Sector News

Bayer floats animal health merger with Lilly spinoff Elanco: report

July 11, 2019
Life sciences

Bayer’s for-sale animal health unit has been stirring up interest among private equity players—but the German pharma may have another buyer in mind.

The company has approached Elanco, spun off by Eli Lilly last year, about a potential tie-up between the two, Reuters reports, citing three unnamed sources. Elanco currently holds the animal health market’s No. 4 spot—behind just Pfizer spinoff Zoetis, Boehringer Ingelheim and Merck—and merging with No. 5 Bayer Animal Health would create a heavyweight contender.

There’s a catch, though: Elanco may not have the cash to buy Bayer’s animal health division outright, Reuters notes. While it boasts a market cap of more than $12 billion, it’s also saddled with significant debt that came with it in the Lilly spinoff. As of the end of 2018, that tab totaled $2.5 billion, Elanco said in its annual report (PDF).

“We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful,” it cautioned.

That means Bayer may have to hold onto a stake in the combined company if it wants to pull off a deal—a prospect the drugmaker may not be thrilled with. Through the animal health sales process, it’s trying to drum up cash in the wake of a $63 billion Monsanto buy that’s been heavily criticized by analysts and investors alike. It said it would seek a sale last November amid announcements that it would also cast off some consumer brands and shed 12,000 jobs.

A Bayer spokeswoman did not immediately respond to a request for comment.

Of course, Bayer doesn’t need to tango with Elanco, given the buzz it’s generated among private equity suitors. Last month, the Financial Times listed CVC, Advent International, BC Partners and a Cinven-Permira team as potential bidders that could shell out up to €8 billion on the unit.

According to Reuters’ sources, Bayer still expects to field private equity bids later this year. But it’s pushed back an auction process meant to start in June to scope out its prospects with Elanco, the news service notes.

Even if the two sides can hammer out a deal, though, regulators might not go for it. The U.S. Federal Trade Commission has been cracking down on drugmakers lately, requiring a blockbuster Otezla sell-off from deal partners Bristol-Myers Squibb and Celgene and slapping Roche with multiple delays to its Spark Therapeutics buyout. Both Bayer and Elanco are working with banks to ensure a transaction would get the green light, Reuters’ sources said.

“The single most important thing that sticks out is potential overlap on flea/tick side. We need to dig into this more … especially since that product category for Bayer animal health is in the top 4 products (which constitute >60% of revs),” Evercore ISI analyst Umer Raffat wrote in a Tuesday note to clients.

By Carly Helfand

Source: Fierce Pharma

comments closed

Related News

June 24, 2022

Echosens and Novo Nordisk announce partnership to increase awareness and advance early diagnosis of NASH

Life sciences

Echosens, a high-technology company offering liver diagnostic solutions, and Novo Nordisk A/S, a leading global healthcare company, announced a partnership to advance early diagnosis of non-alcoholic steatohepatitis (NASH) and increase awareness of the disease among patients, healthcare providers and other stakeholders.

June 24, 2022

argenx receives positive CHMP opinion for Efgartigimod for the treatment of adult patients with Generalized Myasthenia Gravis in Europe

Life sciences

Positive opinion based on Phase 3 ADAPT trial showing efgartigimod provided clinically meaningful improvements in strength and quality of life measures. If approved, efgartigimod will be the first neonatal Fc receptor (FcRn) blocker for the treatment of adults in Europe living with rare neuromuscular disease generalized myasthenia gravis (gMG).

June 24, 2022

Galapagos finally takes M&A plunge, spending $251M for 2 biotechs in CAR-T push

Life sciences

Galapagos CEO Paul Stoffels, M.D., has finally taken the plunge on M&A. The newly minted chief executive has signed not one but two deals in an attempt to right the ship, bringing two small biotechs aboard for a combined 239 million euros ($251.4 million).