Sanofi plays down need for pharma deals
High prices are creating ‘uncertainty’ over value of companies, says top scientist
Sanofi’s top scientist has warned uncertainty over pricing, particularly in the US, is making it hard to value acquisition targets, signalling the company will not rush into dealmaking at potentially inflated prices.
The comments from Elias Zerhouni, global head of research and development at the French drugmaker, come amid investor frustration over the drugmaker’s two recent failed attempts to acquire promising biotech companies.
“There is a lot of uncertainty right now in the values of all companies because of pricing issues in the US . . . in particular, but worldwide,” he said. “And so when you see the values that are being paid you question yourself as to the sustainability of those values, given the uncertainty in the pricing environment.”
A deal of some kind is widely seen as necessary to help offset declining revenues from Lantus, Sanofi’s one-time blockbuster insulin medicine. Analysts have estimated the revenues the drug generates will fall from $6bn a year in 2015 to $2.9bn a year in 2020.
Yet its pursuit of Medivation came to nothing after Pfizer agreed a $14bn deal in August last year to buy the US biotech. Meanwhile, it lost out to Johnson & Johnson this year in its bid for Swiss-based Actelion.
Sanofi received an important boost last month, however, when it received approval from the Food and Drug Administration for Dupixent, a medicine to treat intractable eczema, which is predicted to be the biggest drug launch of the year.
Dr Zerhouni played down the necessity of a merger or acquisition to secure the company’s future, however, saying Sanofi was developing new products and “clearly” had the ability to return to growth.
Dr Zerhouni added: “It’s not fair to say that we’re not interested, but we’re also very disciplined. There is an inflation of prices for these assets and they are quite unusual.”
Data from Dealogic show pharma industry deals this year and last were completed at a multiple of 21 times earnings before interest, tax, depreciation and amortisation. This is above the average of 19 times ebitda since 1995.
Meanwhile the premiums being paid by acquirers, at 37 per cent this year and 38 per cent last year, are the highest since 2008 and 2009, and compare with a 22-year average of 32 per cent. This suggests buyers are having to pay high premiums over share prices to acquire targets.
However, one large life sciences investor with a stake in Sanofi dismissed the comments as coming from a company that had been “left at the altar two times in a row”
“I think M&A needs to be part of the strategy for them given the gaps in the pipeline,” he added.
The investor was critical of Sanofi’s approach of trying to buy Medivation and Actelion, saying: “They always start a bidding war against guys with bigger pocket books.”
Sanofi should instead focus its efforts on a string of smaller acquisitions, or target a company that is unlikely to draw rival bidders, such as rare diseases drugmaker Alexion, the investor argued.