Can Sanofi push a CVR on Actelion after the Lemtrada fiasco?

The buzz this morning is that Sanofi $SNY is moving ahead steadily on working out a deal to buy Actelion. And Bloomberg reports that the pharma giant has brought out its favorite M&A tool — the CVR, or contingent value right shares — to get the job done without handing over too large a premium.

Sanofi observers will well remember that the CVR is what clinched the $20 billion deal for Genzyme. But those CVRs are now trading at 38 cents after Sanofi, not known for a very effective in-house R&D group, failed to hit any of the big milestones it laid out for investors. Originally valued at $5.58, or $3.8 billion, the CVR {GCVRZ} was built around Lemtrada, which was initially rejected by the FDA, derailing the commercialization timeline. And that rejection was followed up with a lawsuit.

The drug was finally approved in late 2014 and went on to post disappointing 2015 sales, further damaging the CVR.

Jean-Paul Clozel

Nevertheless, Bloomberg reports that a CVR may be just what Actelion CEO Jean-Paul Clozel needs to give up his well known preference for independence. Clozel has seen off several would-be suitors and activist investment groups pushing a sale. J&J $JNJ was the last to go a few days ago, officially signing out of the deal room but reportedly keeping an eye on the progress Sanofi makes on a buyout that could weigh in around $30 billion.

One reason why Sanofi would prefer a CVR is that Clozel has been the company’s biggest pipeline fan. He is particularly pumped about the MS drug ponesimod — a sphingosine-1-phosphate 1 receptor agonist — just as Genzyme’s Henri Termeer was pumped about Lemtrada. Sanofi is also well past its $20 billion self-imposed limitation on new acquisitions, which will further add to the attractiveness of a CVR. But after losing Medivation to Pfizer, Sanofi CEO Olivier Brandicourt needs to produce a deal to help appease investors as its diabetes franchise wanes.

Sanofi’s bleak CVR past, current R&D effort — as distinct from its collaborations with Regeneron — and troubled future are likely to keep Clozel focused on the cash. The pharma giant’s promises on research and CVRs look pretty thin at this stage.