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Sanofi-aventis and BMS move closer toward merger

French pharmaceutical company, sanofi-aventis, is progressing merger discussions with US-based Bristol-Myers Squibb

French pharmaceutical company, sanofi-aventis, is progressing merger discussions with US-based Bristol-Myers Squibb (BMS).

If the two companies merge, the new entity would surpass Pfizer, which is the world's largest pharmaceutical company. Sanofi-aventis is currently the world's fourth-largest pharmaceuticals group, with a market capitalisation of EUR 93.8 billion (USD 121 billion/ GBP 62.1 billion) and is twice the size of BMS.

Market analysts have said that sanofi-aventis would have to pay around EUR 50 billion (GBP 33.0 billion/ USD 64.8 billion) to secure overall control. BMS' shares rose six per cent on 29 January on the back of the merger rumour, while shares of sanofi-aventis fell 1.4 per cent in Paris.

A merger between the two companies has always been on the back burner, especially as both have been co-marketing the blockbuster platelet anti-aggregant, Plavix (clopidogrel) since 1989. Plavix is the highest-earning drug in sanofi-aventis' portfolio and is the world's second best-selling drug. Sanofi-aventis' Q3 FY06 sales of Plavix were up 2.5 per cent on the previous year's quarter to rest at EUR 543 million, while for the first nine months of 2006, sales were up 11.2 per cent to rest at EUR 1.7 billion. The growth was attributed to increased market penetration and an increase in the length of patient treatment.

For BMS, the sales picture was less positive, with the 26 January announcement that it had lost USD 134 million in Q4 FY06, as sales of Plavix dropped, as well as the addition of a one-time charge to settle investigations into pricing policies. Plavix Q4 FY06 sales fell 53 per cent to rest at USD 496 million from USD 1.1 billion for Q4 FY05. Total Plavix sales from both firms amounted to over USD 6 billion in FY06. BMS has said that generic Plavix will continue to affect the company's performance in 2007, as US generic manufacturer Apotex sold six months' worth of the product on the US market, before a court injunction halted further sales.

In December 2006, BMS succeeded in persuading US and Canadian courts to reject an injunction appeal from Apotex to allow sales of the generic versions of Plavix. BMS also offered to pay USD 499 million (EUR 385.7 million/ GBP 255.4 million) to settle federal investigations into whether the company misled insurers and government agencies to overpay for drugs. The company continues its search for a new CEO, following the departure of Peter Dolan in September 2006.

The main push behind sanofi-aventis' merger ambitions is chairman, Francois Dehecq, who has always stated his ambition to make the company a world leader before he retires in 2010. The acquisition of BMS would give sanofi-aventis access to BMS' US infrastructure and biologic markets. In the US, BMS employs 7,700 R&D, corporate function and marketing staff.

According to the Financial Times (FT), a merger with BMS would improve sanofi-aventis' profits because BMS' earnings are expected to grow three times faster than the French firm's over the next three years. The increase will come from BMS' autoimmune, inflammatory and oncology pipelines, with the imminent launches of rheumatoid arthritis treatment, Orencia (abatacept) and non-Hodgkin's lymphoma refractory to Gleevec (imatinib) treatment, Sprycel (desatinib).

BMS' oncology portfolio is also set to expand, with three oncology drug launches over the next two years: BMS 247550 (ixabepilone), MDX-010 (ipilimumab) and Javlor (vinflunine). The upcoming launches are highly synergistic with sanofi-aventis' existing oncology franchises, which include Taxotere (docetaxel) and Eloxatine (oxaliplatin) treatments.

31st January 2007

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