Kazakhstan. Bayer HealthCare Acquires Sagmel's OTC Unit in Move Towards CIS Markets

The purchase of Sagmel's OTC business will give Bayer access to rapidly expanding drug markets in Russia and other CIS countries.

Global Insight Perspective

Significance

Germany's Bayer HealthCare has acquired the OTC (over-the-counter) business unit of U.S. firm Sagmel for an undisclosed sum.

Implications

Sagmel's OTC operations will be folded into Bayer Healthcare's sub-unit, Bayer Consumer Care. The acquisition will see Bayer gain greater access to countries in the CIS region, where Sagmel's OTC business is already established in several key markets.

Outlook

With the OTC market in Russia alone predicted to double by 2012, the opportunity for growth in the CIS region remains considerable, and should go some way to making Bayer Consumer Care's sales catch up with those of brand-name unit Bayer Schering Pharma.

Leading German pharmaceutical company Bayer HealthCare has demonstrated its continued interest in the rapidly growing markets of the CIS region by acquiring the over-the-counter (OTC) operations of U.S. drugs firm Sagmel for an undisclosed sum. Sagmel is headquartered in Libertyville, Illinois, but has subsidiaries in countries across the CIS region, including Russia, Ukraine, Belarus, Kazakhstan, and Moldova. Once the acquisition is green-lighted by the appropriate regulatory authorities, Sagmel's CIS-based OTC operations will be folded into Bayer Consumer Care, the OTC division of Bayer HealthCare.

According to Bayer HealthCare, Bayer Consumer Care has been growing and consolidating its presence in the CIS since the start of 2007, thanks to "the integration of the marketing and distribution network of its former [local] partner". The Sagmel OTC takeover will add to this all of Sagmel's OTC brands—including Theraflex (glucosamine hydrochloride), Nazol (oxymetazoline hydrochloride) and Relief (shark liver oil and phenylephrine hydrochloride) —as well as its sales force, distribution network, marketing, regulatory and supply-chain staff.

The acquisition, once completed, looks set to boost Bayer's considerable presence in the consumer healthcare sector, which was first cemented in 2004 upon the 2.4-billion-euro (US$3.7-billion) buyout of Roche Consumer Health from Swiss pharmaceutical giant Roche.

Outlook and Implications

The impending consolidation of Sagmel's OTC business into Bayer Consumer Care should go some way towards boosting the Bayer division's existing sales, which grew by just 4.1% year-on-year (y/y) in 2007, reaching a total of 2.6 billion euro. At present, growth in turnover at Bayer Consumer Care and its parent division Bayer Consumer Health (2007 sales up 6.9% y/y to 4.2 billion euro) is considerably slower than at the group's flagship brand-name business, Bayer Schering Pharma, where last year's sales soared by 37.3% y/y to stand at 10.3 billion euro.

By focusing on the CIS markets, Bayer HealthCare has made a strategic move to invest in a region where sales of OTC medicines are not only extremely popular but are also growing fast. In Russia alone, the market for OTC drugs is expected to double in value by 2012, going from US$3.4 billion in 2006 to an estimated US$7 billion, according to Pharma Poland News. Russia is easily the biggest and most dynamic of all the CIS pharma markets, and Global Insight maintains that the OTC sector is one of several ways in which small investments can potentially yield big returns (see Russia: 22 February 2008: Russian Pharmaceutical Market: Possibilities and Pitfalls).

Source: IHS