Pharmaceuticals

Pfizer's New Foe

Matthew Herper, 04.26.04, 7:39 AM ET

NEW YORK

Now, the so-called French national champion is likely to find itself locking horns with New York-based Pfizer (nyse: PFE - news - people ), the world's largest drugmaker, which itself was created through a series of mergers.

Here's how a potential rivalry could shape up. Sanofi (nyse: SNY - news - people ) is seen as having one of the best batches of experimental drugs in the pharmaceutical industry. But it lacks a large sales force in the United States and had introduced blockbusters like the blood-thinner Plavix and the sleeping pill Ambien to the U.S. by licensing them to other drugmakers. Sanofi now sells Ambien on its own, but Bristol-Myers Squibb (nyse: BMY - news - people ) markets Plavix. Buying Aventis gives Sanofi plenty of marketing heft.

The sales force Sanofi has acquired may have less than two years to ramp up for a gigantic product launch. At that time, Acomplia, a drug that may help patients both lose weight and quit smoking, will hit the market. The drug has even greater benefits, because it seems to influence risk factors for heart disease. If Sanofi can show that Acomplia helps return arteries to a healthier, younger state, cardiologists could conceivably start prescribing it to many at-risk patients. That would make the market for Acomplia considerably bigger than just people who want to lose weight or kick a nicotine habit.

But Pfizer is set to introduce its own new heart drug as soon as 2008. The pill will combine a new drug, torcetrapib, with Lipitor, the $9 billion per-year cholesterol medicine. Raising good cholesterol is among Acomplia's salutatory effects as well, but Lipitor-torcetrapib appears to be far more potent. Because patients and their insurance companies only have a limited amount of money to pay for pricey medicines, the two drugs could find themselves competing for the attention of the same doctors at almost the same time. Sanofi may have more motivation than any other drug firm to try to find chinks in Lipitor-torcetrapib's armor--for instance, looking for hints of high blood pressure seen in high doses of torcetrapib during early clinical trials.

If it hadn't been for the French government, Sanofi might instead be wondering if Pfizer was about to buy it. Two big shareholders, Total and L'Oreal, could soon sell their stakes in the drugmaker--a fact that is thought to have helped drive Sanofi's first bid for Aventis, made in late January and initially valued at $60 billion.

Aventis rejected that hostile bid outright, and investors bought up shares as they anticipated other big drugmakers such as London's GlaxoSmithKline or Basel, Switzerland-based Novartis would line up with their own offers. But French officials vocally favored a pairing with Sanofi, discouraging buyers and sending shares on a roller coaster. Last month, Novartis said it would consider entering the fray only if France would be neutral. Last week, it agreed to enter into merger discussions without that neutrality but backed out over the weekend. That could leave Novartis looking for a new merger partner.

In a prepared statement, Novartis said: "Following Aventis' decision to engage in discussions with Sanofi, at the strong intervention of the French government, Novartis decided not to proceed. Novartis' decision is final."