Genzyme, the subject of an $18.5 billion hostile takeover bid from Sanofi-Aventis SA, posted preliminary Q4 earnings that fell short of Wall Street forecasts and cut its earnings outlook for 2011.

Genzyme said the shortfall in quarterly earnings was due to lower-than-expected sales of Cerezyme, its drug to treat Gaucher disease. The company has failed to meet a series of earnings forecasts.

This, combined with its reduced forecast, could make it harder for Genzyme to persuade Sanofi that it is worth more than the $69 a share offered by the French drugmaker.

The companies said earlier this week that they were discussing using a contingent value right in any potential agreement. The CVR would give Genzyme shareholders an additional benefit if certain sales targets for its experimental multiple sclerosis drug are met and allow Sanofi to pay less up front.
Genzyme issued its financial outlook at the J.P. Morgan Healthcare conference in San Francisco on Tuesday. Sanofi Chief Executive Chris Viehbacher gave a separate presentation to investors an hour later, and was careful to damp down expectations.

"We don't know how far we're going to get," he said of the talks.

Genzyme CEO Henri Termeer declined to discuss the negotiations, saying, "This is not the place for me to make any comments." This disappointed some investors.

"I'm here as much for the drama as anything else," said Jerome Dodson, president and portfolio manager of Parnassus Investments, who holds Genzyme's shares. "I'm not sure if I like the CVR. It's complicated. They're not used very often because people don't like them. There's too much uncertainty with them."

Genzyme said fourth-quarter earnings excluding one-time items were expected to be 80 to 85 cents a share, down from its previous forecast of 90 to 95 cents a share.

Analysts, on average, had expected 90 cents a share, according to Thomson Reuters I/B/E/S.

Genzyme expects fourth-quarter revenue to rise 23% to $1.154 billion. Analysts had expected fourth-quarter revenue of $1.19 billion.

The company said that in 2011 it expects earnings, excluding one-time items, of $4.10 to $4.35 a share, and revenue of about $5 billion. In October, it forecast earnings of $4.30 to $4.60 a share, and revenue of $5.1 billion.

Despite the earnings disappointments, Genzyme's shares have been supported by the expectation that the company will be acquired. Genzyme's shares slipped 0.3% to $72.19 in afternoon trading on Nasdaq.

Genzyme, which was forced to temporarily shut its manufacturing plant in Boston in 2009 due to a viral contamination, has been struggling ever since to supply the market with Fabrazyme, its Fabry disease treatment, and Cerezyme.

Termeer said currently treated Cerezyme patients were now receiving their full supply of the drug, but the company does not expect to be able to fully resupply the market with Fabrazyme until the middle of 2011.