Incoming Bayer CEO looks to deals to beef up in animal health

Bayer's incoming CEO Werner Baumann knows a thing or two about dealmaking, and he's ready to put his M&A smarts to good use. Baumann wants to build up the company's animal health unit through targeted acquisitions and partnerships once he takes the reins next month.

Then again, Baumann just might sell it off.

The German drugmaker's animal health business is one "that we have been trying for many years to strengthen strategically, that is to say inorganically. That is still our goal," Baumann said, as quoted by Reuters.

The animal health industry is "highly attractive" even though it's "relatively small," and the company has the product line and pipeline to succeed in the market, Baumann said, but deals are a natural choice, too. "There are possibilities to further strengthen the business and that is our goal," he said.

The company's Seresto flea and tick collar for dogs has contributed to growth. And Bayer is also developing Zelnate, a drug that helps boost farm animals' immunity to infectious diseases without antibiotics. The company's animal health unit brought in €1.49 billion ($1.71 billion) last year, and the business is expected to grow "slightly" this year, Bayer said in February.

If dealmaking doesn't work out, though, a sale of the unit could be the next best option. Bayer "will have to ask the strategic question, as is the case with all our businesses, are these businesses well placed with us as best owner or can these businesses perhaps progress better in a different environment, with different access to resources?," Baumann said.

Baumann, a 28-year veteran of Bayer, knows how to wrap up a deal. The new helmsman, who will succeed current CEO Marijn Dekkers on May 1, has played a big role in the company's recent acquisitions. Baumann was part of "the driving force" behind the company's $14.2 billion deal for Merck's consumer health unit in 2014.

Beefing up in animal health could pay off for Bayer. The company stands to grab the number two spot in the market, Reuters points out, giving rivals such as Merck and Eli Lilly a run their money. Sanofi late last year entered exclusive talks to transfer its Merial animal health unit to Boehringer Ingelheim, which would further dial up competition.

Plus, Zoetis is still ripe for the taking after Valeant's ($VRX) attempts failed last year. Bayer has already missed out on one animal health deal after Lilly's Elanco snatched up Novartis' animal health unit in 2014. And some analysts have speculated that Bayer would not wait on the sidelines this time if an opportunity to buy Zoetis came along.

- read the Reuters story