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According to French reports, Sanofi-Aventis (NYSE:SNY) and Bristol-Myers Squibb (NYSE:BMY) signed a pre-merger agreement last week that will pave the way for a merger between the two big pharmas.

Sanofi-Aventis is currently worth $123 billion, while takeover speculation has pushed BMS up to value of $52 billion, a three-year high. The combined company would be the largest big pharma in the world, surpassing the current champion Pfizer (NYSE:PFE). The two companies share the troubled blood-clot drug Plavix, which produces almost $6 billion in revenue and briefly saw generic competition last year from Canadian generic company, Apotex.

Most likely, Sanofi and BMS would not merge unless they defeat the generic challenge to Plavix. A trial began last week, though a verdict is not expected until Q3 of 2007. Since the merger beween Sanofi and Aventis, the French firm has been deleveraging, making this new bid possible. Sanofi is expected to offer a combination of cash and shares. BMS remains without a permanent CEO, since its ouster of Peter Dolan last September. Dolan was sacked when he failed to prevent the generic version of Plavix.

Bristol recently launched drugs for rheumatoid arthritis and leukemia, and it has three cancer drugs that it will submit for FDA approval in the upcoming 18 months. Both companies make a Taxol-type cancer drug. Sanofi, meanwhile, is counting heavily on its obesity drug, Acomplia. Sanofi-Aventis, for whom the merge is expected to be dilutive, fell 75 cents to $44.59, but Bristol-Myers Squibb shot up $1.22 to $27.43.

MDS (MDZ), a contract research organization, will purchase Molecular Devices (MDCC), a maker of high-performance measurement tools, for $615 million or $35.50 per share. The purchase price is a 49% premium to the closing quote of Molecular Devices on Friday. In the 12 months ending September 2006, Molecular Devices reported revenues of $185 million and EBITDA of $38 million.

MDS will merge Molecular Devices into its Sciex division, and expects to save $7 million in corporate overhead in 2007. Ultimately, the synergies will be in the $10-$12 million range. MDS expects the merger to be moderately accretive in 2007, excluding one-time expenses. MDS moved up 21 cents to $17.31, while Molecular Devices gained 47%, rising $11.19 to $35.07.

Introgen (NASDAQ:INGN) released positive news from a Phase II trial of its molecular cancer vaccine. The vaccine was given to patients as a second-line treatment before they were given chemotherapy. There was a tumor response in 52% of the patients and 41% of them were alive after one year, in comparison with historical rates of a 30% (or less) tumor response and survival time of under six months for most patients. The vaccine contains the p53 gene, which seeks to restore the effectiveness of chemotherapy. Introgen traded 5 cents higher to $5.39.

A pre-pandemic flu vaccine from GlaxoSmithKline (NYSE:GSK) has been accepted for review by European authorities. The vaccine includes an adjuvant that allows each dose of vaccine to use only a small amount of antigen. In a clinical trial, two small doses of H5N1 antigen, given 21 days apart, created a high seroprotective response in 80% of the recipients. GlaxoSmithKline slipped 9 cents lower to $54.52.

Sunesis Pharma (NASDAQ:SNSS) will put treatment-sensitive patients from its small-cell lung cancer trial into Stage 2 of the Phase II test. SNS-595, a novel cell-cycle inhibitor, is being studied as a first-line treatment for relapsed/refractory small cell and non-small cell lung cancer. In the study, patients were split into treatment sensitive and treatment refractory arms, but the refractory patients did not demonstrate a significant response. In the treatment sensitive cohort, 9 of 11 evaluable patients had either stable disease or objective response after two cycles of treatment. Sunesis took the news hard, dropping 9%. The stock lost 43 cents to end at $4.23.

OSI Pharma (OSIP) and Roche (OTCQX:RHHBY) announced that Tarceva received approval from European authorities for use as a first-line therapy for metastatic pancreatic cancer. Tarceva was administered along with Gemzar from Lilly (NYSE:LLY). OSI and Roche market the drug outside the U.S., while OSI and Genentech (DNA) are responsible for Tarceva in the U.S. Based on a 23% improvement in overall survival, the Tarceva-Gemzar regimen was approved by the FDA in November 2005. OSI was 33 cents higher at $33.51.

Sequenom (NASDAQ:SQNM) will collaborate with Lenetix Medical Screening Laboratory to develop a non-invasive pre-natal Rhesus D [RhD] incompatibility test. The test will be a home-administered test. Sequenom edged up 11 cents to $4.29.

OncoGenex [OGXI], a Canadian biotech that focuses on cancer drugs, said it will offer 4.5 million shares in a $10-$12 range in its IPO.

Biotech continued to suffer from the weakness in Amgen (NASDAQ:AMGN), which fell another 2% today. The Centient Biotech 200™ was down 13 points at 4009, a loss of .33%. The S&P 500 was off .11%, but Nasdaq moved .23% higher.

Disclosure: Centient management holds a position in Genentech shares and does consulting work for Genentech.

Source: Biotech Stocks Day In Review: Will Sanofi-Aventis Merge With Bristol-Myers Squibb?