Merck KgaA - Sigma Aldrich Creates Giant in Biotech Lab Supply

Merck KgaA - Sigma Aldrich Creates Giant in Biotech Lab Supply

This week, Merck KgaA announced it would buy Sigma-Aldrich  for 17 billion dollars.  The move creates a life science supplies giant that will contest Thermo Fisher in the life sciences research tools and reagents market.  It no doubt reflects a response to the Thermo Flsher -Life Technology acquisition;  In the cell culture market, that Kalorama has extensively covered over the years, Merck KgaA-Sigma creates a very close no. 2 player to Thermo-Fisher and possibly a new leader.   On a secondary level, Qiagen, GE Healthcare Life Sciences, Biomerieux are also companies that will be thinking about strategy in light of this move.  
• Merck KgaA is a major drug company with ancillary businesses in electronics through liquid crystal displays.  It is the "German Merck" - separated from its seized US company during World War II.  Uses the EMD brand name in the US.  With 14 billion in sales, 8 billion pharmaceutical, Merck KGAA is the 22nd largest global pharmaceutical company in the world in 2013 according to Kalorama information’s Top 20 Pharmaceutical Pipelines report published earlier this year.  Company revenues were reported at $14.2 billion in 2013. Pharmaceutical revenues for the year accounted for almost$8 billion of total sales. Merck’s leading product is the multiple sclerosis therapy Rebif which posted solid performance of $2.5 billion in 2013. The company’s second leading product is cancer drug Erbitux which also increased in sales for the year to almost $1.2 billion.     
• Sigma Aldrich is a supply company that produces no end-market pharmaceutical products.  It is heavily involved in all the various aspects of making pharmaceutical and the very complex type of products needed to make biopharmaceutical drugs and in the earlier side of drug discovery and development; the drug company can benefit from having access to its technology and it can possibly benefit from the large resources of such a company.

Sigma’s product catalog is extensive.  It offers 200,000 products, but just as a few examples..  You hear a lot about miRNA  and its use in therapies.   Sigma doesn’t create those therapies but it does create ‘mimics’  - mimics are small  molecules that act exactly like human RNA sales in the laboratory so you can do research into human disease, you can do RNA drug testing and development.   Sigma makes for instance toxicology cells - cells that can be used to test if a drug will have cytotoxic effects and should be rejected.  I’m being specific about those product lines but you should understand - they offer thousands of products.   So mostly Merck KgaA does not compete with Sigma.  But there is another side to Merck KgaA --- It also recently -2010-acquired Millipore which put it in the research supplies business.    

So the question becomes Sigma Aldrich and the Millipore part of Merck KGAA?  Complementary, competitive?

Millipore is only about 24% of Merck KgaA.  Millipore and Sigma both operate in what you would say is biotech supplies, research laboratory supplies.  Also drug manufacturing supplies.  That is chemical reagents that are used in various laboratory tests.  Cell culture is an area where they’d have to sort out their offering; both offer animal-free media products for instance, both manufacture supplies for mass spectrometry.  But if you look at microbiology IVD supplies… transport and prepared media, sample collection devices and stains. sigma is dominant and this is a complementary add.   Millipore makes flow cytometers, Sigma does not.  So a lot of complement along with some possible competitive areas; overall I think an enhanced product offering.  300,000 products according to the company.  

If you look at cell culture for biopharmaceutical production, which Kalorama has reported on extensively, Merck KgaA is the 4th largest producer and Sigma Aldrich the 2nd when we last surveyed the market in 2012.      This is just one area, but an increasingly important one for the manufacture of biological drugs.  Merck KgaA’s R&D efforts benefit from having access to these technologies, and we think the combined product offering will assist both Sigma and Millipore in being able to offer a greater product range.  

This is much less two competitors joining and much more of a large company purchasing an innovative and competitive player in an area ancillary to Merk KgaA’s total business.  It is possible the new concern would face anti-trust regulation or requirements to devolve business units. A market where they would dominate so much that it would be necessary is not apparent.   In cell culture for instance, the two combined would be a little shy of Thermo Fisher’s dominant presence in the cell culture market.

Relevant Reports from Kalorama Information

Mass Spectrometry in Clinical Applications

Cell Culture Media and Reagents