Bolt-on deals continue and look ripe for a ramp up

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Sanofi-Aventis delivered a hat trick today, announcing its third acquisition in quick succession, this time of a private US cancer drug developer, as the French company makes good on a commitment to seek bolt-on acquisitions.

For the big pharma groups not involved in the recent wave of mega mergers, “bolt-on” is certainly word of the day, following a strategy of adding new products through licensing deals or striking targeted acquisitions. However, the size of these strategic deals so far this year have been relatively small, a few hundred million dollars here and there (see table below). Comments by a number of chief executives over the last few days suggests that more significant deals could be on the way, and that bolt-ons could still mean billions.

Only today AstraZeneca’s chief executive, David Brennan, reiterated in an interview that he is only interested in “smaller deals”, particularly in Europe. This could still include companies in the €3bn-€5bn range, he told the Wall Street Journal.

John Lechleiter, chief executive of Eli Lilly, recently said he would consider acquisitions up to $15bn, coming hot on the heels of last year’s $6.5bn swoop on ImClone Systems. And Bristol-Myers Squibb, which lost out on ImClone, has $9bn to spend, and is eyeing six or seven deals as part of its so-called "string of pearls" business development strategy.

Back in Europe, GlaxoSmithKline, already one of the biggest pharma majors, has made clear it is not interested in big deals. Chief executive Andrew Witty’s rumoured pursuit of a stake in South African generics group Aspen Pharmacare, rather than an outright acquisition, suggests he is serious, despite having more than enough resources if he really wanted to splash out.

A look at the deals struck so far this year suggests that the tinder is still dry on these companies’ aspirations to add bolt-on deals, although what type of deal fits into that category is a matter for debate. Still, they clearly have money to spend, and if Sanofi-Aventis’ recent spree is anything to go by the inclination is strong.

Bolt-on deals so far in 2009
Company Deal Date Deal Type Target/Partner Company  Deal Value ($m) Region (if M&A) Product (if licensing deal)
Sanofi-Aventis Mar-09 In-licensed Æterna Zentaris 162 Cetrorelix (Benign prostatic hyperplasia (BPH) [Phase III])
Mar-09 Company Acquisition Zentiva 1,698 E. Europe
Apr-09 Company Acquisition Laboratorios Kendrick - Mexico
Apr-09 Company Acquisition Medley Industria Farmaceutica 657 Brazil
Apr-09 Company Acquisition BiPar Sciences 500 United States
GlaxoSmithKline Jan-09 Business Unit M&A Drug portfolio from UCB 662 Africa, Middle East, Asia Pacific and Latin America
Jan-09 Company Acquisition Genelabs Technologies 57 United States
Feb-09 In-licensed Idenix Pharmaceuticals 425 IDX-899 (HIV treatment [Phase II])
AstraZeneca  Feb-09 In-licensed Mayo Clinic & Virginia Tech Intellectual Properties - Triple Reuptake Inhibitor (Depression [Pre-clinical])
Bristol-Myers Squibb Mar 2009 In-licensed Nissan Chemical Industries 385 NTC-801 (Atrial fibrillation (AF) [Phase I])
Jan 2009 In-licensed ZymoGenetics 1,107 PEG-IFN-lambda (Hepatitis C treatment [Phase I]
Eli Lilly Feb 2009 In-licensed Neurosearch 342 Eli Lilly/Neurosearch CNS Research Project ([Research project])

Despite widespread scepticism about the value of mega mergers, the recent wave still happened, and chief executives who were previously not interested changed their tune. As such, there is no guarantee that a similar change of heart will not happen to those currently professing a desire to seek smaller deals.

If any company is likely to divert from the bolt-on strategy, Sanofi-Aventis would seem to be the most likely. In the past month or so senior management have hinted that expansion of its non-pharmaceutical arm might be pursued, potentially into food and nutrition or animal health. A stride in this direction might require a larger cheque to be written, and speculation has already linked Sanofi with Belgium's Solvay and Danone, which makes a wide range of nutritional food brands.

Also, if rumours that Sanofi-Aventis was “company X”, the mystery group that tried to muscle in on Pfizer’s negotiations with Wyeth, are true, it could indicate that new chief executive Chris Viehbacher has more of an appetite for bigger deals than he has so far let on.

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