Bayer's drug business is booming. So much so that the German company has decided to put its focus squarely on its life sciences division: It plans to spin off its plastics unit within 18 months, taking a lead from its Big Pharma peers with the industry's latest slim-down move.
The divestment will leave Bayer with just its HealthCare and CropScience businesses on hand--as well as potential spinoff proceeds of €10 billion ($12.9 billion). That cash could fund some HealthCare dealmaking, Kepler Cheuvreux analyst Fabian Wenner told Bloomberg.
"They can basically now look to a target to buy with the proceeds," he said. "They've always known they didn't need this business, but they haven't had a target to replace it with."
Bayer's just the latest in a long line of Big Pharma players to shed one or more of its noncore assets. Pfizer ($PFE) helped get the party started back in 2012, selling off its nutrition unit to Nestlé and spinning off its animal health unit shortly thereafter. Companies like GlaxoSmithKline ($GSK), Novartis ($NVS) and Merck ($MRK)--which agreed to sell its consumer health unit to Bayer itself in a $14.2 billion deal this May--have since followed suit to double down on what they do well.
And for Bayer right now, that's drugs. The company boasts a lineup of 5 hot new products--including eye drug Eylea and blood thinner Xarelto, which have enjoyed two of pharma's top product launches in recent memory. Those new meds have helped the company power past analysts' forecasts; in the second quarter, new drug sales more than doubled year over year, boosting the company's HealthCare revenue to €4.85 billion ($6.24 billion).
And while Bayer's consumer health unit hasn't seen the same surge, the company is putting plenty of focus on that business, too. CEO Marijn Dekkers has said repeatedly that he's angling for the top spot in the global OTC market, a goal furthered by the Merck buy. And rumor has it that Bayer is scouting for smaller deals, too. As Bloomberg reported late last month, the company could get involved in a bidding process for Belgian OTC specialist Omega Pharma.
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