From: LAURENT CHEKROUN (MAKOR SECURITIES LLP) At: Jan 13 2015 11:55:23
Subject: >>> Bayer to focus on internal pipeline in animal health --> -ve for Zoeltis
Bayer to focus on internal pipeline in animal health - Healthcare CEOBayer AG does not need to gain scale to grow its animal health business and thus is focusing on its internal pipeline, said Healthcare CEO Olivier Brandicourt.Brandicourt, speaking at the JP Morgan Healthcare conference, said that animal health is "not a critical mass type of business," unlike its over-the-counter business, for which Bayer bought Merck & Co's OTC unit for USD 14.2bn in 2014.There has been speculation of Bayer as a possible bidder for top animal healthcare company Zoetis, which was spun off from Pfizer and has a market capitalization of USD 22.2bn.Asked about the spin-off of its Material Sciences unit, Brandicourt said that Bayer would still prefer to IPO the unit. Both Brandicourt and investor relations manager Jürgen Beunink declined to comment on the timing of the IPO when asked by this news service. Media reports had said that Bayer was also exploring a sale of the unit.Proceeds from the IPO of the Material Sciences unit could be used for bolt-on acquisitions, though Bayer will still focus on paying down debt, largely generated from the acquisitions of Merck's OTC business, said Brandicourt. The scale of bolt-on acquisitions can be gauged from its purchase of Algeta in 2013, which came to USD 2.9bn.Brandicourt also declined to comment about the auction process to sell its diabetes unit. But he admitted that the unit had come under pressure, losing 70% of its reimbursement in the US. The unit is now doing "slightly better" but diabetes remains a tough area for Bayer.Bayer has reportedly mandated Credit Suisse to explore a sale of the unit. This news service previously reported that it failed to attract solid interest, with KKR as the only feasible bidder.