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Merck KGaA: $17bn 'Rolls Royce' Sigma-Aldrich to keep major St Louis site

By Dan Stanton & Gareth Macdonald

- Last updated on GMT

Merck KGaA: $17bn 'Rolls Royce' Sigma-Aldrich to keep major US site

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The $17bn (€13.2bn) acquisition of Sigma-Aldrich is “not just a milestone but a quantum leap” for Merck KGaA, the firm says.

The deal, which is still subject to shareholder approval, will expand Merck’s presence in both North America and Asia according to the German drugmaker, which said that it plans to maintain a significant presence at Sigma's St Louis facility and its own site in Billerica, US.

“Currently we are under-represented in the US,”​ Merck CEO Karl-Ludwig Kley said in an interview, adding the deal brings “the strong presence of Sigma-Aldrich in the US market, with a size that really allows us to take products and services to the customer throughout this great country.”

Kleys added that the combination of the two companies would mean there would of course be certain synergies, though said it would be premature to discuss any cuts until the deal was approved by regulators.

However, he said the firm remained committed to Sigma-Aldrich’s operations in St Louis, Missouri, a key centre of biologics GMP manufacturing which works in close alignment with the Madison, Wisconsin, Highly Potent APIs (HPAPI) manufacturing plant. “[St Louis] has been home to Sigma-Aldrich for decades and we not only respect this but St Louis will play a major role in taking this company forward.”

Value for money?

The $17bn pricetag represents a 37% premium to the latest closing price of Sigma-Aldrich, but Kleys said the firm was a “compelling” ​value proposition. “If you want to buy a Rolls Royce you don’t get it at a bargain price.”

 In the life sciences sector “there are a lot of technology developments, with customers asking for more global solutions and services,” ​and thus this helped propel the deal. He added the completion of an internal efficiency programme was also a driver, showing Merck is ready to strengthen its service offerings.

“We rolled out our efficiency measure and are ready to strengthen our life science business,”​ he said. “This is not just a milestone but a quantum leap in our business.”

Abandoning Pharma?

In addition to Sigma’s life science and laboratory reagents business, the acquisition will give Merck KGaA control of the fine chemicals unit, SAFC, and Bioreliance, which is Sigma’s biopharmaceuticals-focused safety testing services and dry powder culture media manufacturing business.

Asked whether the ‘world’s oldest pharmaceutical firm’ was abandoning its roots and become a services firm, Kleys joked Merck does “not let anyone become older than us.”

“We are staying in pharma, and are committed to pharma,”​ he said, adding the firm has been delivering very stable sales on its existing product portfolio, while simultaneously advancing its pipeline across all sectors.

Within the last few months, the Germany-based company has teamed up with Indian drugmaker Lupin​ over biosimilars, begun construction of a small molecule facility in Nantong, China​, and launched a solid dose formulation lab in India​ to aid development of generics.

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