LONDON, Oct 14 (Reuters) - GlaxoSmithKline is seeking binding bids by next month for a range of older drugs worth more than $3 billion, which it is likely to sell by geographical region, according to people with direct knowledge of the process.
Potential bidders include private equity firm KKR, India’s Lupin and Denmark’s Lundbeck, all of which are interested in acquiring rights to products in certain regions.
Britain’s biggest drug maker is looking to divest the mature products in a bid to improve its growth profile and wants to dispose of off-patent drugs marketed in North America and western Europe.
The medicines on the block, known as established products, are expected to have combined 2014 sales of around 1 billion pounds ($1.6 billion), although their sales are declining due to competition from cheap generic drugs.
The sources said GSK was looking for a multiple of more than two times sales, suggesting a price of at least $3.2 billion.
GSK, which is being advised by Lazard, aims to find buyers by the end of the year and is keen to maximise returns for shareholders, whether that means selling the products as a single unit or splitting them up by region, they added.
Danish pharmaceutical company Lundbeck is reviewing a bid for products marketed in North America as it seeks to expand there, two of the sources said.
KKR has teamed up with private Netherlands-based gastrointestinal specialist Norgine in a bid to acquire some of GSK’s drugs sold in Europe, said the same people.
Indian generics firm Lupin is also expected to participate in the second round of the auction and would be interested in products in the United States, said the sources.
Other private equity funds with an interest in healthcare are also looking at some specific products. Some bidders might still emerge with an interest in the entire portfolio, although this scenario is seen as less likely.
Acquiring GSK’s older drugs would be more complicated for private equity funds than other drug manufacturers as GSK is not planning to sell the factories, which means the funds would need to outsource manufacturing and distribution operations.
GSK, Lundbeck, KKR and Norgine all declined to comment.
Lupin, meanwhile, has said for some months it wants to enhance its U.S. branded generics business and a company official previously confirmed to Reuters it was looking for deals, while declining comment on specific targets.
GSK Chief Executive Andrew Witty said in July that there had been significant interest from both mid-sized pharmaceutical companies and buyout specialists in the assets now on the block.
The GSK brands up for sale include antidepressant Paxil, migraine treatment Imitrex, Zantac for stomach acid and Zofran for nausea. The company intends to retain the rights to such products in emerging markets, where they are still growing.
Ditching mature products sold in Western markets makes long-term sense, since sales are declining. However, these items remain very profitable, so a sale may dilute earnings per share, which could further strain GSK’s already stretched dividend cover.
Sales of all GSK’s established products - including those being retained - totalled 1.51 billion pounds in the first half of 2014, down 18 percent on a year earlier.
GSK’s decision to carve out some of its mature drug portfolio is part of a wider industry trend, with Mylan agreeing in July to buy Abbott Laboratories’ branded specialty and generics business in non-U.S. developed markets.
Other companies including Sanofi and Merck & Co are also looking at similar divestments.
1 US dollar = 0.6277 British pound Additional reporting by Freya Berry and Anjuli Davies in London; editing by Susan Thomas