Sanofi Drugs Sale Said to Draw Interest From Blackstone, KKR

Jul 24, 2014 7:44 pm ET

July 25 (Bloomberg) -- Sanofi’s $8.5 billion portfolio of older, off-patent drugs has drawn interest from private-equity firms KKR & Co., Blackstone Group and TPG Capital, people with knowledge of the matter said.

Sanofi, based in Paris, is still reviewing options for its mature-drug portfolio, said the people, who asked not to be identified because the information isn’t public. An internal Sanofi document circulated by a labor union this month said the portfolio has an enterprise value of 6.3 billion euros ($8.5 billion).

Sanofi has held talks with Mylan Inc., Abbott Laboratories and firms such as Warburg Pincus LLC about a possible sale of its mature-products portfolio in Europe, according to the document. The company also has been considering possible partnerships for the assets, the document shows.

Large pharmaceutical companies are seeking to sell older drugs to generate cash to invest in developing newer, more in- demand treatments. Merck & Co. and GlaxoSmithKline Plc are among other drugmakers that are reviewing their portfolios of established drugs. Andrew Witty, chief executive officer of London-based Glaxo, said July 23 there is “significant” interest in his assets from private-equity firms and mid-tier pharmaceutical companies.

Complicated Deal

While Sanofi CEO Chris Viehbacher is keen to find a solution for the portfolio, carving out the drugs is complicated and may make a transaction difficult, two people said. The products are made in four different facilities with hundreds of employees, one person said. The process is still in early stages and Sanofi doesn’t yet have financial information for the private-equity firms to examine for due diligence, the person said.

The project, involving 200 Sanofi products in Europe with about 2.1 billion euros in estimated sales this year, was nicknamed Phoenix, according to the internal Sanofi document, which was dated May 6.

Spokesmen for Sanofi, KKR and Blackstone declined to comment. A representative for TPG didn’t return calls seeking comment.

Earlier this month, Mylan acquired some of Abbott’s generic drugs business in Europe, Canada and Japan to establish a presence in those markets. Mylan is also using the deal to change its tax domicile to the Netherlands and lower its effective tax rate to 21 percent, in what’s being called a spinversion, when part of a company is joined with another in a way that allows both to relocate. The U.S. corporate tax rate is 35 percent.

Mylan is considering additional acquisitions and is still looking at Sanofi’s assets, two of the people said. The company may wait until Abbott closes to pursue another deal, one person said. A spokeswoman for the company declined to comment.

Cash Flow

Though sales of the drugs often drop once patents have expired and generic alternatives are available, marketing costs are also low, meaning older portfolios can provide strong cash flow for their owners.

Private-equity firms interested in the Sanofi assets would face the challenge of developing distribution methods for the drugs, one person said. They could have Sanofi continue to produce and distribute the drugs for a fee as part of the deal, the person said.

--With assistance from Kiel Porter in London and Caroline Chen in New York.