Big consolidation in global pharmaceutical industry remained strong and alive in 2016 with the latest portfolio swap deal between European drug giants Sanofi and Boehringer Ingelheim got formally signed on Monday (June 27).
The $19 billion deal, which is similar to the 2014 vaccine-oncology business exchange between Novartis and GSK, will help Sanofi consolidate its consumer health or over the counter business to meet its 2020 goal to become the world leader in this segment.
While, the transfer of Merial—the animal health business of Sanofi to Boehringer will make the German company a leader in veterinary business.
Sanofi and Boehringer said on Monday that they have signed the contracts to secure the strategic transaction initiated in December 2015 which consists of an exchange of Sanofi’s animal health business ("Merial") and Boehringer Ingelheim’s consumer healthcare business.
This step marks a major milestone before closing of the transaction which is expected by year-end 2016 and remains subject to approval by all regulatory authorities in different territories. The integration of Boehringer Ingelheim’s consumer healthcare business into Sanofi and Merial into Boehringer Ingelheim would start after closing, the companies said in a joint statement.
Upon successful completion, Boehringer Ingelheim’s consumer health business - with an enterprise value of $7.41 billion - would be transferred to Sanofi and Sanofi’s Merial – with an enterprise value of $12.60 billion - would be transferred to Boehringer Ingelheim. The transaction includes a cash payment to Sanofi of $5.20 billion to reflect the difference in value of the two businesses.
It is the second significant asset swap in the world pharmaceutical industry after the $21 billion deal between Swiss drug major Novartis and UK’s GlaxoSmithKline to swap Novartis’ $7.1 billion worth vaccine business with GSK’s $14.5 billion oncology businesses to become strategically focused players in the respective areas in April 2014.
Presence In India
Sanofi and Boehringer Ingelheim have active presence in India at present in both of these segments and the business impact of this deal in this market will be significant once it is successfully closed.
Since Sanofi is a listed entity in India after the merger of Aventis Pharma in the company in 2006 as part of its global takeover of Aventis, the transaction and the related business consolidation in India would also require regulatory approvals.
Boehringer’s consumer healthcare is the 8th largest in the segment in the world at present with sales of around $1.66 billion in 2015. This business currently contributes about 10 per cent to Boehringer’s net sales. While, Merial, Sanofi’s animal health business, had a sales of at least $2.76 billion in 2015 and has presence in about 150 countries.
Merial addresses some 200 animal diseases with its current product portfolio, while the leading brands of Boehringer’s consumer heath business includes antispasmodic Buscopan, the laxative Dulcolax, the multivitamins Pharmaton, the cough treatments Mucosolvan and Bisolvon and the sore throat treatment Mucoangin, Lysopaïne.
Win-Win Deal
"This is a win for Boehringer Ingelheim and Sanofi alike," said Andreas Barner, chairman of the board of Boehringer Ingelheim.
"Moreover, it is one of the most significant steps in our corporate history. It demonstrates the consistent orientation of our business towards innovation-driven sectors. As a research based pharmaceutical company, we will substantially enhance our position in the future market for animal health and will prospectively be one of the largest global players in this segment. The similarity in culture and approaches of BI and Sanofi will ensure that the businesses acquired by the other partner will develop well in the future," Barner added.
"In signing these (asset swap) contracts, we are meeting one of the key strategic goals of our roadmap 2020, to become a leader in consumer healthcare and a leading diversified global human healthcare company," said Olivier Brandicourt, chief executive officer, Sanofi.
"This business swap will bring a complementary portfolio to our consumer healthcare activity with highly recognized brands, allowing for mid and long term value creation, and enhancement of our market penetration in some major countries," he said.
Combining Merial and Boehringer Ingelheim’s complementary portfolios and technology platforms in anti-parasitics, vaccines and pharmaceutical specialties would put the combined company into a more competitive position in the key growth segments of the industry and bring more value and innovation to customers globally. The Boehringer Ingelheim animal health business would more than double its sales to approximately €3.8 billion based upon 2015 global sales.
With this transaction, Sanofi would integrate Boehringer’s consumer health business in all countries except China. The combined sales in this segment for Sanofi after the deal would amount to approximately €4.9 billion.
BW Reporters
Unnikrishnan is currently Senior Associate Editor with BW Businessworld at its Mumbai Bureau. During his two decades long journalistic career, he has received several media awards and recognitions. His articles on healthcare, life sciences and intellectual property rights (IPR) have been republished by several international blogs and journals.
