Bayer Exploring Sale Of $2.5 Billion Diabetes Device Business
By Chuck Seegert, Ph.D.
In order to focus on developing more lucrative pharmaceutical businesses, Bayer is considering the sale of its diabetes device unit. 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.
Bayer, headquartered in Leverkusen, Germany, appears to be considering a move that 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.
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, the previous CEO Joerg Reinhardt claimed that 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, according to Bloomberg. 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," said Kevin Kedra, a Gabelli & Co. analyst, according to 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.