Just a couple of weeks ago, Sanofi announced that it was mulling options for its animal health unit, Merial, which offered “limited synergies” with the rest of the company.
Now, investment bankers at Lazard are running the numbers on a sale or spinoff that could value the unit at up to €12 billion, or about $12.7 billion.
As Reuters reports, Lazard is working with Sanofi execs on a potential deal–and, of course, angling for the lead role in the sale or spinoff.
Merial is a big business, with more than 6,000 employees and an expected €2.4 billion-plus in 2015 sales. It got that way under Sanofi’s previous CEO, Chris Viehbacher, who engineered a deal to buy out its previous partner, Merck & Co., in 2009.
But Merial doesn’t quite fit into new CEO Olivier Brandicourt’s plans to slim down the company, which he recently reorganized into 5 business units, including Merial. At an investor day early this month, Brandicourt said he planned to cut $1.6 billion in costs and consider selling not only the animal health unit, but Sanofi’s European generics business as well.
“If we want to win, we need to be more focused on businesses where we have, or can, build a strong position,” Brandicourt said at the time.
With a sale or spinoff of Merial, Sanofi would follow in the footsteps of several Big Pharma rivals; Merck, for instance, jettisoned animal health by selling its share to Sanofi, and last year sold off its consumer business to Bayer HealthCare. GlaxoSmithKline, Novartis and Eli Lilly & Co. pulled off a multi-pronged sale-and-swap, which put Lilly in control of Novartis’ animal health business. And Pfizer hived off its animal health business Zoetis in a two-stage spinoff that wrapped up in 2013.
Selling Merial could be tricky from an antitrust perspective, what with the current size of potential buyers, which would include Lilly and Bayer, Reuters points out. A spinoff might be easier to pull off. Brandicourt has experience with one, apparently; he helped with the Zoetis spinoff while working at Pfizer.
In January, Sanofi will officially split into three internal units: specialty meds, including Genzyme; cardiovascular and diabetes drugs; and established products and consumer health, which includes generics and emerging markets sales. Sanofi Pasteur, the vaccines operation, makes up the fifth. Within those groups, Sanofi plans to invest heavily in multiple sclerosis, oncology, immunology and consumer healthcare, plowing money gained via cost cuts into research and acquisitions.
At this stage, it is unclear exactly where the ax will fall. Brandicourt said two thirds of the savings will come from the “simplification of the organization,” with the rest being generated by “investment prioritization.” Brandicourt, who has already warned unions in France that manufacturing costs must fall, said some of the savings would come from a “reshape” of the manufacturing network.
Brandicourt’s overhaul plans come as Sanofi’s sales are suffering from a sluggish diabetes franchise, thanks in part to payer pressure on pricing. The company is also bracing for U.S. biosimilar competition to its longtime best-seller, Lantus; Lilly and Boehringer Ingelheim are set to roll out their version of the med next December under a recent settlement deal with Sanofi.
By Tracy Staton
Source: Fierce Pharma
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