- The European Union reportedly gave the greenlight for Sanofi to move forward with its plans to exchange its Merial animal health business for Boehringer Ingelheim’s consumer health unit, provided the companies make a number of divestitures to clear anti-trust concerns, The Wall Street Journal said.
- Sanofi and Boehringer agreed to the €22.8 billion (roughly $25 billion) asset swap in late June, with the privately-held company paying the French pharma about €4.7 billion in cash to compensate for the difference.
- The deal is the latest in a number of “swaps” by big pharmas to tailor their businesses, to better focus on a small number of key areas where they can hold market-leading positions.
Sanofi and Boehringer will both benefit greatly from the swap. Sanofi, in particular, has been trying to find new areas of strength as its once market-leading diabetes franchise gets swallowed by generic competition for its blockbuster insulin Lantus.
Meanwhile, Boehringer has been trying to position itself as a major player in animal health—the deal will make it one of the largest competitors in the space.
Asset swaps amongst major pharma competitors became a new way of dealmaking in 2014 when Novartis swapped its vaccines business for GlaxoSmithKline’s oncology portfolio—it also divested its animal health business to Eli Lilly in a transaction that was worth more than $26 billion.
While there hasn’t been many of these monster transactions since, the approach was touted as a strong way for big pharmas to reorganize their businesses to better reflect areas of strength.
Historically, large pharmaceutical companies were built up by diversifying across a multitude of therapeutic areas. This was a successful business model until blockbuster primary care drugs began to go off patent and it became more difficult for companies to be successful in several fields at once. It soon became apparent that being number a dominant player in three to four areas made these large companies more competitive.
Novartis, for example, has since built out its oncology portfolio with the hopes of being a leader in the space. The company has been at the forefront with its work in CAR-T therapies and recently announced a restructuring that makes its oncology business a separate unit from the rest of its pharmaceutical products.
Even though asset swaps have not been as common, divestitures have marked the dealmaking landscape over the last three years as other pharmas have reorganized: Allergan just exited the generics business with its just-approved sale of its behemoth generics unit to Teva for $40.5 billion; Abbott Laboratories spun out its pharmaceutical unit into AbbVie; Baxter divested its drug unit making Baxalta; and the list goes on.