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Pharmaceutical sector roiled

Sanofi looks to shed multi-billion portfolio, Pfizer proposes $106 billion takeover to AstraZeneca

May 01, 2014
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Based on patent expiries and for other reasons, the global pharmaceutical industry is going through a process of consolidation, impacting European suppliers.

The 13 biggest European and U.S. drug makers will lose $50 billion in sales from patent expirations from 2013 to 2018, data compiled by Bloomberg show. That’s led to more than $217 billion in deal agreements or proposals in the last month or so, including Merck’s sale of its over-the-counter consumer business.

Most recently, French pharmaceutical giant Sanofi SA is said to be exploring options to sell a range of older drugs, with an estimated portfolio value between $7 billion and $8 billion, according to Reuters, citing sources familiar with the matter.

Anglo-Swedish giant AstraZeneca rejected an initial takeover bid of $101 billion on May 2from U.S. pharmaceutical company Pfizer. The company has enhanced its bid to $106 billion based on pipeline potential, cost-cutting opportunities and tax benefits that would follow from an acquisition. The proposal is still being intensively examined, including by committees of the British Parliament.

Cleaning house

The Sanofi SA move is the latest effort to refocus strategic efforts by a large pharmaceutical company. Companies optimize operations by shedding assets they find less profitable or marginal, focusing on areas with more potential for growth. Large players have been willing to engage in asset swaps with rivals.

According to unnamed sources, Sanofi has hired Evercore Partners Inc. to advise it on the deal and has reached out to potential buyers over the past few months. Drugs on offer include for treating of high blood pressure and cardio-metabolic diseases and include combined annual revenue of about $3.7 billion, Reuters said.

Industry experts speculate that specialty pharmaceutical companies and generic drug-makers could be among those interested in the Sanofi portfolio. At present neither Sanofi nor Evercore Partners have commented but Sanofi’s chief executive Chris Viehbacher recently told reporters the company had no plans to venture into large-scale deals and will stick to its current strategy of small transactions and narrowly targeted acquisitions.

Phizz around Pfizer

Meanwhile, U.S. pharma company Pfizer has expressed interest in taking over Anglo-Swedish giant AstraZeneca for a total of $101 billion. Although both companies declined to comment on the matter, the BritishSunday Times newspaper recently quoted senior industry sources who confirmed that informal discussions over a possible deal. AstraZeneca apparently turned down the offer, Reuters reported.

Despite being the second-largest pharmaceutical group in the UK, AstraZeneca’s future growth is quite uncertain. The group is facing patent expirations on several of its most profitable drugs. Moreover, new drug development has not been particularly successful over the past couple of years for the company. For these reasons, reports of rivals approaching it for a takeover are not rare. The group has previously been linked with proposals from Swiss giant Novartis and the largest British pharmaceutical group, GlaxoSmithKline.

In a bid to secure its future, AstraZeneca has concentrated on developing experimental cancer drugs, which may be what attracted Pfizer. In fact, the U.S. pharmaceutical giant has also been struggling with patent expiries, most notably Lipitor — a product used for treatment of high cholesterol. The two companies have cooperated on a series of projects, including the new clinical trial for cancer drugs, so they are familiar with each other’s portfolios, Reuters said.

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