Sanofi's Bid for Aventis: Winning Won't be Enough
As Aventis digs its heels in and Sanofi refuses to raise its offer, a friendly deal between the two players looks increasingly less likely. Most observers still expect the deal to happen: white knight stories aren't convincing and none have the political support that this combination enjoys. But if Sanofi does win, it must use the transaction to transform its Franco-centric business, not merely enlarge it.
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Sanofi-Aventis stands apart from most other Big Pharma mergers. Granted, it shares many of the same drivers as previous tie-ups: looming patent expiries and hunger for size. But the unashamed political intervention, which helped turn one of the most vocal bidding wars from bitterly hostile to friendly overnight, was quite extraordinary. It points to the still delicate balance in France between commercial freedom and nationalistic pride; more importantly though, its effects may hamper Sanofi-Aventis' success on the global stage.
Observers and investors are placing their bets on the outcome of Europe's first hostile pharma bid, Sanofi-Synthelabo's proposed takeover of Aventis, and on whether the resulting entity would indeed be able to thrive against competitors such as GSK and Pfizer. But even against the checkered backdrop of past pharmaceutical mergers, it remains unclear whether Sanofi can achieve even an average amount of savings from such a deal.
Still as French as they come, Sanofi's extraordinary international success--its P/E and growth rate are among the industry's highest--has been due to two factors. The first is its productive research group, which has eschewed most biotech fashions in favor of a conservative, small-molecule, therapeutically focused R&D program. The second has been its joint venture with Bristol-Myers on two of its most important products, a joint venture which allowed Sanofi, in a protected fashion, to learn to compete internationally against the most powerful pharmaceutical marketers in the world. If the company has an Achilles' heel, it is the francocentrism of its marketing and development, and perhaps research as well.