Roche sells non-prescription activities to Bayer

Bayer's Aspirin and Alka-Seltzer will be digesting Roche's Rennie. Roche

The Roche pharmaceuticals company has agreed to sell its over-the-counter (OTC) drugs business to Germany’s Bayer for SFr3.6 billion ($2.94 billion).

Roche said the sale of its non-prescription unit would allow the group to focus on its core pharmaceuticals and diagnostics businesses.

Under the terms of the deal, announced on Monday, Basel-based Roche will also sell to Bayer its 50 per cent stake in the companies’ joint venture in the United States.

However, Roche will not be selling the OTC operations of Chugai, a Japanese pharma company in which it has a majority stake.

News of the sale comes two days before Roche is due to publish its financial figures for the first half of the year.

Chairman and CEO Franz Humer said the sale of Roche Consumer Health was part of the company’s long-term strategy of focusing on the two research-driven, high-margin businesses of diagnostics and prescription pharmaceuticals.

“These businesses have significant growth potential and a steadily increasing potential for synergies,” he said in a statement from Roche headquarters in Basel.

“The sale… ensures that Roche’s non-prescription brands move to a company with traditionally strong expertise and solid market positions in the non-prescription field, offering healthy prospects to Roche Consumer Health and its employees worldwide,” he added.

Humer later told journalists in a conference call that the company’s disposal programme was now completed and he was satisfied with the new shape of the Roche business.

Strengthen balance sheet

The proceeds from the consumer health unit sale are expected to be used to further strengthen the company’s balance sheet and invest in expanding its core businesses.

Humer commented that the sale did not change Roche’s earnings forecast for this year or next.

Analysts said the price was better for Roche than for Bayer, although the acquisition made good sense for the German company.

“It’s strategically the right move [for Bayer], though a touch expensive,” said analyst Ludger Mues at Bank Sal Oppenheim.

A Swiss-based analyst said: “The sale price is above my forecast and that of the market. It is certainly good as it enhances Roche’s financial flexibility.”

Consumer healthcare

The combined OTC businesses of Bayer Consumer Care and Roche Consumer Health will have sales of about €2.4 billion and employ about 6,700 people in 120 counties, including five production sites from Roche’s pharmaceutical division.

The deal sees Bayer, which is Germany’s second-largest drug and chemical maker, become one of the top three consumer healthcare companies worldwide.

Included in the product portfolio are household brands such as Bayer’s Aspirin, Alka-Seltzer, Midol and One-A-Day vitamins, and Roche’s Aleve, Bepanthen, Rennie and Supradyn.

The global headquarters of the combined company will be in the United States – in Morristown, New Jersey. The European headquarters will be based in the Basel area.

Roche Consumer Health, which has its headquarters in Kaiseraugst near Basel, reported sales of SFr1.6 billion in 2003. About 3,200 people work for the division in more than 50 countries.

Roche and Bayer hope to close the transaction by the end of the year.

Non-prescription rights

In a separate deal, Roche said it had granted GlaxoSmithKline Consumer Healthcare an exclusive licence for the US non-prescription rights to the anti-obesity drug Orlistat, marketed by Roche as a prescription medicine under the brand name Xenical.

The agreement provides for a payment of $100 million and additional payments on the achievement of agreed milestones and royalties.

Roche retains all rights to market Xenical as a prescription drug in the US and all rights (prescription and non-prescription) outside the US.

In 2003 Roche’s worldwide sales of Xenical totalled SFr618 million, including SFr146 million in sales in the US.

swissinfo with agencies

Key facts

Roche’s over-the-counter drug sales rose 12 per cent to SFr1.77 billion in 2003.
Operating profit rose 12 per cent to SFr267 million, or 15.1 per cent of sales.
Bayer does not report operating profit for its OTC business.

In brief

Roche has agreed to sell its consumer health business to Bayer of Germany for SFr3.6 billion.

It is also disposing its 50 per cent stake in the Roche/Bayer joint venture in the US to Bayer.

Roche has also granted GlaxoSmithKline a licence for the US non-prescription rights to Orlistat, marketed by Roche as the prescription medicine Xenical.