Dollars and Jens
Monday, January 26, 2004
Pharma News
There were three stories I found interesting in the world of drugs today, two of them about Eli Lilly.

The patent for Lilly's top-selling drug Zyprexa (olanzapine) is being challenged in court:
Three generic drug manufacturers are seeking to have declared invalid Lilly's patent on Zyprexa, an anti-psychotic introduced in 1996 to treat schizophrenia that has sales of about $4 billion a year.

The companies challenging the patent argue that discovery of the drug's molecular structure was obvious and that a previous Lilly patent covered it. The companies also claim that Lilly mislead the patent office and omitted certain test results when applying for the patent.
This is on top of the fact that a couple months ago Eli Lilly released results of a study indicating that Zyprexa isn't any better than generic haloperidol. (Thanks to drug researcher Derek Lowe for the tip.)

On the bright side, Cialis (tadalafil) is selling well, and its owners (Lilly and ICOS) are going to advertise during the coming weekend's football game:
It's a first in an advertising category that has been characterized by sexual innuendo, insinuation and allusion: a new television commercial for erectile dysfunction drug Cialis debuting during the Super Bowl actually states what condition the medication treats.

Frankness was necessary to highlight what Cialis' makers call a major advantage over its two competitors: It lasts for up to 36 hours. Rival products expire after roughly four hours.
Finally, there's a hostile-to-management take-over bid for Aventis by smaller French drug company Sanofi-Synthelabo. The bid was something less than 5% higher than Aventis's market price, which seems small to me (especially for a hostile-to-management bid), but maybe Sanofi thinks it can convince Aventis shareholders that there are real synergies -- the transaction would be about 80% stock. Derek Lowe has thoughts, starting along the lines of "why is Sanofi's management so eager to trade its company's shares for something else?" Hmm.

UPDATE: Actually, after today's trading, the value of the bid is less than the value of Aventis, which suggests that Lowe isn't the only person thinking "bidding war". Also interesting: according to the Wall Street Journal, Sanofi is roughly one-third controlled by TotalFinaElf -- if we're lucky, that scandal will come into play. Actually, let me quote a few paragraphs from the Journal:
But Prime Minister Jean-Pierre Raffarin joined a growing chorus of French leaders expressing support for the takeover. In a warning that foreign companies should think twice before joining the takeover fray, Mr. Raffarin said he was "very attentive" to developments surrounding the deal and backed the creation of "big champions" in corporate France. Sanofi is based in Paris and Aventis is based in Strasbourg.


Sanofi's original €60.43-a-share bid represented a premium of 5% to Aventis's closing stock price of €57.55 on Friday -- although Sanofi was quick to point out that Aventis's shares have risen substantially in recent weeks amid merger speculation. Mr. Dehecq said his bid represented a 13.9% premium to the Aventis share price of Jan. 21, before the sharp speculative rise. And, at a meeting with analysts in London, he played down suggestions that the offer was too low. "Some say it is not enough -- that is normal," he said.

One big wild card is Kuwait Petroleum Corp., Kuwait's state-owned oil company, which holds a 13.5% stake in Aventis. The Kuwaiti company has said it no longer considers the Aventis stake a core holding, and it has been looking for a buyer for the shares. It isn't clear yet how the oil company views the Sanofi bid. A Kuwait Petroleum spokesman declined to comment.


Asked about the timing of the bid, Mr. Dehecq said the expiration of a key Sanofi shareholders' pact between L'Oreal SA and Total SA at year's end would leave Sanofi exposed to a takeover if it doesn't bulk up. That pact has kept the two top holders from selling their stakes in Sanofi. "The appetite of predators will be immense. If you don't want to submit, you have to anticipate," he said. "I wouldn't be doing my job as CEO if I didn't anticipate."
In conclusion, this may be more political than it is economic, and it may get a lot more interesting before the dust settles.

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