GE Sells off biopharma business for $21.7B
General Electric has about $20 billion coming its way — after taxes — by selling its biopharma business to Washington, D.C.-based Danaher Corp.
The global conglomerate announced plans to sell the segment of its GE Life Sciences division on Monday. The $21.7 billion deal is expected to close toward the end of this year, according to national reports.
The biopharma unit, part of GE Life Sciences, generated revenue of about $3 billion last year.
The announced sale was a short-term windfall for the company — its shares increased nearly 17 percent Monday — but it may also be a long-term boon, according to industry observers in Connecticut, where bioscience industries have thrived in recent years.
For a company focusing on near-term profits, said David Wurzer, CIO for Connecticut Innovations, GE selling the biopharma unit may have been in the conglomerate’s best interest, given its earnings pressure.
GE has a debt load of $121 billion, according to published reports.
“It takes time” for pharmacy-based products — seven to 15 years, Wurzer said — to make enough money to pay for the research and development.
“Until it’s on the market, ... there is no opportunity for profit that GE would be interested in,” Wurzer said.
Connecticut Innovations is responsible for helping Connecticut businesses grow through innovative financing and strategic help.
A 2018 study conducted by the agency found that Connecticut’s bioscience sector employed nearly 39,000 workers in more than 2,500 companies and that more than half of all venture capital invested in state was in bioscience.
“The nature of the bioscience industry is very volatile,” said Dawn Hocevar of BioCT, an industry association that focuses on advocacy and supporting state companies and start-ups.
“It could take 10 years for a company to become successful, and at some point they are either acquired by a pharma company or they do an IPO and go public,” she said.
That’s what happened with Connecticut-based Biohaven and Arvinas, which both filed IPOs this year.
Most drugs that are in clinical trials fail, Hocevar said, and it typically takes billions of dollars to get one drug to market — a luxury and time window GE doesn’t have, given its current financial state, Wurzer said.
The mostly-cash transaction between the two companies marks another sign of GE trying to pull itself out of its financial woes by divesting its non-core businesses, experts said.
Last fall, GE sold part of its Healthcare Equipment Finance business to TIAA Bank and agreed to sell its Current, powered by GE business — part of the company’s lighting business — to American Industrial Partners.
Earlier this month, the company announced it was opting out of building its 12-story world headquarters tower in Boston and return $87 million in incentives it received from Massachusetts for relocating from Fairfield in 2016.
Danaher, a medical technology company, was led by new GE CEO Larry Culp Jr. for almost a decade until 2014.
GE’s biopharma segment will operate as a separate company within Danaher’s $6.5 billion Life Sciences division, the company said.
Contributions from the Associated Press and staff writer Alexander Soule.