What's wrong with Sanofi's dealmaking approach? To hear Actelion tell it, plenty

Sanofi sign
2016 saw Sanofi frustrated in its attempts to pull off two major deals.

It’s no secret that Sanofi has struggled of late at the dealmaking table. But why? The deal prospectus from former target Actelion and its agreed-to buyer, Johnson & Johnson, offers some clues.

Late last year, when J&J walked on Actelion after nearly a year of talks, many industry watchers thought Sanofi had a $30 billion deal for the Swiss biotech in the bag. The French drugmaker had reportedly offered up a price higher than what J&J was wiling to pay, forcing the New Jersey pharma giant out of the picture.

But as the prospectus notes, things didn’t go as planned when it was time for Actelion and its new bidder—referred to only as Company A—to hammer out specifics. “Prior to and during the course of this meeting, Company A indicated that it would only be willing to proceed with a transaction on the basis of a price lower than its previously communicated offer price and on different terms,” the prospectus notes. Sanofi also had “extensive due diligence requests” for its target.

The way Actelion saw it, those issues—along with the “tenor and content” of the meeting itself—raised “significant uncertainty” in a potential transaction, and that was enough to convince Actelion to ring up old friend J&J. Time between J&J announcing it had ended negotiations and then that it had struck exclusive ones back up? Eight days. And the two unveiled their $30 billion deal about a month after that.

It’s not a good look for Sanofi, which has now been foiled twice in high-profile M&A conquests since CEO Olivier Brandicourt took the helm. Earlier last year, he embarked on a hostile pursuit of Xtandi-maker Medivation that ended in Pfizer nabbing the $14 billion prize.

The failures have frustrated some investors, who think Sanofi needs deals to help get itself back on track. After all, payer pressure and competition have hit its anchor diabetes business hard, and its PCSK9 therapy Praluent has so far been stymied in more ways than one.

Brandicourt, though, notified investors on the company’s fourth-quarter conference call that Sanofi is “not in a hurry to do M&A,” and last month, he told Reuters that some investors are perfectly fine with that fact.

“When I see investors they seem to be very happy for us not to have spent $14 billion on Medivation," he said.