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Bayer to acquire Dihon drugmaker
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Bayer yesterday said it would buy privately held Dihon Pharmaceutical Group Co, a maker of traditional Chinese medicines, as the German drugmaker pushes to become the world’s largest non-prescription medicines group.
With China’s healthcare spending forecast to nearly triple to US$1 trillion by 2020 from US$357 billion in 2011, according to consulting firm McKinsey, the country is a magnet for makers of medicines and medical equipment, but many patients remain strongly attached to traditional approaches.
“What’s growing the most within Chinese healthcare is traditional medicine. It’s a strong part of their culture,” said Lilian Montero, a healthcare analyst at Swiss bank Julius Baer.
“Local companies tend to show superior growth in emerging markets. It’s a good move from that point of view.”
Dihon has about 2,400 employees and generated sales of 123 million euros (US$168 million) in 2013, Bayer said.
It declined to provide the financial terms of the deal but brokerage MM Warburg estimated it was worth about 500 million euros.
Even though TCM is winning a following in some urban communities in the West, Bayer acknowledged it was too early to say whether Dihon products would be exported to Germany or Europe.
“It’s less likely that these products will move to the West,” said Julius Baer’s Montero.
“You would need a lot more medical training and education, otherwise it will stay a niche market like homeopathy,” he said.
Dihon’s products include dandruff treatments, antifungal creams and medicine against gynaecological conditions such as endometriosis.
The deal, which could help Bayer challenge Johnson & Johnson to the No. 1 spot in the over-the-counter market, underscores its push into herbal medicine after it bought smaller German supplier Steigerwald last year.
The fragmented OTC market is gearing up for more consolidation, with Merck & Co Inc’s consumer healthcare business drawing interest from Bayer and Novartis.
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