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Sanofi-Aventis will find a Bristol-Myers Squibb takeover difficult to stomach given the relative valuations of the two businesses and possible anti-trust issues, according to sources familiar with the situation. A difference of opinion between the French pharmaceutical giant’s chief executive Gerard Le Fur and its Chairman Jean-Francois Dehecq over whether to pursue the tie up has also hindered the prospect any near-term move.
Tuesday’s announcement that Judge Sydney Stein had upheld the patent on Plavix, the anti-platelet drug marketed by BMY and Sanofi, after a long drawn out battle with Canadian generic drug maker Apotex has given rise to further speculation of a near-term deal. Plavix is Bristol-Myers’ lead drug with expected 2008 sales of about USD 5.2bn (2007 sales are not clear as Stein has allowed a six month supply of generic Plavix to continue on the market).
However, those familiar with Sanofi said that while it makes sense to dust off the books on BMY again – Sanofi-Synthelabo had considered a deal with BMY prior to buying Aventis – the relative valuations between the two companies makes it incredibly expensive for the Paris based pharmaceutical.
Sanofi currently trades on a p/e multiple of 20.9x, while BMY trades at 27.7x making any share for share deal dilutive.
“Bristol is quite expensive, I’m not sure if anyone is looking at it,” a source close to the company said.
What’s more, issuing shares to execute the deal will almost certainly result in flowback, always a potential ‘deal-breaker on trans-Atlantic takeovers.
A number of sources say have also flagged the possibility that an overlap between the product lines of Sanofi and BMY could pose a problem for anti-trust regulators. The so-called “horizontal merger“ between two competitors could pose ”serious anti-trust issues,” according to an attorney who litigates pharmaceutical anti-trust cases.
The companies both market top-selling colorectal cancer drugs; Sanofi-Aventis’ Eloxatin brought in USD 2.27bn last year, and BMS’ Erbitux, which it co-markets with ImClone, earned USD 652m - a 58% increase over 2005.
The recent licensing deals struck by Bristol Myers Squibb may have also dented any potential deal with Sanofi-Aventis, according to one inside view in the French company. The US drug company signed a deal with fellow US rival Pfizer in April of this year over the development of phase III anticoagulant apixaban. This follows an earlier deal signed with AstraZeneca on two drugs BMY is developing for type II diabetes, saxagliptin and dapagliflozin.
“It is kind of thing you do to make yourself un-saleable,” the insider said.
Still, Sanofi’s setback last week when the FDA refused to rubberstamp the approval of Accomplia has the cost the company at least EUR 1.8bn sales by the turn of the decade, according to analyst estimates. That has certainly forced a review within the company about what its next step will be.
As reported before, a part cash/part share deal for BMY despite the execution risk is still doable on paper given the potential to restructure the combined group. BMY owns saleable assets in infant formula business Enfamil and ostomy/colostomy and wound management business Convatec, both significant businesses in their respective industries. The guarantee of prolonged anti-trust review in the US would buy Sanofi time as under US takeover rules the company need not have the financing in place at the onset of a takeover deal.
But chief executive LeFur is adamant that the next acquisition should be a large molecule company. “He wants to buy biotech assets,” one source said.
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