Sanofi Looking to Slap 'For Sale' Sign on Its European Generic Drug Biz, Deal Could Bring in $2.1 Billion
March 8, 2017
By Mark Terry, BioSpace.com Breaking News Staff
According to Reuters, Paris-based Sanofi is planning to sell its European generic drug business. The deal could be worth $2.1 billion.
Reuters’ sources indicate that a number of banks are hoping to handle the transaction, with the possibility of a “boutique bank working hand in hand with a larger player.” A decision is expected in the next two weeks.
On March 1, 2016, Bloomberg reported that the European generics sale was likely to be delayed as the company tried to work out which assets to include in the deal. The sources in that story suggested that the deal, which was planned to start the first quarter of 2016, probably wouldn’t start until late 2016 or early 2017. That story appears to be accurate.
In November 2015, Olivier Brandicourt, Sanofi’s chief executive officer, described the company’s new strategy, which included spinning off its animal health unit, Merial, and its European generics business. In mid-December 2015, Sanofi and Germany-based Boehringer Ingelheim GmbH announced they had plans to exchange business units. The intention was for Sanofi to swap Merial with Boeheringer Ingelheim’s consumer healthcare (CHC) business. Boehringer Ingelheim’s CHC China business was not part of the deal.
Sanofi’s generics unit is Zentiva, and includes generics of Plavix and Aprovel, among many others. It sells products in 50 markets, with a strong presence in the Czech Republic, Romania and Turkey. Sanofi acquired Zentiva, a Czech business, in 2008 for $2.6 billion.
Most recently in January, Sanofi indicated it hoped to complete the sale of the European generics business by the close of 2018. Work on it began at the end of 2016.
Reuters reports, “Financial advisers will need to bring potential bidders to the negotiating table and conduct a formal auction process. Sanofi, which recently failed to buy Swiss biotech firm Actelion and U.S. drug maker Medivation , wants to hold on to its global generics business including in emerging markets where it is looking to further develop its operations.”
Its European generics business brought in about 1 billion euros in 2015.
Late in 2016, a Sanofi spokesperson indicated that the divestment would exclude Russia, the Commonwealth of Independent States (CIS) and Turkey. Zentiva also has two manufacturing sites for generics in the European market, one in Prague, Czech Republic, and one in Bucharest, Romania. Both are believed to be part of the potential sale.
In 2012, Zentiva sold an API and drug manufacturing plant in Hlohovec, Slovakia to Wood Pharma Holding.
The last two years has shown a massive consolidation in the generics market. The most notable was Teva Pharmaceutical Industries ’s acquisition of Allergan plc ’s generic drug business in July 2015 for $40.5 billion.
Analysts indicate the movement is related to distributor consolidation. Distributors buy the generic versions to sell to patients, and if merged, they have more leverage to negotiate lower prices.
Bloomberg Business reported in late 2015 on how in the U.S. there were four major distributors that controlled generics. They were McKesson Corporation , CVS Health Corp., through a partnership with Cardinal Health, Inc. , Walgreens Boots Alliance Inc., through a relationship with AmerisourceBergen Corporation and Wal-Mart Stores Inc.
In a 2014 article in Drug Channels, Adam Fein wrote, “Generic manufacturers need a survival strategy. For generic drugs, formulary power lies with the distribution channel, not with the payer channel. If we consider Express Scripts Inc. and Walmart, then five entities will purchase about 90 percent of generic drugs for the U.S. market.”
Generics and Biosimilars Initiative published a report in 2016 on the generics market share in Europe, which indicates that in most European countries, generic drugs account by volume for more than 40 percent of the market. Germany is the largest, with the highest volume share of generics in 2014 of 73 percent. It was followed by Poland (69%), The Netherlands (66%) and the UK (66%). The report noted that, “The share of generics by value is in most European countries distinctly lower than in volume. The exception to this is Greece, where the generics share by value is 19% and by volume 27%, a difference of only 8%. The largest differences between the generics share by volume and by value were found in Denmark (46%) and Sweden (42%).”