Bristol-Myers Drops on Dashed Deal Hopes

Shares fell Monday after press reports that a potential merger with Sanofi had unraveled

Wall Street players have long wondered if a merger between Franco-German drugmaker Sanofi-Aventis (SNY) and New York-based Bristol-Myers Squibb (BMY) might enable the two to create the world's largest drugmaker, vaulting Sanofi past Pfizer (PFE) and Britain's GlaxoSmithKline (GSK). But investors sold Bristol-Myers shares on Feb. 12 after a report that the long-rumored merger talks fell apart.

Sanofi disliked the valuation of Bristol-Myers with a share price of about $28, The Times said in an article Feb. 10. Meanwhile talks were further complicated by the start of a "key" court case over Sanofi's top-selling drug, Plavix, which Bristol-Myers jointly markets and sells in the US, the British newspaper said.

The New York drug maker's CEO Peter R. Dolan got ousted on Sept. 12 after a patent fight with Canadian generic drugmaker Apotex Inc. over the blockbuster anti-clotting drug, Plavix. He tried to pay Apotex to prevent it from selling generic copies of Plavix, but failed in the effort. Although a judge halted sales a few weeks later, the Justice Dept. launched an investigation into Bristol-Myers' dealings with Apotex (see BusinessWeek, 9/25/06, "Why Peter Dolan Got The Boot").

"We think no deal is likely until BMY's Plavix patent litigation is resolved," Standard & Poor's equity analyst Herman Saftlas said in a research note Feb. 12. Noting that neither company has yet acknowledged any merger developments, he added that it "could make strategic sense, given existing co-marketing deals and major potential synergies."

Merging with Bristol-Myers could bring helpful changes like protecting both companies when a slew of their best-selling drugs come off patent in the next few years. It would also boost Sanofi's U.S. sales force in preparation for the company's expected April launch of potential obesity blockbuster Acomplia (see, 11/24/06, "Will Sanofi's Wonder Drug Save the Day?"). The two companies have long-standing marketing alliances for Plavix and hypertension drug Avapro (see, 1/29/07, "Is Sanofi-Aventis After Bristol-Myers?").

Disappointed investors sold Bristol-Myers stock on Feb. 12 by 3.6% to $27.49 per share in afternoon trading on the New York Stock Exchange. Shares had hit an earlier low of $26.85 per share.

Saftlas still thinks Bristol-Myers Squibb stock has a $27 per share intrinsic value plus $3 premium due to its potential as an acquisition candidate, which brings S&P's target price to $30 per share. (S&P, like, is owned by The McGraw-Hill Companies.) Time will tell what really happens.

Kerry Capell contributed to this report

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