Fresenius’ new CEO has pulled off a dealmaking double play, committing more than $5.4 billion to expand its reach in sterile generics as well as in the rapidly expanding area of biosimilars.
The Germany-based company today announced two deals. In the first, it reached a $4.3 billion agreement in its previously announced talks to buy U.S.-based generics maker Akorn, also assuming $450 million in debt. The deal, expected to close in early 2018, will add three U.S. manufacturing sites and one in India to Fresenius’ network, as well as about 2,000 employees.
Separately, Fresenius said it will buy the biosimilars portfolio of Germany-based Merck KGaA for €170 million upfront and up to €500 million in milestone payments, about $729.2 million total. Manufacturing of biosimilars will continue at Merck's two plants in Switzerland as part of that deal.
“Akorn brings to Fresenius Kabi specialized expertise in development, manufacturing and marketing of alternate dosage forms, as well as access to new customer segments like retail, ophthalmology and veterinary practices,” John Ducker, CEO of Fresenius Kabi USA said in a statement.
On the biosims deal, Mats Henriksson, CEO of Fresenius Kabi, pointed out that some of the largest biological branded products will go off patent over the next few years. “With this acquisition, Fresenius Kabi enhances its position as a leading player in the injectables pharmaceutical market and further diversifies its product portfolio,” he said in a statement.
Analysts liked the deals, pointing out that the Akorn buy will not only add some heft to Fresenius’ generics portfolio but also expands Kabi into new segments like ophthalmics and topical solutions, segments which might be less vulnerable the generics pricing pressure that has been difficult for drugmakers in last few years. Sterile injectables accounted for about 35% of Akorn's $1.1 billion in sales last year.
Bernstein analyst Lisa Clive told clients in a note that the biosimilars deal was a good entry point for Fresenius. At €170 million, she said it appears it is essentially reimbursing Merck for the money it has spent to date on its “fledgling product portfolio of 4 molecules.” She noted the German company has committed to spending up to €1.4 billion in total by 2022, including the purchase price, to expand in biosimilars.
There has been considerable consolidation in the generic sterile manufacturing segment of the industry in recent years, where expertise in the tricky-to-produce products draws premiums but also offers buyers significant growth. With its expanded sterile injectables portfolio and move into biosimilars, Fresenius appears to be mimicking the approach taken by sterile injectables leader Hospira, which Pfizer bought in 2015 for $15 billion.
The buyout will mark deals two and three for Fresenius CEO Stephan Sturm since he took over in July. Last year the company struck a $6.11 billion deal to buy Spanish private hospital group Quironsalud. The company also bought a line of prefilled syringes from BD last year.