Bracco gains full control of its imaging, pharmaceutical businesses

Pharmaceutical firm Bracco Diagnostics of Italy began the new year with a shift in its 70-year-old partnership with Merck of Germany. After months of discussions between the two firms, the Bracco family announced that it will acquire Merck’s 50% stake in its imaging and pharmaceutical business, paying Merck $900 million over five years. The deal is pending approval from the Italian Antitrust Authority.

The two firms began discussing the future of their partnership in June (SCAN 7/7/99), and it was suggested that Merck would either divest its share or would seek to purchase a controlling share of Bracco to strengthen its position in the contrast-media market. Although the companies chose the divestiture route, the transaction will not end their relationship: As part of the deal, Merck will purchase the Bracco family’s 50% stake in Bracco’s laboratory and special chemicals business, which produced revenues in 1998 of approximately $53 million. The laboratory business will be transferred to an Italian branch of the Merck Group. In addition, Bracco and Merck will continue to maintain semi-exclusive licensing agreements for Merck’s existing pharmaceutical products in Italy, and any new products.

Privately owned Bracco was established in 1927 as a marketing agent in Italy for Merck’s pharmaceutical products, and since then has forged a strong reputation in the international imaging agent market. The company boasts 2300 employees worldwide and has six fully owned operations and two joint ventures in Europe, Asia, and the U.S., as well as research facilities in Milan, Geneva, and Princeton.

The company’s European sales constitute approximately one-third of its business, which rose 9% to reach $774 million in 1998. In volume terms, 40% of Bracco’s unit sales are in Europe, where the firm has direct sales operations in Italy and markets contrast media in other countries through distribution agreements. Led by its nonionic x-ray contrast media, the Italian company captures one-third of the European contrast market and is estimated to hold a share comparable to that of rival Nycomed Amersham.

The mainstays of Bracco’s contrast media range are the nonionic x-ray product Iomeprol (iomeron), used for imaging the brain, central nervous system, and cardiovascular system. The product has been available in Europe since 1994, but is still pending FDA approval in the U.S. Another important product is ProHance (gadoteridol), the MR contrast medium that was acquired with Bracco’s 1994 purchase of Bristol-Meyers Squibb subsidiary Squibb Diagnostics.

The purchase of Merck’s share in its imaging and pharmaceuticals business will fortify Bracco’s efforts to focus on diagnostic imaging, according to Diana Bracco De Silva, chair and CEO of the Bracco Group. Bracco would like to strengthen its share in this market, De Silva said, and began to do so when it bought a majority stake in Italian medical imaging firm Esaote in 1998 (SCAN 4/14/99). Bracco and Esaote are collaborating on the development of ultrasound contrast agents.