with an earn-out based on how this drug actually does."

The two companies are expected to continue discussions on a CVR structure ahead of a Jan. 21 expiry of Sanofi's hostile tender offer. Sanofi had extended that deadline earlier this month to buy time for an agreement, though it has not ruled out more aggressive options, including a proxy battle for Genzyme.

Many of the claims for Campath superiority over other current MS treatments, including the potential to reverse disease disability, must be borne out by data from large late-stage studies expected to become available next year.

"In about six months we will see the first Phase III clinical trial," Termeer said.

Few analysts believe that Campath, which is already sold as a cancer treatment and known generically as alemtuzumab, will generate the kind of sales projected by Genzyme. Independent market research group BioMedTracker has forecast Campath sales of about $1.6 billion in 2019.

Nonetheless, the company said its own market research and conclusions from an independent firm that canvassed hundreds of physicians and payors worldwide estimate the drug could generate eventual annual sales of $3 billion to $3.5 billion.

It said physicians that were consulted strongly associate the Genzyme drug "with best-in-class efficacy" and believe it will be safer than Biogen Idec's Tysabri.

"MS is an efficacy-driven market," said Mark Enyedy, Genzyme's head of transplant, oncology and MS.

He called the market share projections issued at the meeting "conservative given the efficacy profile" and said Genzyme's revenue model is achievable.

A Complicated Deal
Genzyme first presented its argument for a higher value at an investor event in New York two months ago. At the time, it forecast 2011 earnings of $4.30 to $4.60 a share and said Sanofi's offer was not based on up-to-date information.

Analysts had on average been expecting 2011 earnings of $3.57 a share. Sanofi's offer represented a multiple of just over 19 times that estimate.

Applying the same multiple to its own forecast, Genzyme said Sanofi would need to pay $89 a share -- a figure Sanofi dismissed as "totally unrealistic."

Investors and analysts had said a deal could be reached within a range of $75 to $80 per share.

But executing a deal involving CVR would be complicated and time-consuming. Shareholders would be unlikely to accept it unless Sanofi also increased its cash offer.

"They have to sweeten the underlying price," said Geoffrey Porges, an analyst at Sanford Bernstein. "If they sweeten the current price, a CVR could be a little extra to get a deal over the line."

Genzyme laid out its case for why it believes it can command a premium price for Campath in MS. It is currently used to treat B-cell chronic lymphocytic leukemia, but generated less than $150 million in sales in 2009.

Most MS drugs, such as Biogen's Tysabri, cost more than $40,000 a year. A new oral drug made by Novartis called Gilenya costs roughly $50,000 a year. Campath sells for a fraction of that. As a result, Genzyme has to persuade governments and insurance companies to pay a higher price for the drug as a treatment for multiple sclerosis than it does as a treatment for cancer.