Breaking News

Tweet TWEET

Novartis Veterinary Unit Said to Draw Interest From Merck

Novartis AG (NOVN)’s animal-health business is drawing interest from drugmakers including Eli Lilly & Co. (LLY) and Merck & Co. as the Swiss pharmaceutical giant prepares to sell the unit, people with knowledge of the matter said.

Bayer AG (BAYN) is also preparing for a potential auction of the unit, which makes Sentinel flea control tablets for dogs and the Vira Shield antiviral medicine for cattle. Novartis hasn’t yet invited bids for the business and none of the potential bidders has made an offer, the people said. The company is working with Goldman Sachs Group Inc. on a review of its portfolio that may lead to a sale of the veterinary business, people said last month.

Drugmakers are weighing options for their veterinary units as they seek to boost the valuation that investors award those operations. Bayer is interested in expanding in animal health, Chief Executive Officer Marijn Dekkers said yesterday. Merck said in October that its veterinary business may be divested or partnered outside the company, while Pfizer Inc. in June completed the spinoff of its Zoetis Inc. (ZTS) animal-health unit.

Citigroup Inc. analysts valued the Novartis veterinary unit at about $4 billion including net debt in October. Novartis does not publicly report separate financial results for the business.

Photographer: Gianluca Colla/Bloomberg

An illuminated logo sits above windows at Novartis AG's headquarters in Basel. Close

An illuminated logo sits above windows at Novartis AG's headquarters in Basel.

Close
Open
Photographer: Gianluca Colla/Bloomberg

An illuminated logo sits above windows at Novartis AG's headquarters in Basel.

Spokesmen for Eli Lilly and Merck declined to comment. Speaking at a conference in London yesterday, Bayer CEO Dekkers and Novartis Chairman Joerg Reinhardt declined to comment on the animal-health business sale.

Reuters reported earlier that Bayer is a potential bidder for the unit.

Bayer’s Interest

Novartis is weighing the sale of several units, including the over-the-counter medicines unit and vaccines operation. The Basel-based drugmaker wants its businesses to be among industry leaders or it will consider divesting them, Chief Executive Officer Joe Jimenez said last month.

The company hasn’t made any final decision on whether to divest any units, Reinhardt said at the conference.

Bayer acquired Teva Pharmaceutical Industries Ltd.’s U.S. veterinary business this year. The Leverkusen, Germany-based company last year considered bidding for Zoetis, which has a market value of $15.6 billion, before the spin off. In 2009 Bayer offered 6 billion euros to 7 billion euros for Schering-Plough Corp.’s Intervet unit. The sale of Intervet was later scrapped.

The German company’s veterinary sales dropped 0.9 percent to 1 billion euros ($1.4 billion) in the first nine months of the year.

Merck Spinoff

Merck’s animal health business is the second-biggest in the industry, the company says, with $3.40 billion in sales last year. Ken Frazier, Merck’s CEO, has talked about possibly selling or spinning off the unit in a move that could mimic Pfizer’s decision last year to do divest units and focus the company on developing new human drugs.

On a Oct. 28 call with investors, Frazier praised the business’s performance though also said he’s trying to “determine whether these businesses are more advantageous inside or outside the company.”

Steve Cragle, a spokesman for Merck said the company is still evaluating the unit along with its other businesses and sees it as an important part of the Whitehouse Station, NJ-based company.

Eli Lilly, based in Indianapolis, has said it’s been more likely to do deals in animal health than in its human drugs business, and about a third of the unit’s growth in the last five years has been from acquisitions, chief financial officer Derica Rice said on an Oct. 23 call with investors.

“We’ve been probably more acquisitive in the animal-health space than we have been on the human-pharma side, and we continue to see business development as an opportunity to further leverage our organic growth,” Rice said on the call. The animal unit, called Elanco, had $2.04 billion in sales in 2012.

To contact the reporters on this story: David Welch in New York at dwelch12@bloomberg.net; Eva von Schaper in Munich at evonschaper@bloomberg.net

To contact the editors responsible for this story: Mohammed Hadi at mhadi1@bloomberg.net; Phil Serafino at pserafino@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.