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Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

Biopharma asset prices are "pretty high," according to Sanofi's CFO. 

He's not the only one who thinks so. His comments as Sanofi released its second quarter earnings echo those of a number of other large pharma executives. But those gripes don't always line up with market reality. A change in strategy and attitude might be needed for companies claiming sticker shock. 

It's All Relative
Biotech stocks are recovering, but they're still a long ways off their summer 2015 highs
Source: Bloomberg

These comments are supported to some extent by what's been a sluggish year on the biopharma M&A front. About $75 billion worth of deals have gone down, with nearly $30 billion of that coming from Johnson & Johnson's purchase of Actelion Ltd.  Unless deal flow picks up in the final five months of the year, 2017 could be the worst for M&A in the sector since 2013.     

Slowdown
2017 may end up being a down year for pharma M&A
Source: Bloomberg

But the actual valuations don't quite line up with Big Pharma's rhetoric and reluctance. This year's deals have come at an average premium of 29 percent. In contrast, the average premium in 2015 and 2016 was more than 55 percent, according to Bloomberg data.  

Valuations for the entire Nasdaq Biotech Index are up from the end of 2016. But they're a long way down from the heights of the biotech bubble and appear to have reached a steady plateau. The more-mature subset of biotechs on the S&P 500 are trading at a discount both to their past valuations and to the broader market. 

Premium Blend
The broadest index of biotech stocks still trades well below past heights, and mature biotechs are notably cheap
Source: Bloomberg

Some segments of the market where a lot of acquirers are circling are notably expensive. Firms with growing on- or near-market drugs are costly. Sanofi R&D head Elias Zerhouni, on the company's earnings call, noted cancer drugmaker valuations are particularly "hard to justify."

But that's exactly where Sanofi has tried to spend its money lately. It has been a losing bidder on two of the biggest recent biopharma acquisitions -- Johnson & Johnson's purchase of Actelion and Pfizer Inc.'s 2016 buyout of Medivation. Both deals were expensive; but the latter, which focuses on cancer, was pushed to a substantially higher valuation than rare-disease-focused Actelion. 

Chasing It
One reason Sanofi may think asset prices are inflated? It's gone after some extra expensive and competitive deals
Source: Bloomberg

In aggregate, biopharma assets don't appear to be especially expensive. And there were far more deals two years ago, when relative valuations and the premiums being paid were higher.

With several companies in need of new medicines and biotech generally on the upswing lately, there's unlikely to be a big change in relative valuations in the direction Sanofi wants.

Obviously, prospective buyers have an interest in lowering the expectations of potential targets and trying to keep speculators from driving up their stock prices too much. But instead of gamesmanship -- which is unlikely to have the desired effect -- Sanofi and other buyers might want to consider seeking deals in the parts of the market where valuations are attractive, instead of clustering around the same groups of assets.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Max Nisen in New York at mnisen@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net