Deal could cause unwanted side effects

THE FRENCH must be returning from their month-long summer sojourn, because Sanofi-Aventis’ long-awaited bid for US-based Genzyme is finally upon us. Sanofi’s timing probably has more to do with pesky patents than the vagaries of continental holidays, however. Last week, the French drugmaker failed in a last-ditch attempt to stop the approval of generic versions of Lovenox, its blockbuster blood-thinning drug. Sanofi says it will fight on, but the Lovenox cash cow – which accounts for some $4bn (£2.6bn) of group sales – is close to death.

With the cupboard marked “blockbuster drugs” worryingly empty, Sanofi has to pull something off quickly. It could continue to cut costs and push into emerging markets, a direction that has served it well so far. But neither strategy solves its central problem: the bulk of its best-selling drugs will lose their patents in the next few years. That means Sanofi boss Chris Viehbacher – an acquisitive chief executive who notched up some 33 tie-ups and deals last year – will have to hit the buyout trail once again.

His reasons for settling on Genzyme are not immediately clear. The US firm is bedevilled by production problems and has a troubled relationship with regulators. But, like Ireland-based Shire, it focuses on niche high-margin treatments for rare genetic diseases, making it less vulnerable to generic rivals. In that sense, a deal makes sense. Sanofi has the scale to help solve Genzyme’s structural problems, while Genzyme makes products that are relatively safe from generic insurgents. As with all big pharma deals, there are likely to be a plethora of unknown side effects, however, meaning shareholders should read the label carefully.