Bayer AG said it would buy privately held Dihon Pharmaceutical Group Co (滇虹藥業), 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.
Dihon has about 2,400 employees and generated sales of 123 million euros (US$168 million) last year, Bayer said on Thursday, declining to provide the terms of the deal.
Dihon’s products include dandruff treatments, antifungal creams and treatments relating to gynecological conditions such as endometriosis.
A spokeswoman said it was too early to say whether the products would be exported to Germany or other parts of Europe.
The deal, which could help Bayer challenge Johnson & Johnson to the No. 1 spot in the over-the-counter (OTC) market, underscores its push into herbal medicine after it bought smaller German supplier Steigerwald last year.
A number of international healthcare firms have been making inroads in China. Alliance Boots, the owner of Europe’s largest pharmacy chain, plans to take a 12 percent stake in Chinese distributor Nanjing Pharmaceutical Co Ltd (南京製藥), while Medtronic Inc purchased China Kanghui Holdings (康輝控股) in 2012.
However, doing business in the world’s most populous country is not without risk. China’s regulators have been investigating several foreign and domestic drug companies on suspicion of bribery, with the most high-profile investigation involving Britain’s GlaxoSmithKline.
China’s consumer health and wellness market is expect to hit almost US$70 billion by 2020 as increasing numbers of consumers turn to health supplements and OTC health treatments, according to a recent report from Boston Consulting Group.
The OTC market alone was worth US$18 billion and is estimated to grow at a rate of about 8 percent per year, the report said.
The Dihon deal is expected to close in the second half of this year, Bayer said.
On Wednesday, Bayer said it will increase its dividend payout to shareholders for last year. The company said in a statement it will pay shareholders 2.10 euros per share for last year, up from 1.90 euros a year earlier.
With 826.95 million eligible shares, the dividend payment will be 1.74 billion euros, up from 1.57 billion euros in 2012, it said.