Sanofi-aventis' (NYSE:SNY) new CEO, Chris Viehbacher, must have said something right on its conference call: Shares of the French health-care giant were up 8% Wednesday. Bien.
Maybe it's more what Viehbacher said the company wouldn't do that made investors so happy. Much like his former employer, GlaxoSmithKline (NYSE:GSK), Viehbacher says he's not interested in doing a large Pfizer (NYSE:PFE)-Wyeth (NYSE:WYE) size deal. No, he's much more interested in picking up companies for less than $19 billion.
What a bloody good idea. There's much more value tucked away in the smaller companies. Something I thought Pfizer should have noticed. Besides, "Sanofi-aventis-Bristol-Myers Squibb" would use up more than its fair share of hyphens.
Sanofi-aventis will certainly experience severe revenue drops if it doesn't do anything. Blood thinner Plavix, which it sells with Bristol-Myers Squibb (NYSE:BMY), contributed 9.5% of sales last year, but it's likely it will face competition from Eli Lilly's (NYSE:LLY) prasugrel soon, and sales likely will fall hard when the patent runs out in 2011. Its top seller, Lovenox, isn't safe either. Momenta Pharmaceuticals and Novartis (NYSE:NVS) are waiting on an approval from the Food and Drug Administration to market a generic version of the drug.
But I believe those drops in revenue are already priced into the stock, which is trading at less than nine times last year's earnings. Doing something, just for the sake of doing it -- hey there, Pfizer -- doesn't make a whole lot of sense for investors.
As long as you can trust management to be value investors and not overpay just to push out the patent cliff a few years, Sanofi-aventis looks like a decent investment right now.
