Type of information: Pipeline acquisition
Acquired company: Merck KGaA's biosimilar business (Germany)
Acquiring company: Fresenius Kabi (Germany)
Amount: €656 million plus royalties on future product sales
- • On September 1, 2017, Fresenius Kabi has successfully closed the acquisition of Merck KGaA’s biosimilars business. The biosimilars business will be consolidated as of September 1, 2017. The purchase price of €656 million will be mainly cash flow financed. Thereof, €156 million have been paid upon closing. Up to €500 million are milestone payments strictly tied to achievements of development targets in the coming years. The slight reduction in purchase price is related to phasing of R&D expenditures between signing and closing of the acquisition. These are now expected to amount to around €60 million from closing until year-end 2017. All clinical studies for the product pipeline are on track.
• On April 24, 2017, Merck KGaA announced the divestment of its biosimilars business to Fresenius. The decision to divest biosimilars is aligned with Merck KGaA’s strategy for its healthcare business sector to focus on its pipeline of innovative medicines. According to the terms agreed for the transaction, Merck KGaA will receive an upfront payment of 170 million €, milestone payments of up to 500 million € plus royalties on future product sales. The parties agreed to enter into supply and services agreements, which include drug development support and manufacturing services. Closing is expected in the second half of 2017, subject to regulatory approvals and other customary closing conditions. The total investment in the biosimilars business will be mainly cash flow financed.
- The acquisition comprises the entire development pipeline sand an experienced team of more than 70 employees located in Aubonne and Veveyin Canton de Vaud, Switzerland. The product pipeline has a focus on oncology and autoimmune diseases with current branded sales of around $30 billion. Fresenius Kabi expects first sales towards the end of 2019 and estimates to rampup the business to high triple-digit million sales from 2023 onwards based on the
current product development schedule.
Analytical testing, clinical studies, quality requirements specific to biosimilars as well as marketing and sales activities are expected to result in increased costs for Fresenius Kabi. These costs are expected to occur in uneven tranches. The total expected cash-out and self-imposed investment ceiling is estimated to be up to €1.4 billion until projected EBITDA break-even in 2022. From 2023 onwards, the acquisition is expected to be significantly accretive to Group net income and Group EPS.