sanofi-aventis, BMS and merger speculation

Here we go again, another day when rumors out of France suggest that s-a and BMS have signed a pre-merger agreement. These two long term partners have had a good deal of success - most especially with Plavix. I don't think there is much doubt that the managements of these two companies would see some significant benefits to a merger.

BMS have been under a cloud for quite a while - probably right back to the massive Imclone deal that looked very expensive and coincided with the appointment of two former BMS senior managers to senior positions at Imclone. The cloud has been lifting slowly but all is not yet clear and a mega merger with s-a would go a long way to clearing the air.

s-a would love to be the largest pharmaceutical company in the world. With market cap of around $170 billion this would be a huge organisation with significant synergies, an existing strong relationship and the all important US market capabilities that s-a have sought for so long.

But I wonder if this rumor is really true? If these two companies are really seeking to merge, why would BMS sell 50% of their very promising DPP-IV anti-diabetic (saxagliptin) to AstraZeneca? Is the s-a diabetes pipeline so strong that they could afford to go without that business? Or are BMS so dysfunctional that the two decisions were being managed separately? Or is saxagliptin not what they thought it would be and selling 50% in exchange for all future development costs plus $100 million was an offer to good to turn down? It goes without saying that I don't know the story behind the story behind the rumor, but something in there doesn't quite pass the sniff test - yet.

Either way, I am sure that this rumor will not be the last relating to a mega-merger in 2007 as all of the majors try to shift their fortunes by acquiring assets that will allow them to maintain (or return to) growth of revenue, earnings, dividends and ultimately shareholder value.