Sanofi weighs Actelion offer to compete with J&J's $27B: Bloomberg

Sanofi CEO Olivier Brandicourt hotly pursued Medivation amid a bidding war. Would he do the same with J&J target Actelion?

Sanofi CEO Olivier Brandicourt has held firm on his requirements for M&A since first outlining them last year: Bolt-on deals in the French drugmaker’s current specialties, all the way up to a bigger buy à la its $20 billion 2011 Genzyme pickup, if the opportunity was right.

Would he make an exception for Actelion, the Swiss specialty pharma now under pursuit by Johnson & Johnson? That company is said to be offering up to $27 billion to a so-far unresponsive Actelion—but Bloomberg sources now claim Sanofi is weighing a counterbid. Which presumably would have to top that $27 billion.

Sanofi is working with financial advisers on a potential offer, Bloomberg reports, and it has told Actelion that it’s interested. It hasn’t yet made a formal move or even decided whether to make an offer, the news service says. Sanofi hasn’t yet commented on the reports.

The case for: Sanofi has been looking to beef up outside its big-earning diabetes franchise as pricing pressures erode sales and biosimilar versions of its top seller, Lantus, prepare to launch. Actelion brings immediate sales to the effort, and a pipeline of other meds, including a Phase 3 multiple sclerosis drug, which could fit into Sanofi's current MS franchise.

Plus, Sanofi is already marketing Praluent, its cholesterol-fighting PCSK9 drug, to doctors, including cardiologists, who are most likely to prescribe Actelion’s meds for pulmonary arterial hypertension (PAH). And Sanofi does have a broader CV franchise, so the PAH remedies would have built-in marketing support even beyond Praluent.

The case against: Actelion is a specialty drugmaker, and as such, its current offerings are narrow. One of its leading drugs, Tracleer, is already off patent. Though its follow-up brand Opsumit is making inroads quickly, to the point of pushing Actelion's Q3 above analyst forecasts, that growth isn’t a given. Nor is the success of Uptravi, a more recent PAH launch that debuted at a price tag of $160,000.

And speaking of price tag: $27 billion. Even Genzyme, itself specialized, brought with it a suite of rare disease meds and a multiple sclerosis franchise to boot for that $20 billion. When AbbVie bought Pharmacyclics for $21 billion, largely for its blood cancer med Imbruvica, analysts called the deal overpriced, and though Imbruvica continues to grow, the deal has yet to fully prove itself.

Plus, Sanofi would have to go up against J&J and its $20 billion stash of cash, something of a dejá vù to its fight to buy the cancer-focused biotech Medivation earlier this year. It lost that race to a similarly deep-pocketed Pfizer, which ended up shelling out $14 billion for Medivation’s cancer med Xtandi and a couple of promising follow-up drugs. Sanofi had lodged an earlier bid at around $9 billion.

Bloomberg says other financial advisers are contacting other potential buyers to gauge their interest in jumping into the fray, including Roche and Pfizer, which still has cash to spend on M&A. Shire was pegged as a potential buyer—at a price of around $19 billion—earlier this year. Others might pop up, too; Actelion has been a perennial entry in analysts' lists of probable takeover targets for companies looking to grow sales now and reap pipeline benefits later.

But with President-elect Donald Trump promising a tax holiday that would allow U.S.-based Big Pharmas to bring home their overseas cash without shelling out to the IRS, Pfizer (and other U.S. pharma shoppers) might want to save their money for a U.S. acquisition.

Sanofi wouldn’t comment for Bloomberg, and it has not yet responded to our request for a response. Actelion has kept mum on the potential deal, beyond CEO Jean-Paul Clozel’s long-stated preference to fly solo. “If we want to continue to create shareholder value, the best for us is to remain independent," Clozel told the news service last week.

Meanwhile, a major Actelion investor told Reuters that, if J&J were willing to pay more than the price last quoted in the press—250 Swiss francs per share, or about $27 billion—then a deal could be a “win-win,” given J&J’s recent track record in R&D.

J&J is said to be aiming to strike a deal before Christmas, so the process could move quickly from here. And with a $27 billion price tag, among the largest of 2016, Actelion will be a closely watched target along the way. Expect more talk to follow.