Some of pharma's biggest players--including Merck ($MRK), Sanofi ($SNY) and GlaxoSmithKline ($GSK)--have already said they're looking into jettisoning their portfolios of older meds or selling off certain established products with an eye toward newer, fast-growing drugs. And as that trend takes flight, other pharma companies may look to make similar moves, The Wall Street Journal's sources say.
It's part of the slim-down-fest that's caught hold among Big Pharma's biggest, with drugmakers attempting to narrow their focuses to concentrate on what they do best. With such portfolios often containing off-patent meds, many of them have slow-growing or falling revenues that pharma's big guns--and maybe others, too--are ready to kiss goodbye.
"Companies are responding to their shareholders, who are asking management teams to double down on their strengths and divest their weaknesses," ISI Group analyst Mark Schoenbaum told the paper.
As the WSJ notes, the largest portfolio up for grabs appears to belong to Merck, whose "diversified brands" category contains aging antihypertension treatments Cozaar and Hyzaar, baldness therapy Propecia, and migraine med Maxalt. The New Jersey drug giant has already held preliminary discussions with multiple potential buyers for a collection of brands that could rake in close to $15 billion, sources told the paper.
Glaxo, for its part, has solicited bids from a handful of private equity firms for some or all of the 50 or so brands in its own established products portfolio, worth an estimated $12.6 billion, reports said last week. After selling off thrombosis brands Arixtra and Fraxiparine last September, GSK's remaining offerings include products like antidepressant Paxil, ulcer remedy Zantac and migraine treatment Imitrex--all part of a division that posted an 11% sales drop in 2013.
Sanofi, on the other hand, thinks its older products might be able to help it snag a larger deal. According to the WSJ, the French drugmaker believes throwing in those meds may help persuade another pharma to make a swap; that may involve contributing them to a joint venture with another company in exchange for the opportunity to buy one of its assets.
And the list goes on. Reports have said Abbott ($ABT) could reap $5 billion from selling its older drugs, and AstraZeneca ($AZN) CEO Pascal Soriot has proposed deals for its neuroscience and anti-infectives businesses, which tally $15 billion in potential proceeds. Pfizer ($PFE), too, has an established products unit, and the company has said it has its sights set on a bigger breakup after divestments it made last year.
Just because drugmakers are eager to unload these products doesn't mean hordes of eager buyers are out there, however. Rival drugmakers have limited interest in slow-growing meds, leaving private equity firms among the most logical buyers. But as the WSJ points out, the borrowed money PE firms use to make acquisitions could be harder to come by for the pickup business with southbound sales.
- read the WSJ story (sub. req.)
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