Two heavy hitters in the diabetes care industry are joining forces, in a deal compelled by a growing market for cheaper testing supplies.
Japan's Panasonic Healthcare Holdings has announced plans to acquire the diabetes care business of Bayer AG for roughly $1.13 billion.
Panasonic Healthcare, a joint venture of Panasonic and the U.S.-based Kohlberg Kravis Roberts (KKR) & Company private equity firm, is taking advantage of the German pharmaceutical group's efforts to shed ancillary businesses and focus on prescription and over-the-counter drugs, according to a story in The Wall Street Journal. Bayer paid $14.2 billion to acquire U.S. Merck & Company's OTC business last October, and announced plans one month later to spin off its plastics unit in an IPO tentatively scheduled for next year.
Bayer had tried to sell its Diabetes Care business unit – which includes the Contour portfolio of monitors and strips and Breeze2, Brio, Entrust, Elite and Microlet lancing devices – as early as 2012, before pulling back. Diabetes Care has a collaboration agreement in place with Medtronic, one of the biggest players in the mobile diabetes care management industry.
The market is a fast-growing but very competitive one, featuring Abbott, Johnson & Johnson and Roche. Bayer officials have said the combination of increased competition and pressure from the payer market to rein in reimbursements have led to sharp decreases in prices for diabetes care products.
"The integration of BDC’s global sales network with PHC’s high-quality production capabilities better enables the companies to reach global consumers at a transitional time for the diabetes healthcare sector," Panasonic officials said in a press release. "According to the World Health Organization, nearly 350 million people live with diabetes globally up from an estimated 30 million in 1985. The rate of diagnoses is expected to rise particularly in low- and middle-income countries. To accommodate the rising number of incidence many country healthcare providers have instituted price reduction programs for diabetes care products. This has contributed to an increase in the volume of diabetes care products in the market at lower prices."
Panasonic sold 80 percent of its device business to KKR last year, keeping control overt the remaining 20 percent. The company also makes blood glucose meters, and officials said the acquisition would give them a wider range of affordable devices.
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