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February 12, 2007
Good Sense Breaks Out, Film at Eleven?
Posted by Derek
This weekend brought reports that the widely rumored Sanofi-Aventis / Bristol-Myers Squibb merger deal has been called off. No one at either company is confirming this, but then, no one at either company ever confirmed that a deal was being worked on in the first place.
I'm quite happy to hear this, naturally, since I've been ranting about pharmaceutical mergers for years now. But I'm afraid that this isn't a case of Sanofi-Aventis realizing that perhaps they shouldn't hogtie their research productivity just as they need it to expand. No, if the deal has indeed been put aside, it seems likely to have been done in by disagreements over Plavix and perhaps by the rise in the BMS share price. That last factor, although cited in some of the news reports, seems a bit odd. You'd think that a company would factor those things in when they cost out one of these ideas, but who knows?
So as the Plavix situation gets settled in court this year (one way or another), I would expect this deal to come back to life. S-A's chairman, Jean-Francois Dehecq, seems to enjoy this kind of thing, and once a CEO gets a taste for engulfing other companies they often don't seem to know when to quit. For their part, Bristol-Myers Squibb seems to want to remain an independent company, and I salute them for it.
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1. tom bartlett on February 12, 2007 9:42 AM writes...
"That last factor, although cited in some of the news reports, seems a bit odd. You'd think that a company would factor those things in when they cost out one of these ideas, but who knows?"
We're talking MBA's here; not people with a clue.
Permalink to Comment2. John Thacker on February 12, 2007 1:35 PM writes...
once a CEO gets a taste for engulfing other companies they often don't seem to know when to quit.
Well, quite a few studies show that CEO pay is highly correlated to the size of a company (and that this explains a lot of changes in CEO pay). Mergers are often a case where the principal agent problem comes into play; it might be in the CEO and the board's interest, but not the corporation's/shareholders'.
Permalink to Comment3. CR on February 12, 2007 3:10 PM writes...
"For their part, Bristol-Myers Squibb seems to want to remain an independent company, and I salute them for it."
Not sure you can make any assumptions that BMS wants to "remain an independent company". From some of the reports, S-A just didn't want to pay the price that was being sought. It doesn't seem BMS went away saying--no, no we won't sell at any price!!! But rather, it was S-A saying "we aren't paying what you are asking". Either way though, I agree this is good news (if true, since the original report of the pre-merger deal was a bit sketchy) at least in the short term
Permalink to Comment4. kw on February 13, 2007 7:35 AM writes...
Don't you think part of this "back down" by sa comes from the fact that they just lost a patent suit on their #1 drug, Lovenox?
Permalink to Comment5. CR on February 13, 2007 9:40 AM writes...
The loss of the patent on Lovenox is an interesting case since it is not a small molecule. It's unclear whether the companies that sued to invalidate the patent will even be able to get their drug approved. It may, in fact, take a couple of years before someone comes to market--if the FDA even approves a generic. Some "analysts" were predicting it wouldn't be until 2008.
Seems the "back down" might just be good common sense as the title implies. BMS had a ramp up in their stock price due to speculation, and they are probably just too expensive for what you get. A supposed good pipeline--but aren't all pipelines good when there is speculation of an M&A?
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