The consumer health space is consolidating rapidly--and Bayer knows it. It also knows its whopper $14.2 billion deal for Merck & Co.'s ($MRK) consumer business last year isn't going to be enough to keep it on the OTC leaderboard.
|Bayer consumer health divisional head Erica Mann|
The German company's consumer care unit is "always interested in acquisitions," its consumer health divisional head, Erica Mann, recently told Reuters. "Consolidation is going to happen. We have to do strategic acquisitions which make sense."
That means following up on the Merck deal, which brought it big-time brands like Coppertone sunscreens and Dr. Scholl's foot products. But a couple of factors could throw a wrench into the company's plans.
For one, it's currently saddled with net debt that tallied €19.3 billion at the end of September. "We need to pay off the debt, we are working very hard to do that," Mann acknowledged.
And for two, the landscape for consumer deals is getting more competitive by the minute. Just Tuesday, Sanofi ($SNY) announced it had entered trade talks with Boehringer Ingelheim that could send its animal health business, Merial, to Germany and bring the French drugmaker BI's consumer unit. Earlier this year, Novartis ($NVS) and GlaxoSmithKline ($GSK) joined hands to form an industry-leading joint venture, a position the pair likely has no plans to surrender.
And non-Big Pharma companies are on the prowl, too. Ireland's Perrigo ($PRGO)--newly free of a months-long hostile pursuit by generics giant Mylan ($MYL)--has said it's looking for "consumer-facing assets," and the chief exec of OTC specialist Reckitt Benckiser recently said he'd be plenty interested if Pfizer ($PFE) were to put its consumer products up for grabs.
Still, Bayer--which has said repeatedly that it's gunning for the No. 1 spot on the global market--plans to do what it can to keep up. As Mann pointed out, if waits long enough to strike another pact, it may be too late.
"You have to be under the top three, with the consolidation we have to make sure that we stay relevant," she told Reuters. "It gets increasingly difficult for the smaller companies to get better. Scale is really critical going forward."
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