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Rimonabant failure in US may force sanofi-aventis merger

The failure of sanofi-aventis' Zimulti diet pill to gain US marketing approval may force the French pharmaceutical giant to merge

The failure of sanofi-aventis' (S-A) Zimulti (rimonabant) diet pill to gain US marketing approval may force the French pharmaceutical giant to merge, according to a Bloomberg report.

S-A lost EUR 5.8bn (USD 7.7bn) in market value the day after the FDA advisory panel recommended that the FDA reject Acomplia, which cost the company USD 1bn to develop. The panel believed that the advantage of weight loss in obese patients was outweighed by the potential danger of depression and suicide, as seen in clinical studies. EU regulatory bodies have announced that they will revisit the initial approval next week.

S-A's failure to introduce the drug in the US meant that its annual earnings growth could fall to "low to mid-single digits" over the next five years from estimates above five per cent now, according to Nomura analysts. Acomplia's Q1 FY07 sales were EUR 15m.

S-A has no current blockbuster drug to shore up the missing revenues from Acomplia (the EU trade name for Zimulti) and already faces generic competition in India from a number of domestic firms there which took advantage of S-A's delayed patent approval for rimonabant.

Elsewhere, Acomplia may lose a third of its sales to generic competition within five years, according to analysts. Profits are falling, while the shares traded at the lowest level in more than two years, as S-A had been relying on Acomplia to rack up annual sales of USD 3bn.

Analysts have said that a merger with Bristol-Myers Squibb (BMS), which sells S-A's blood-thinner Plavix (clopidogrel) in the US, or Eli Lilly would help stem profit losses from Acomplia and also help by cost cutting.

Nomura Code Securities analysts said: "A big strategic move does become more of a possibility. It's the easiest quick-fix because there are always costs you can take out. While BMS would be a logical merger partner for S-A, it doesn't necessarily have to be  the New York-based company."

S-A and BMS were first identified as a merger possibility in a January 2007 report in La Lettre de L'Expansion, which said they had agreed to merge operations. The US firm hired Morgan Stanley, Citigroup and Lehman Brothers Holdings for advice on a possible takeover. Lilly may also be another possible target, according to London-based Mirabaud Securities analysts. Neither company has commented on the rumours.

Conversely, S-A has revealed it may initiate a takeover of a mid-sized Japanese pharmaceutical company. The Asian country's market offers more opportunities for growth than the EU, where healthcare spending cuts have cut into sales.

Plavix wins patent protection until 2011
BMS and S-A co-market Plavix, sales of which fell in 2006 when a cheaper generic copy was approved for marketing in August.

In better news for S-A, the US District Court for the Southern District of New York upheld the validity and enforceability of US patent 4,847,265 covering clopidogrel, the active ingredient in Plavix, maintaining the main patent protection for the treatment in the US until November 2011.

The court also ruled that Apotex's generic clopidogrel infringed sanofi-aventis' patent, and has banned Apotex from marketing this product in the region until the patent expires.

S-A's shares fell USD 0.35, or 0.6 per cent, to rest at EUR 62.65 in Paris. In all, the shares have dropped 10 per cent in 2007, compared with a 2.6 per cent drop in the Bloomberg Europe Pharmaceutical Index.

30th September 2008


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