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| Sanofi mulls diagnostics, animal-health buys |
| Bloomberg / Paris/London Mar 14, 2009, 00:42 IST |
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Merck will sell its half of Merial, an animal-health venture
Sanofi-Aventis SA may buy Merck & Co’s stake in the world’s third-biggest animal-health company and expand into the diagnostics market to revive growth at the French drugmaker, Chief Executive Officer Chris Viehbacher said.
Merck will sell its half of Merial, an animal-health venture with Sanofi, after agreeing to buy Schering-Plough Corp for $41.1 billion, according to people familiar with the situation. Merck’s stake in the maker of the Frontline flea and tick repellent may be worth as much as ¤2 billion ($2.6 billion).
“Merial is an extremely interesting company and if we have an opportunity to increase our presence in animal health we will welcome that,” Viehbacher said in an interview in Paris.
Viehbacher, who joined Sanofi at the start of December from GlaxoSmithKline Plc, says he is redefining the company’s strategy, moving away from the search for blockbuster drugs and shunning for now the wave of mergers that’s reshaping the industry. Instead, he favours smaller acquisitions and partnerships with researchers that will give Sanofi access to innovative science.
“There is actually an awful lot that’s out there and you have to kiss a lot of frogs before you find a prince,” he said in the interview. Viehbacher, who spends a fifth of his time reviewing potential deals, said the large pharmaceutical mergers of the past didn’t “really create value.”
Even so, he considered bidding for Wyeth before Pfizer Inc offered $68 billion for the Madison, New Jersey-based company on January 26, said two people familiar with Sanofi who didn’t want to be identified because the plan was confidential.
Two camps
The 48-year-old CEO didn’t pursue Wyeth because he was still new to the job, the people said. Pfizer’s proposal also included $44 billion in cash, which Sanofi couldn’t top, they said. Viehbacher declined to comment on the subject.
Sanofi rose 77 euro cents, or 1.9 per cent, to 40.18 euros at 9.47 am in Paris trading. The stock has lost 11 per cent this year.
Like Pfizer, Merck and Switzerland’s Novartis AG, Sanofi will face a sales slump once its best-selling medicines go off patent. Products that account for a fifth of the company’s revenue will face generic competition in the next five years.
Merck, which faces patent losses on medicines with $8 billion in annual sales, announced an agreement this week to buy Schering-Plough, which has a dozen experimental drugs nearing marketing approval.
‘Last at the dance’
Speaking in a conference room at Sanofi’s Paris headquarters near the Seine, Viehbacher said the French company is among the drugmakers in “the diversification camp” as opposed to “the consolidation camp.”
“Sanofi, Glaxo, Novartis, I think we’ve all pretty much said, we want to get off the patent treadmill and develop a business that has longer-term sustainable growth prospects,” he said.
Viehbacher said he is looking at entering the diagnostics field, for example, collaborating with companies developing so- called biomarkers. A biomarker is a substance secreted by cells and found in blood or urine that doctors use as an early indicator of a cancer or infection.
He warned against the fear of being “the last one at the dance without a partner,” he said. “You’ve got to be careful about that kind of mentality. You want to have enough time to be disciplined in how you do things.”
At the same time, he did not rule out “something on a big scale. I’ve got cash, I’ve got some time,” he said. “It takes some time to get some things done.”
Viehbacher’s Labrador
Asked whether Sanofi would consider buying New York-based Bristol-Myers Squibb Co, which shares the best-selling blood thinner Plavix with the French drugmaker, Viehbacher responded “at the moment, where do you see” the value?
Viehbacher has said he would prefer acquisitions of up to ¤15 billion, which he calls “small and medium-sized,” that can bring value to Sanofi or expand on existing platforms.
The company has 4 billion euros in annual cash flow that can be used for purchases, he said.
Merck’s 50 percent stake in Merial is worth from 1.5 billion euros to 2 billion euros, according to Philippe Lanone, an analyst at Natixis Securities in Paris. Viehbacher’s own Labrador, named Poppy, uses Frontline, he told analysts last month, praising Merial as “an extremely important business” for Sanofi.
Merial had sales of more than $2.6 billion last year and employs about 5,000 people, with products including the Ivomec parasite treatment, according to the company’s Web site. Merck formed Merial by merging its animal-health unit in 1997 with a division of Rhone-Poulenc, a predecessor of Sanofi-Aventis.
To contact the reporter on this story: Albertina Torsoli in Paris at atorsoli@bloomberg.net; Trista Kelley in London at tkelley2@bloomberg.net
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