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* New generation of CEOs more open to restructuring
* Established drug products in focus at Pfizer, GSK, Sanofi
* Bankers see divestments helping to unlock value
By Ben Hirschler
NEW YORK, May 7 A new generation of drug
industry chief executives is stepping up plans to restructure
their businesses by divesting slower-growing and maturing
operations, opening up new opportunities for deal-makers.
Bankers speaking at the Reuters Health Summit said the
success of transactions such as Pfizer Inc's
divestitures of noncore assets and Abbott Laboratories
splitting off its innovative drugs into AbbVie Inc had
fuelled a wider rethink across the industry.
"The mindset has changed with a new generation of CEOs ...
investors love the fact that they are thinking creatively,
thinking shareholder-friendly" said Ercument Tokat, partner at
investment banking and advisory firm Centerview Partners.
"In the past, there was a lot of revenue protection. Now the
focus is more about keeping the profitable revenue, keeping the
The new attitude is reflected in a willingness to consider
whether other companies may be better owners for certain assets,
thereby unlocking value for shareholders.
Much attention is focused on Pfizer, the world's largest
drugmaker, which has already spun out its animal health
operations into Zoetis Inc, sold its infant nutrition
business to Nestle and has set up a unit for older off-patent
drugs that could, in theory, be sold in future.
But Pfizer Chief Executive Ian Read is not the only one
contemplating a smarter and leaner corporate structure.
Britain's GlaxoSmithKline Plc last month also
announced plans to bundle many of its established drugs into a
new unit in a move that CEO Andrew Witty said would give it
"optionality" on a potential future spin-off.
Chris Viehbacher, the CEO of French drugmaker Sanofi SA
, is considering similar strategic options for the
company's portfolio of older drugs, although no decisions have
yet been taken, he told investors in a conference call last
'LOT MORE TO COME'
Chris Gordon, managing director of healthcare at private
equity group Bain Capital, told the summit meeting in New York
that the trend toward carve-outs and divestitures was still in
"We're in the very early innings of it ... I think you'll
see a lot more to come," he said.
"For most of the history of the life sciences and pharma
sector, they've been pretty reticent about selling off pieces
or, frankly, walking away from revenue - now there is more
creativity around portfolio management."
And the trend is not confined only to drugmakers. Bain, for
example, agreed to buy Medtronic Inc's external
defibrillator business, Physio-Control, for $487 million in
For bankers focused on mergers and acquisitions (M&A), the
industry's restructuring offers a rich seam of business, since
units slated for divestment often have hundreds of millions or
billions of dollars in annual sales.
GSK is currently seeking a buyer for its Lucozade and Ribena
soft drinks brands in an auction that analysts expect to
generate more than 1 billion pounds ($1.6 billion).
Johnson & Johnson, meanwhile, arguably the ultimate
healthcare conglomerate, is considering selling its diagnostics
business or turning it into a stand-alone company.
Not all the reviews will result in outright sales or
spin-offs, however. Henry Gosebruch, managing director of
healthcare M&A at JPMorgan Chase, believes industry leaders will
also consider striking more joint ventures within certain
therapy areas, such as the ViiV alliance created by GSK and
Pfizer in HIV in 2009.
"The times when Big Pharma wanted to be everything to
everybody, they just aren't there anymore," he said.
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(Additional reporting by Jessica Toonkel and Soyoung Kim in New
York; editing by Matthew Lewis)