Merck deal puts pressure on drugmakers AstraZeneca, Sanofi, J&J

Merck & Co.’s $41.1 billion takeover of Schering-Plough Corp. puts pressure on drugmakers Sanofi- Aventis SA and AstraZeneca Plc to make megamergers of their own to gain new products.

Merck’s agreement, which follows New York-based Pfizer Inc.’s $68 billion bid for Wyeth, of Madison, New Jersey, and Swiss drugmaker Roche Holding AG’s $45.7 billion offer for Genentech Inc., of South San Francisco, will propel other drugmakers fearful of missing opportunities, said David Moskowitz, an analyst with Caris & Co. in Washington.

The world’s biggest drugmakers, armed with about $100 billion in cash and short-term investments, are seeking acquisitions to replace $84 billion in sales from products nearing the end of their patent life. The takeover of Schering- Plough, of Kenilworth, New Jersey, by Whitehouse Station, New Jersey-based Merck would give Merck a larger experimental pipeline and products unhindered by imminent patent losses.

“Most companies now are pretty cheap, really, and anyone sitting on cash can make a bid,” said Nick Turner, a Mirabaud analyst in London, in an interview yesterday. “This could be a trigger for a wave of mergers and acquisitions.”

Paris-based Sanofi may target Bristol-Myers Squibb Co., of New York, which sells the French company’s Plavix blood thinner and Avapro hypertension treatment in the U.S. Other possible suitors for Bristol-Myers include AstraZeneca, of London, and Johnson & Johnson, of New Brunswick, New Jersey, Moskowitz said.

J&J may also make a bid for Schering-Plough, Sanford C. Bernstein analyst Tim Anderson said in a note to clients.

AstraZeneca fell 15 pence, or 0.7 percent, to 2,208 pence as of 9:08 am in London trading. Sanofi shares fell 56 euro cents, or 1.4 percent, to 39.75 euros in Paris. Bristol-Myers rose 66 cents, or 3.6 percent, to $19.01 in New York Stock Exchange composite trading yesterday on investor speculation it may be a target, Moskowitz said. The US drugmaker has bolstered its pipeline of experimental drugs, making it a candidate for acquisition, he said.

“Bristol-Myers is next,” Moskowitz said in a telephone interview yesterday. “There is more consolidation to come.”

Brian Henry, a spokesman for Bristol-Myers, and Geoffroy Bessaud, a spokesman for Sanofi, declined to comment on acquisition strategies. Sarah Lindgreen, a spokeswoman for London-based AstraZeneca, said the company doesn’t comment on market speculation. Bill Price, a J&J spokesman, declined to comment.

J&J Chief Executive Officer William Weldon said in a Jan. 20 interview he has a list of takeover targets and is evaluating “unique opportunities” and “big mergers and acquisitions.”

Sanofi’s Viehbacher
Sanofi Chief Executive Officer Chris Viehbacher, while not ruling out a large deal, has said he will seek “small to medium- sized” acquisitions to replace revenue that will be lost to generic competition. He told CNBC in a March 5 interview the French company’s partnership with Bristol-Myers is “sufficient” for now. Other drugmakers have also said they will avoid large mergers.

Andrew Witty, chief executive officer of London-based GlaxoSmithKline Plc, said last month that a megamerger would “distract” the company. Glaxo will rely on agreements valued from about $50 million to the “low billions,” Witty said in a January interview.

Chief Executive Officer John Lechleiter, chief executive officer of Eli Lilly & Co., of Indianapolis, Indiana, said his company is shopping for small to mid-sized acquisitions after buying New York-based ImClone Systems Inc. in November for $6.3 billion.