Sanofi's Going Shopping?

According to a rumor posted on Bloomberg, Sanofi-aventis (NYSE: SNY) is supposedly closing in on a "major" acquisition in the U.S. Equally supposedly, the talks are in early stages, so plenty could go wrong.

It certainly has the ring of truth, though. Since coming into the top spot, Sanofi's CEO has led the company to 25 acquisitions costing $17 billion (also according to Bloomberg). That's pretty good work for two year's time. Most of those deals were small, though, and added drugs to the pipeline with a long march towards approval. Because of that, the company is still facing some pretty serious revenue hits from upcoming generic competition.

So, even though it's still an early-stage rumor, why not play around with who Sanofi might buy?

First, I'm going to put a range of $20B - $50B on the most Sanofi might be willing to pay.

At that level, Bristol-Myers Squibb (NYSE: BMY) and Lilly (NYSE: LLY) could both be doable, though with little premium. Bristol, though it has an interesting oncology portfolio, has the same problem as Sanofi as the companies are partnered on drugs about to go generic. Likewise, Lilly could see up to 40% of its sales go to generics between now and 2013.

Gilead (Nasdaq: GILD) would give the company a great franchise in HIV/AIDS and an okay pipeline outside of virology (mostly cardiopulmonary). Genzyme (Nasdaq: GENZ) would not make much sense as I don't think Sanofi wants to focus on rare disease. Biogen Idec (Nasdaq: BIIB) is definitely interesting. The company has a strong MS franchise and a good cancer drug, as well as a pretty good collection of Phase 3 candidates and an irritating activist investor (Icahn).

Below that level, you're looking at names like Human Genome Sciences (Nasdaq: HGSI), Amylin (Nasdaq: AMLN), and Incyte (Nasdaq: INCY). HGSI and Amylin would cost less than $10B, and Incyte probably less than $4B. All three have a lot going for them, with interesting drugs very close to the market, but are they big enough? Maybe ... Human Genome has great technology and a good cancer pipeline, and Amylin would definitely expand the company's diabetes business. Incyte, likewise, has a great portfolio and would give Sanofi a host of options, though minimal revenue contribution.

So... my guess(es)? I think Biogen, and Amylin are the best bets. Gilead makes a lot of sense, but a take-out of Gilead would probably cost more than Sanofi wants to spend.

Disclosure - I own shares of Amylin.