Baxter International Inc., of Deerfield, Ill., has entered an agreement to acquire Seprafilm adhesion barrier and related assets from Paris-based Sanofi SA. The expected price at closing is $350 million, with the transaction anticipated to wrap up in the first quarter of 2020.

Wells Fargo analyst Larry Biegelsen labeled the deal “as strategically and financially sound” and “consistent with its strategy to invest in the surgical business.”

For his part, Wil Boren, general manager, Baxter’s advanced surgery business, said Seprafilm will complement the company’s hemostat and sealant portfolio. “While Seprafilm is clinically recognized among surgeons globally, we plan to provide commercial support for the product through our dedicated surgery salesforce and pursue opportunities for expansion in certain countries,” he added.

During Baxter’s third-quarter earnings call in October, the company reported $216 million in sales for the advanced surgery business, driven in part by hemostats and sealants. Seprafilm is being sold in several markets, including the U.S., Japan, China, South Korea and France. Sales of the acquired products are expected to be about $100 million in the 12 months following the deal’s close.

Looking to boost sales

Biegelsen noted that Seprafilm sales stood at about $100 million annually, with the U.S. and Japan leading the way. However, sales have fallen under Sanofi’s watch due to a lack of sales support and detailing. “According to Iqvia, last 12 months U.S. sales of Seprafilm totaled $36 [million] or -7% yr/yr (IQVIA may not capture all sales channels),” he wrote.

“BAX expects to promote Seprafilm via its existing surgical salesforce and hopes to return the product to growth mode,” he continued, noting that the company plans to invest in R&D to develop a laparoscopic indication at some point.

Finalizing strategic plans

Sanofi has had the Seprafilm asset for a while, picking it up through its 2011 acquisition of Genzyme Corp. There were some challenges associated with the product. In 2015, Genzyme agreed to resolve criminal charges that it violated the federal Food, Drug and Cosmetic Act related to the unlawful distribution of Seprafilm. The alleged conduct occurred between 2005 and 2010, prior to the Sanofi purchase.

That payment followed a separate $22.28 million civil agreement reported in December 2013. In that case, the government alleged that Genzyme sales representatives had instructed clinicians and other health care professionals to cut the Seprafilm sheets into small pieces, add saline and allow the pieces to dissolve until the desired consistency was reached. This mixture was dubbed “slurry.”

This mixture was used in keyhole surgeries by inserting a catheter into the body and squirting the slurry into the abdominal cavity. Seprafilm has approval in the U.S. for open abdominal surgery but not for minimally invasive surgeries. As a result of the sales reps’ actions, the company knowingly caused purchasers to submit false and fraudulent claims to federal health care programs for non-reimbursable uses of Seprafilm, according to the government.

Changes at Sanofi

In September, Paul Hudson became CEO of Sanofi. During the company’s Oct. 31 earnings call, he noted that he and his team have met with the executive committee and the board to finalize strategic plans. “There is still a lot of work to do, and not everything will be finalized by our Capital Markets Day, but we do look forward to sharing with you our strategic direction at that time,” he added. The company is slated to hold that meeting at its offices in Cambridge, Mass., Dec. 10.

In a Nov. 27 note, Jeffries analysts predicted that Hudson would address several topics that day, including the prioritization of therapeutic areas. Expected topics of focus are oncology, immunology and rare diseases.

Another possible topic for discussion is bolt-on buys. The Jeffries analysts noted that future Sanofi deals likely will be less than $10 billion. In addition, the company could discuss the possible spinoff of its consumer health care business, which the analysts estimate is worth €25 billion to €30 billion ($US 27.5 billion to US$33 billion).


Moves on Baxter’s front also have been a topic of discussion. During the October earnings call, the company addressed M&A following a question from Robbie Marcus of J.P. Morgan. CEO Joe Almeida declined to comment on any M&A activity.

He did, however, discuss Marcus’s point on capital allocation. “Capital allocation, as we've mentioned, remains unchanged. We are – we always prefer strategic deployment of capital into acquisitions. We said before that adjacencies are more reasonably priced and easier to integrate, and we are very open to those.”

The previous month, Baxter reported that it had reached a definitive agreement to acquire Cheetah Medical Inc., a provider of noninvasive hemodynamic monitoring technologies. Baxter agreed to pay $190 million up front in cash, with the potential for an additional $40 million based on clinical and commercial milestones.

Baxter (NYSE:BAX) closed Monday at 81.86, down $0.11, or -0.13%.