Merck Bargain Puts Megamerger Pressure On Astrazeneca, Sanofi, J&j
Mercks agreement, which follows New York-based Pfizer Inc.s $68 billion bid for Wyeth, of Madison, New Jersey, and Swiss drugmaker Roche Holding AGs $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 worlds 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 companys 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 Gains
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 U.S. 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 doesnt 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.”
Sanofis Viehbacher
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.
Novartiss Vasella
Novartis AGs CEO Daniel Vasella said that the Swiss drugmaker will continue to make small acquisitions to replace products facing generic competition. AstraZeneca CEO David Brennan has also said he favors smaller licensing deals to shore up its pipeline of new products.
The heads of Bristol-Myers Squibb Co. and Abbott Laboratories, of Abbott Park, Illinois, have made similar statements.
Licensing entanglements between pharmaceutical companies may complicate future deals.
Schering-Plough sells the anti-inflammatory drug Remicade outside the U.S., and its agreement allows J&J to claim all rights if Schering-Ploughs ownership changes, said Lawrence Biegelsen, a Wachovia Capital Markets analyst in New York, in a note yesterday. Remicade generated $2.19 billion for Schering- Plough last year, 16 percent of company revenue.