Bristol-Myers, Sanofi Ink Pre-Merger Deal, Newsletter Claims

French financial newsletter La Lettre de l'Expansion claims that Sanofi-Aventis and Bristol-Myers Squibb signed a pre-merger deal last week. The merger -- if it takes place -- will result in the world's largest pharmaceutical company. If Sanofi succeeds in purchasing U.S. pharma Bristol-Myers, which has a market value of around $51.5 billion, it will oust Pfizer from the position of world's biggest pharmaceutical company and push GlaxoSmithKline into third place. A Sanofi-Bristol-Myers alliance makes strategic sense, since the two companies already co-market the blood thinner Plavix and the hypertension drug Avapro. Sanofi is much bigger than Bristol-Myers with a market capitalization of 95 billion euros ($123 billion). Its shares are less highly rated, though, and there is concern that a large acquisition could dilute its earnings. Bristol-Myers is trading at about 21x forecast 2007 earnings, largely on takeover speculation. Sanofi is trading at 13.3x. Before a deal can be finalized, litigation will have to be concluded on Plavix patents that have been challenged by Canadian generic drug manufacturer Apotex. Sanofi and Bristol-Myers are expected to win the case.

• Sources: Reuters
• Related commentary: Bristol-Myers, Sanofi Gain Temporarily Halt to Generic Plavix, Bristol-Myers Squibb Partners with AstraZeneca in $1.2 Billion Pact, Sanofi-Aventis Diet Drug Acomplia May Have Use in Diabetes Treatment, Top Picks for 2007 from JPMorgan HealthCare Analysts
• Potentially impacted stocks and ETFs: Bristol Myers Squibb Co. (BMY), Sanofi-Aventis [ADR] (SNY). Competitors: Eli Lilly & Co. (LLY), Merck & Co. Inc. (MRK), Pfizer Inc. (PFE), Novartis AG (NVX), GlaxoSmithKline plc [ADR] (GSK). ETFs: iShares Dow Jones US Pharmaceuticals (IHE), Pharmaceutical HOLDRs (PPH), SPDR Pharmaceuticals (XPH), iShares KLD Select Social Index (KLD)

Seeking Alpha's news summaries are combined into a pre-market briefing called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only a few seconds to sign up.

Comments

[Rothmla:]

Many Wall Street analysts and august financial papers suggest that
BristolMyers Squibb (NYSE:BMY) is a maiden in distress and is being dressed up by its "savvy" management team to be taken to the alter.

If BMY is acquired, the leading contender may very well be Sanofi-Aventis (NYSE: SNY) of Paris and the truth be told, there is some merit in their thinking. SNY has lots of cash, a new CEO Chris Viehbacher, ex-Glaxo and runner up to Andrew Witty for that CEO job who is anxious to make a mark for himself by "expanding and diversifying" their business. And, oh lest we forget they share rights to PLAVIX, both companies' largest blockbuster and one that is beset by potential generic competition.

Let's suppose BMY want to be the acquirer, not the "acquiree". BUT, wait a minute, didn't BMY very recently get outfoxed by Eli Lilly (NYSE:LLY) in a very expensive acquisition of Imclone Systems and its blockbuster oncology pipeline known as Erbitux? It seems to us that BMY's strategy was a combination of expanding its oncology franchise, diversifying into large molecule (e.g. Biotechnology) science and hanging onto some potentially massive blockbuster extensions? If you believe that and BMY's management has learned a lesson,why not think that BMY looks at Biogen-Idec (NASDQ: BIIB) as an alternative or parallel version of its Imclone thinking. With a market cap of $14 billion or so, it could be affordable-NOT cheap, but very attractive with marketed and developing drugs in the areas of oncology, neurology, immunology, and cardiology in the United States and internationally. Its product set includes among many otehrs AVONEX for the treatment of relapsing forms of multiple sclerosis (MS) ; RITUXAN for the treatment of r non-Hodgkins lymphomas and the somewhat controversial TYSABRI for the treatment of relapsing forms of MS. This would be a very interesting fit with BMY's marketed products and pipelines. However, THE SAME COULD BE ALSO SAID FOR SNY!! Think of the fun, merriment and myrth that the bidding war could become!

Feb 04 11:22 AM