Why Lilly Should Ride to Genzyme's Rescue in Sanofi Takeover
Sanofi-Aventis (SNY) is apparently moving slowly in its takeover bid for Genzyme (GENZ) but it might want to pick up the pace: Eli Lilly (LLY) CEO John Lechleiter is under renewed pressure to do something -- anything! -- to bolster his sagging revenue streams. Suddenly, Lilly riding to Genzyme's rescue like a knight in shining armor with a bid topping Sanofi's $69 a share/$18.4 billion makes a whole lot of sense. Look how slowly Sanofi is moving on Genzyme:
Genzyme and Sanofi remain in contact and continue to talk, but no CEO-to-CEO meetings have taken place yet, one source familiar with the situation said.
As contact between the sides continues, neither company's executives or bankers have put August vacation plans on hold because the discussions are not yet at the round-the-clock stage and may never get there, the first source said.Compare that with the growing sense of urgency enveloping Lilly. The company has launched one new product in the last five years and analysts are clamoring for Lechleiter to do make a move:
... longer-term financial pressures are looming because Lilly faces loss of patent protection through 2014 on drugs that account for more than 60 percent of its revenue.Bernstein Research's Tim Anderson told investors this morning that one of Lilly's Alzheimer's drugs, semagacestat, was cancelled while still in development and another, solanezumab, will only arrive on the market (if approved) after Pfizer (PFE) and Elan (ELN)'s bapineuzumab, which is expected to dominate the category.
Lilly has been under pressure for at least a year, despite the ImClone acquisition, when it started to become clear that its new blood thinner Effient was not going to be a blockbuster. Effient is, in fact, a total disaster. It sold only $31.6 million in the first six months of 2010, according to Lilly's Q2 2010 earnings report. Here are the predictions from Wall Street before the drug was approved:
[Robert] Hazlitt, at BMO Capital Markets, predicts prasugrel (Effient) will bring Lilly $850 million in revenue in 2011 and $1 billion by 2013.
Steve Scala, an analyst at Cowen and Co., predicts prasugrel sales of $750 million by 2011 and as much as $1.75 billion by 2015.Effient's sales are so small it probably costs Lilly more to make, promote and distribute the drug than it gets back in sales.
Perhaps it's time for Lilly's Lechleiter to make a call to Genzyme CEO Henri Termeer. After all, snagging Genzyme might give Lilly a chance to unlock Genzyme's hidden value, its potential multiple sclerosis blockbuster Campath.
Related:
- Effient and Onglyza Launches "Sluggish"; Multaq More Hopeful
- Lilly CEO Lechleiter's Prasugrel Bet Appears to Pay Off
- Lilly's Job Cuts Not Enough for Wall Street; Another Merger Suggested; CEO Lechleiter Eats a Steak
- In Light of Prasugrel Delay, Lilly-ImClone Deal Suddenly Makes Sense
- A Lilly-ImClone Deal May Offer the Drama that CEO Lechleiter Craves