Bayer looks to grow Chinese OTC business with Dihon acquisition

By Dan Stanton

- Last updated on GMT

Bayer looks to grow Chinese OTC business with Dihon acquisition

Related tags: Bayer, Merck kgaa

Bayer has predicted double digit growth in its Chinese consumer health business as it acquires OTC firm Dihon Pharmaceutical Group.

The Germany-headquartered firm confirmed it will buy 100% of Dihon which specialises in over-the-counter drugs and traditional Chinese medicines on Thursday, as it reported end-of-year figures which included an overall 9.4% rise on 2012’s sales in pharma to €11.2bn (€15.4bn).

For the full year, Bayer’s consumer care business saw “significant growth,”​ Olivier Brandicourt – CEO of Bayer Healthcare – told investors during a conference call Thursday, with China growing by 13%.

“We are very confident that the business there will continue to grow in 2014,”​ he continued (according to​ transcript). “We are actually anticipating to grow volume by 17-18% next year, but we are also facing price cuts, and therefore we are planning to be in the range of 11-12% next year.”

Furthermore, the acquisition of Dihon will give Bayer “a portfolio of well-known local OTC brands,”​ Chairman Marijn Dekkers added, moving Bayer “into a leading position among multinationals in the OTC market in China.”

Among the drugs Bayer will acquire are a number of anti-fungal and scalp disorder OTCs. "The addition of these brands puts Bayer into a leading position in the OTC dermatology category in China,"​ spokesperson Tricia McKernan told "The acquisition also provides us with access to lower-tier cities in China given Dihon’s well-known portfolio of complementary brands."

Dihon has a number of manufacturing facilities across China and manufactures OTCs both locally and for the Nigerian, Vietnamese, and Cambodian markets. According to the firm’s website​, Dihon is approved by the China Food and Drug Administration (CFDA – previously SFDA) and has its own research and GMP facilities.

The firm generated sales of €123m in 2013 and employs around 2,400 people. Bayer has not said how much it paid for the company but according to German investor bank M.M. Warburg, the firm may have cost approximately €500m, Reuters reported​.

Though specific integration plans are still unclear, McKernan told us that "until closing, Bayer and Dihon will continue to operate as independent companies. Our goal will be to ensure as little disruption as possible to allow us to come together as a stronger combined organization for the future."

Recently Bayer shelled out $2.9bn to acquire Norwegian oncology drugmaker Algeta.

Pharma in China

Two other Germany-based multinationals have also invested in China in recent months. Merck Serono committed $80m to build a diabetes and cardiovascular facility​ for the local market, whilst Boehringer Ingelheim announced it was tripling production at a Shanghai solid and liquid dose plant​.

However, the news was not all positive for Big Pharma in China as a series of bribery scandals rocked the industry with GSK, AstraZeneca and Novartis​ all being investigated by Chinese authorities in 2013.

Furthermore, Actavis pulled out of its Chinese joint venture​ earlier this year, adding it was not looking to invest further in the country after describing the business environment as both “unfriendly”​ and “too risky.”

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