By Sophie Sassard and Ben Hirschler
LONDON, Oct 14 (Reuters) - GlaxoSmithKline isseeking binding bids by next month for a range of older drugsworth more than $3 billion, which it is likely to sell bygeographical region, according to people with direct knowledgeof the process.
Potential bidders include private equity firm KKR,India's Lupin and Denmark's Lundbeck, all ofwhich are interested in acquiring rights to products in certainregions.
Britain's biggest drug maker is looking to divest the matureproducts in a bid to improve its growth profile and wants todispose of off-patent drugs marketed in North America andwestern Europe.
The medicines on the block, known as established products,are expected to have combined 2014 sales of around 1 billionpounds ($1.6 billion), although their sales are declining due tocompetition from cheap generic drugs.
The sources said GSK was looking for a multiple of more thantwo times sales, suggesting a price of at least $3.2 billion.
GSK, which is being advised by Lazard, aims to find buyersby the end of the year and is keen to maximise returns forshareholders, whether that means selling the products as asingle unit or splitting them up by region, they added.
Danish pharmaceutical company Lundbeck is reviewing a bidfor products marketed in North America as it seeks to expandthere, two of the sources said.
KKR has teamed up with private Netherlands-basedgastrointestinal specialist Norgine in a bid to acquire some ofGSK's drugs sold in Europe, said the same people.
Indian generics firm Lupin is also expected to participatein the second round of the auction and would be interested inproducts in the United States, said the sources.
Other private equity funds with an interest in healthcareare also looking at some specific products. Some bidders mightstill emerge with an interest in the entire portfolio, althoughthis scenario is seen as less likely.
Acquiring GSK's older drugs would be more complicated forprivate equity funds than other drug manufacturers as GSK is notplanning to sell the factories, which means the funds would needto outsource manufacturing and distribution operations.
GSK, Lundbeck, KKR and Norgine all declined to comment.
Lupin, meanwhile, has said for some months it wants toenhance its U.S. branded generics business and a companyofficial previously confirmed to Reuters it was looking fordeals, while declining comment on specific targets.
SIGNIFICANT INTEREST
GSK Chief Executive Andrew Witty said in July that there hadbeen significant interest from both mid-sized pharmaceuticalcompanies and buyout specialists in the assets now on the block.
The GSK brands up for sale include antidepressant Paxil,migraine treatment Imitrex, Zantac for stomach acid and Zofranfor nausea. The company intends to retain the rights to suchproducts in emerging markets, where they are still growing.
Ditching mature products sold in Western markets makeslong-term sense, since sales are declining. However, these itemsremain very profitable, so a sale may dilute earnings per share,which could further strain GSK's already stretched dividendcover.
Sales of all GSK's established products - including thosebeing retained - totalled 1.51 billion pounds in the first halfof 2014, down 18 percent on a year earlier.
GSK's decision to carve out some of its mature drugportfolio is part of a wider industry trend, with Mylan agreeing in July to buy Abbott Laboratories' brandedspecialty and generics business in non-U.S. developed markets.
Other companies including Sanofi and Merck & Co are also looking at similar divestments.
(1 US dollar = 0.6277 British pound) (Additional reporting by Freya Berry and Anjuli Davies inLondon; editing by Susan Thomas)
Glaxosmithkline (GSK)
