12.03.14
Bayer AG may be getting back to basics.
The Leverkusen, Germany-based pharmaceutical giant is considering selling its diabetes device unit to concentrate on its more lucrative drug business. Optimistically valued at $2.5 billion, the potential sale signals a change in the company’s direction, driven by its relatively new CEO, Marijn Dekkers.
The move would allow the company to focus on core competencies in the drug development space. In addition to the diabetes unit, other peripheral business units, like the company’s plastics unit, could be placed on the stock market. Citing unnamed sources, Bloomberg reports that Bayer is working with Credit Suisse Group AG on the potential sale, and private equity firms such as Cinven Ltd., EQT Partners AB, KKR & Co. and Triton Advisers Ltd. may consider bidding for the unit, which could fetch between 1 billion euros and 2 billion euros ($2.5 billion).
The potential deal is only one of many illustrating daring strategy changes that depart from the company’s previous plans, according to a recent Bloomberg article. As recently as January of last year, previous CEO Joerg Reinhardt claimed the company had no plans to sell the diabetes unit. Some observers believe that this move makes sense, although there could be challenges.
“It probably would be better to concentrate on their growth business, which is the pharma pipeline and the animal-health business,” said Ulle Woerner, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart, Germany, according to Bloomberg. “It’s going to be hard to sell it at a good price.”
Blood glucose meters like Contour are key products in the diabetes unit’s portfolio, which boasts annual sales that exceed over 700 million euros, Bloomberg notes. Recently, the company also purchased the over-the-counter (OTC) healthcare unit from Merck for $14.2 billion in an effort to become the global OTC leader, according to a recent article from Fierce Pharma.
Bayer’s desire to grow isn’t limited to developing human healthcare either, as one of its potential acquisition targets is Zoetis, a $22 billion animal-health company, according to Bloomberg. Despite this interest, the company isn’t urgently pursuing Zoetis, but intends to wait on the proceeds of its peripheral business units first.
"Buying Zoetis would give Bayer an instant leadership position, and it seems like they've expressed wanting to be leaders in the spaces they compete in," Kevin Kedra, a Gabelli & Co. analyst, told Fierce Pharma. "It would give them a business that has stable cash flow, steady growth and a relatively predictable business in an area that they know pretty well."
While Bayer may be considering removing itself from the diabetes space, there are many advances continuing in the area. For example, an artificial pancreas has recently entered clinical trials and may revolutionize the treatment of diabetes.
The Leverkusen, Germany-based pharmaceutical giant is considering selling its diabetes device unit to concentrate on its more lucrative drug business. Optimistically valued at $2.5 billion, the potential sale signals a change in the company’s direction, driven by its relatively new CEO, Marijn Dekkers.
The move would allow the company to focus on core competencies in the drug development space. In addition to the diabetes unit, other peripheral business units, like the company’s plastics unit, could be placed on the stock market. Citing unnamed sources, Bloomberg reports that Bayer is working with Credit Suisse Group AG on the potential sale, and private equity firms such as Cinven Ltd., EQT Partners AB, KKR & Co. and Triton Advisers Ltd. may consider bidding for the unit, which could fetch between 1 billion euros and 2 billion euros ($2.5 billion).
The potential deal is only one of many illustrating daring strategy changes that depart from the company’s previous plans, according to a recent Bloomberg article. As recently as January of last year, previous CEO Joerg Reinhardt claimed the company had no plans to sell the diabetes unit. Some observers believe that this move makes sense, although there could be challenges.
“It probably would be better to concentrate on their growth business, which is the pharma pipeline and the animal-health business,” said Ulle Woerner, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart, Germany, according to Bloomberg. “It’s going to be hard to sell it at a good price.”
Blood glucose meters like Contour are key products in the diabetes unit’s portfolio, which boasts annual sales that exceed over 700 million euros, Bloomberg notes. Recently, the company also purchased the over-the-counter (OTC) healthcare unit from Merck for $14.2 billion in an effort to become the global OTC leader, according to a recent article from Fierce Pharma.
Bayer’s desire to grow isn’t limited to developing human healthcare either, as one of its potential acquisition targets is Zoetis, a $22 billion animal-health company, according to Bloomberg. Despite this interest, the company isn’t urgently pursuing Zoetis, but intends to wait on the proceeds of its peripheral business units first.
"Buying Zoetis would give Bayer an instant leadership position, and it seems like they've expressed wanting to be leaders in the spaces they compete in," Kevin Kedra, a Gabelli & Co. analyst, told Fierce Pharma. "It would give them a business that has stable cash flow, steady growth and a relatively predictable business in an area that they know pretty well."
While Bayer may be considering removing itself from the diabetes space, there are many advances continuing in the area. For example, an artificial pancreas has recently entered clinical trials and may revolutionize the treatment of diabetes.