Shares in Sanofi-Aventis have started the day brightly as the markets react with glee to reports that the Franco-German drugmaker has ended talks with the USA’s Bristol-Myers Squibb over a possible merger.
A report in The Times, which did not reveal its sources, said that discussions over a link-up had been called off because disagreements over price and the ongoing legal disputes surrounding the blockbuster blood-thinner Plavix (clopidogrel), which B-MS jointly markets.
If Sanofi and B-MS had linked up more permanently, the deal would have created the largest pharmaceutical company in the world, worth some $175 billion, but the rumours about a possible merger had pushed up the US firm’s stock considerably and a valuation of some $28 per share was more than Sanofi was prepared to consider, according to the newspaper.
The Times said that merger talks were further complicated by the start of a key trial on the validity of one of Plavix’ patents, where Sanofi and B-MS are fighting against generics group Apotex, which flooded the US market with copycat versions of the drug last summer. The paper also noted that Tamar Howson, the senior executive in charge of mergers and acquisitions at B-MS has left the company.
The story of a split came just as analyst Paul Mann of Deutsche Bank had upgraded Sanofi from ‘hold’ to ‘buy’ and raised the target price from 74 euros to 76 euros. He believed that a B-MS acquisition was on the cards and said the deal would be accretive to earnings per share by 10%-30%. He said that the stock was also likely to go forward, given the possibility of victory in the Plavix litigation and receiving approval in the USA for its anti-obesity drug Acomplia (rimonabant).
Analysts at ING maintained their ‘hold’ rating on Sanofi, saying that the company’s fourth-quarter results (out tomorrow morning) are likely to be adversely impacted by a restructuring charge of 300 million euros, US Plavix sales of 440 million euros lost to generics and an approximate decline of 3.5% in reported sales. However, they had also said that a planned bid for B-MS appears financially sensible, as long as the majority of the takeover can be funded by debt.