Bayer to buy Dihon of China adding OTC and TCM products

Also reports 2013 sales of €40.16bn boosted by recently launched pharmaceutical products

Dr Marijn Dekkers

Bayer is to buy Dihon Pharmaceutical Group of China for an undisclosed sum.

Privately held Dihon specialises in over-the-counter and herbal traditional Chinese medicine (TCM) products. A leading player in China's OTC industry, the firm's products include scalp disorder treatment Kang Wang and antifungal cream Pi Kang Wang, plus a TCM product, Dan E Fu Kang, for the treatment of various women’s health indications.

The deal is expected to close in the second half of 2014.

Dihon, which is headquartered in Kunming, has several manufacturing sites in China and its products are also sold in Nigeria, Vietnam, Myanmar and Cambodia. It employs around 2,400 people and had sales of €123m in 2013.

Bayer CEO Marijn Dekkers said the company aims to strengthen its life sciences portfolio with strategic bolt-on acquisitions. 'We are very pleased to have identified a consumer healthcare company in China with such a strong track record of success built by its dedicated employee base,' he said.

He added that the acquisition 'moves us into a leading position amongst multinationals in the OTC industry in China'.

Bayer reported group sales of €40.16bn in 2013 with EBITDA before special items, up by 1.5% to €8.4bn.

Sales of the HealthCare subgroup increased by 1.7% to €18.92bn, largely attributable to gains posted by recently launched pharmaceutical products.

Five products take pharmaceutical sales to €11.19bn

Pharmaceuticals sales climbed by 9.4% to €11.19bn, mainly driven by the anticoagulant Xarelto, the eye medicine Eylea, and the cancer drugs Stivarga and Xofigo, which posted combined sales of €1.52bn (2012: €368m). Marketing of the pulmonary hypertension treatment Adempas began last autumn after Bayer received marketing authorisations in North America.

'In light of this very positive performance, we have now significantly increased our estimate of the combined peak annual sales potential of these five products to at least €7.5bn,' said Dekkers. 'However, further investments in marketing, distribution and life-cycle management will be required to exploit these opportunities and actually achieve the aforementioned sales potential.'

Among Bayer's established top pharmaceutical products, sales of the blood-clotting medicine Kogenate increased by 6.4% on a currency-adjusted basis. By contrast, sales of the multiple sclerosis drug Betaferon/Betaseron declined as expected, particularly in the US due to increased competition, and were down 11.6% year-on-year worldwide. Generic competition in Western Europe and the US also led to a fall in sales of 12.5% in the oral contraceptives YAZ/Yasmin/Yasminelle.

Bayer plans to spend more than €18bn on research and development and capital expenditure between 2014 and 2016, mainly in the Life Science businesses.

Dekkers said the company was 'optimistic about 2014' and aims to grow total sales by about 5% to between €41–42bn.

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