As if the Atos file wasn’t enough… Here’s a new pebble in Bruno Le Maire’s shoe. While the Minister of the Economy has made industrial reconquest and sovereignty his political markers, the affair could cause a lot of noise. Especially since it affects a sensitive sector which speaks directly to millions of French people: medicines.
It’s an open secret: the Servier laboratory is on the verge of offloading its subsidiary Biogaran, the French specialist in generic medicines. A heavyweight which eats 32% of market share in France. Thousands of molecules. More than 1 in 8 boxes of medicines sold in France are labeled Biogaran. The company, which has only 250 employees, subcontracts its entire production to dozens of service providers scattered across France and throughout Europe. In France alone, the laboratory directly and indirectly supports nearly 8,600 people.
Officially, at Servier, we swear that nothing has been done and that it is a “simple strategic review of assets that all companies carry out once a year”. In the secrecy of the office of lawyers and investment bankers – in particular those of the Lazard bank, charged by Servier with steering the sale – the negotiations are nevertheless progressing quickly. In order not to serve as a scarecrow during the European election campaign, Bercy would have discreetly invited Servier to postpone the submission of offers, initially planned for mid-May, until after the election. And some contenders could officially come out of the woods as early as June 11. While foreign players covet the French nugget, the file risks landing in the hands of Bruno Le Maire as part of the strategic investment control procedure. It is therefore up to him to examine the offers of the candidate(s) selected by Servier, to weigh their pedigree and their promises, before giving his opinion. Green light or categorical refusal? The affair is politically flammable.
Why has Servier decided to now part with its French flagship? Some put forward the idea that the laboratory is in dire straits and is looking for new money. The company, which is now in the hands of a foundation, is not listed and its accounts are not public. In December 2023, she was ordered on appeal in the Mediator scandal to pay a fine of 415 million euros to Health Insurance and mutual insurance companies, to which must be added 9 million euros to nearly 7,000 civil parties. These fines were paid in stone five days after the sentence, even if Servier appealed to the Court of Cassation. In reality, it is the conditions governing the generic activity in France which are now pushing the laboratory to divorce from Biogaran.
“The regulation is such, and the prices imposed by the State are so low for mature molecules which are no longer protected by patents, that it is today very difficult to make a profit on this activity in France,” argues a representative of G5 Santé, the health industry lobby. On average, the selling price (excluding tax) of a generic tablet in France is just 16 cents… compared to 21 cents in Germany and 32 in Italy, according to calculations by Gemme, the union of French generic manufacturers. . “Many small laboratories specializing in generic drugs today sell at prices lower than their production costs,” breathes Patrick Gehin, a former AstraZeneca executive. Untenable for Servier, which would therefore have decided to follow the path already traced by certain Big Pharma.
Since last fall, Sanofi has no longer hidden its desire to separate from its consumer subsidiary, which distributes Doliprane in particular. As for the Swiss Novartis, it shed its generic subsidiary Sandoz last year. All the major laboratories have embarked on a race for innovations in much more profitable therapeutic areas. Servier, for its part, has invested massively in oncology, a sector where the company would have achieved nearly 1 billion euros in turnover last year, an objective achieved two years in advance. And he is now eyeing cardiology and neurology. But for that you need money. A lot of money…
The problem is that since the Lazard bank circulated the “memo” detailing Biogaran’s accounts, the French and European suitors have not been rushing to the gate. The company is profitable, however, the bankers trumpet. A small Franco-Lebanese laboratory, Benta, based in Lyon, apparently showed up before quickly dropping the matter. A European investment fund, BC Partners, which has swallowed up a few health start-ups in recent years, would also have raised its hand, without convincing. Moderately strong candidates, points out a person close to the file. Even less industrialists.
In the running, two Indian labs
The only really serious contenders both come from the kingdom of medicine: India. Aurobindo Pharma and Torrent Pharma, two giants listed on the Bombay Stock Exchange and which rank among the largest drug manufacturers on the planet. The first, Aurobindo – almost 3 billion euros in turnover – is present in 150 countries, employs more than 33,000 people worldwide and is already the leading producer of generics in the United States. In France, he is far from being unknown. In 2014, with the approval of Bercy, he already got his hands on a French laboratory, Arrow, which he made in the space of a decade the leading supplier of generic drugs to hospitals. The second, Torrent – 1.2 billion turnover – is also a heavyweight in Brazil, the United States and especially in Germany where in 2008 it bought Biogaran’s twin, the Heumann laboratory, which doubled in size. size since the operation.
An armchair for two? Nothing is less sure. Behind the PowerPoint presentations and sophisticated financial arrangements, Indian investors have discovered a very French subtlety which is weighing down Biogaran’s accounts, like those of all French laboratories. A regulatory micmac called “escape clause”. Every year, the government sets in the Social Security financing bill (PLFSS) an envelope for medication expenses reimbursed by Health Insurance. If sales exceed this threshold, the laboratories must pay back to Social Security between half and three-quarters of the difference. Thus, of the 4.4 billion euros in turnover posted by French generic manufacturers last year, nearly 300 million would have been returned to Health Insurance through this means, i.e. 12 times more than in 2019!
Sustainability or sovereignty?
For Biogaran, this safeguard clause would have represented nearly 75 million euros last year, according to our information, or a little more than 10% of the laboratory’s turnover estimated at 760 million euros. Clearly, the majority of the margin would have been eaten up by this drain, observes a close connoisseur of the company. A situation that buyout candidates put into the equation to justify a lower price. To further complicate the matter, Bercy promised during the last PLFSS for 2024 to limit this famous clause to a maximum of 2% of turnover for generic manufacturers. Except that no guarantee has been given for the coming years. Not really engaging for potential buyers, while the State, in search of new money, is scraping the bottom line.
While waiting to agree with Servier on a sale price, the two suitors are refining their file to attract the Ministry of the Economy. When Torrent assures that it wants to devote between 6 and 7% of Biogaran’s turnover to investment – compared to a meager 1% currently – its competitor Aurobindo promises not to break current contracts with French and European subcontractors. . Yes, but tomorrow? Bruno Le Maire, who discreetly gave the green light at the end of 2023 to the acquisition of the French laboratory Cenexi – certainly much smaller than Biogaran – from another Indian group, Gland Pharma, controlled by the Chinese conglomerate Fosun, is up against the wall . Corporate sustainability or national sovereignty? Political high-flying.
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