Sanofi shuffles the global consumer health care products deck, moving from the fifth spot to third in sales by adding Boehringer Ingelheim GMBH's consumer products brands in exchange for its animal health business, the French pharma says.

According to the agreement announced June 27, Sanofi also will receive €4.7bn ($5.2bn) from the German firm to reflect the difference in value of the two businesses – €6.7bn ($7.4bn) for its Merial subsidiary and €11.4 ($12.7bn) for Boehringer Ingelheim's consumer products business excluding China. [See Deal]

Privately held BI, based in Ingelheim, Germany, markets brands including Mucoangin (ambroxol) cough suppressant, Dulcolax (bisacodyl) constipation treatment and Zantac (ranitidine) heartburn remedy in the US or international markets. Those and other brands would join Sanofi's consumer product portfolio including US brands Allegra Allergy (fexofenadine) antihistamines, Nasacort Allergy 24HR (triamcinolone) nasal decongestant and Maalox antacid (aluminum/magnesium) and upset stomach (bismuth subsalicylate) products.

In a same-day briefing with analysts, Sanofi consumer business head Vincent Warnery pointed out BI's Mucoangin line available in Europe and its Mucosolvan and Bisolvon cough/cold lines also marketed in Europe and South America are key additions to the firm's OTC lineup.

"We have a strategic interest in building a stronger presence in the large Cough & Cold category which has a natural seasonal complementarity with a strong allergy OTC franchise," said Warnery, Sanofi's senior vice president for global consumer health care.

In addition to cough/cold, Sanofi said BI's "highly complementary product and brand portfolio" would boost its market position in categories including pain care, allergy solutions, feminine care, digestive health and vitamins, minerals and supplements.

The combined sales of both firms' consumer products in 2015 would have been around $5.4bn and would have claimed 4.3% global market share, Sanofi says.

The firm has targeted moving up among the global consumer health care sales leaders since former CEO Christopher Viebacher targeted it soon after taking the helm in 2008. Olivier Brandicourt became CEO after Viehbacher's sudden ouster by Sanofi’s board in 2014 following disappointing earnings in 2013 and after he clashed with the board over planned job cuts Also see "Sanofi Board Forces Out CEO Chris Viehbacher Amid Lantus Woes" - Pink Sheet, 3 November, 2014..

While Sanofi made several acquisitions in the OTC and nutritional product sectors under Viebacher, most notably adding US manufacturer and marketer Chattem Inc. in 2010, the firm has lagged behind other large pharmas in climbing the consumer sales ladder ([A#05150720010]).

Two firms in front of Sanofi in the global consumer product market – Bayer AG and GlaxoSmithKline PLC – fueled their climb through acquisitions or other agreements that expanded their portfolios.

According to a presentation made during the analyst briefing, the combined Sanofi-BI consumer product businesses would hold the No. 3 spot in global market share. It would be behind leader Bayer's consumer business at 4.5% and GSK Consumer Healthcare L.P. at 4.4% and ahead of Johnson & Johnson's disparate consumer interests with 4.2%, Sanofi said, based on Nicholas Hall & Co. market research.

Bayer's major move in the sector was its 2015 acquisition of Merck & Co. Inc.'s consumer business and Glaxo, after divesting under-performing OTC and nutritional brands, combined its consumer business with Novartis AG's in a joint venture it operates Also see "Lonely At The Top? Not In OTC Sector As Bayer, GSK/Novartis Challenge J&J" - Pink Sheet, 14 October, 2014..

Sanofi Chief Financial Officer Jerome Contamine reminded analysts about the firm's goal in the consumer sector, "a strategically important market for sustainable and stable growth of the group."

"However, today, Sanofi is only the fifth largest player with 3% market share. With the transaction we are discussing today, we are building a global leadership position in CHC in order to deliver on one of our strategic goals," said Contamine.

Global Consumer Office Planned

Leerink Partners LLC analyst Seamus Fernandez notes Sanofi expands its footprint for its own products, particularly in European Union markets and Japan, as well as adds BI's brands. The transaction makes Sanofi the leading consumer health product marketer in Europe, up from fourth, and pushes the firm from eighth to second in Japan while leaving "plenty of room to grow in North America," where it will be No. 6 after the deal closes.

"In addition to becoming the #3 player in the global [OTC] market … the deal will significantly increase [Sanofi's] footprint in key geographies," Fernandez wrote in a June 28 research note.

Sanofi also pointed out its US consumer business grew from $44.2m in 2010, when it acquired Chattem, to $1.03bn in 2015 and the firm remains "optimistic about the business in US."

The firm's near-term focus, though, is integrating BI's consumer brands and operations, which is operating below the 30% operating margin of Sanofi's business. It will form a consumer product global business when the deal closes, which it expects before the end of 2016 following regulatory approval in multiple countries.

The firms said the agreement came after six months of negotiations, during which they consulted with "appropriate regulatory authorities to lay the groundwork for the realization of the business swap." From a "commitment at the beginning of the negotiations," the companies agreed that Germany would be a key center of Sanofi's expanded consumer health business, particularly for the gastrointestinal and cough/cold categories Also see "Sanofi Looks To Climb Consumer Ladder In Boehringer Business Swap" - Pink Sheet, 21 December, 2015..

Sanofi also makes the deal with BI as it attempts a $9.3bn hostile takeover of Medivation Inc., a San Francisco biotech with an androgen receptor antagonist, Xtandi (enzalutamide), and two later-stage cancer drug programs ([A#14160501001]).

Sanofi Adds Consumer Brands, Grows Footprint With Boehringer Ingelheim Deal

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