Roche moves to expand diabetes business

The proposed merger would make Roche a leader in diabetes care Keystone Archive

The Roche pharmaceutical group has launched a bid to grab a larger slice of the healthcare market covering diabetes.

It has tabled a SFr1.6 billion ($1.18 billion) offer for Switzerland’s Disetronic company, Europe’s largest maker of insulin injection pumps.

The Basel-based group said the deal would make Roche Diagnostics a leader in integrated diabetes management.

The news sent Disetronic’s share price soaring by just over 50 per cent. At the end of trading on Monday, it had risen to SFr817 – up from SFr543 at Friday’s close.

Roche said on Monday it would offer Disetronic shareholders two Roche non-voting equity certificates and SFr670 in cash for each Disetronic share.

The SFr1.6 billion price tag represents a premium of around 55 per cent over Disetronic’s closing price on Friday.

The deal comes at a time when Roche is facing increasing pressure to merge with its bigger Swiss rival Novartis.

Earlier this month Novartis announced that it had upped its voting stake in Roche from 21.3 per cent to 32.7 per cent at a cost of $2.1 billion.

Positive impact

Commenting on the Disetronic merger, Roche said that the companies’ combined technological know-how and experience in marketing and sales had the potential to stimulate additional growth, which would have a positive impact on market share, particularly in the United States.

Disetronic is the number two supplier of insulin pumps in the US and the market leader in Europe.

“The combination of these two businesses is another clear signal of our commitment to implementing the strategy we have mapped out for Roche,” commented Roche CEO and chairman Franz Humer.

“We are pursuing a course of steady growth, with a focus on high-potential therapeutic areas that can be served by our core Pharmaceuticals and Diagnostics divisions,” he added.

Right timing

Analyst Michel Auch from the Ferrier Lullin bank in Geneva said the planned acquisition had come at the right moment.

“Disetronic is operating in a sector in which competition is growing. It was becoming increasingly difficult to compete with the giants, such as the Medtronics company of the United States,” he told swissinfo.

Auch commented that although the price was a little on the high side, Roche would have no problem in raising the necessary cash.

Disetronic’s technology head Bruno Reihl announced at the end of last month that the company was close to making an alliance that would boost its presence in the key US market.

He added that it would give the company access to a US sales force of several hundred people.

Diabetes

According to the World Health Organization, there are currently 150 million people living with diabetes and it is estimated that the figure will double by the year 2025.

Roche said that the combination of its diabetes monitoring systems business with Disetronic pumps would offer “comprehensive” diabetes management solutions.

These would range from blood glucose meters for self-monitoring to sophisticated, programmable insulin pumps that allow patients to continuously administer insulin doses according to their individual needs.

The statement said that after the transaction is finalised, Disetronic’s Infusion Systems division would become part of Roche Diagnostics’ Diabetes Care unit.

Roche will not acquire the smaller of Disetronic’s two divisions, Disetronic Injection Systems.

The proposed acquisition is subject to approval by competition authorities and a special meeting of Disetronic shareholders.

The Roche offer must be accepted by at least 80 per cent of Disetronic’s shareholders.

Disetronic, which is based in Burgdorf near the capital, Bern, employs more than 1,200 people worldwide.

Vitamins

Roche also on Monday completed the sale of its vitamin unit to the Dutch firm DSM for €1.9 billion ($2.11 billion) – €300 million less than originally agreed in September.

The company also announced that it had settled all litigation with the US direct customers on its vitamin price-fixing case.

“The sale of the division and the litigation settlement bring a significant part of our history to an end,” said Humer.

Roche added that the price difference resulted from the continued slowdown of the world’s economies and the weakening of the value of the dollar against the Swiss franc.

The pharmaceutical group said it was also increasing its provisions for price-fixing claims in the US from SFr1.2 billion to SFr1.77 billion. It said it expected no additional provision would be required for US cases.

swissinfo with agencies

Roche Disetronic

Diabetes is a chronic disease in which the pancreas does not produce any insulin or produces too little.
The number of people affected is growing rapidly.
The World Health Organisation estimates that 300 million people will have diabetes by the year 2025.
Diabetes can lead to a number of serious conditions and complications. These include hypertension, abnormal fat metabolism, blindness, kidney disease, heart attack, stroke and blood vessel damage that can block blood flow to the limbs and may necessitate amputation.