Bayer sells Diabetes Care business to Panasonic Healthcare for ~$1.2 billion – June 10, 2015

Executive Highlights

  • As has been rumored for some time, Bayer announced the divestment of its Diabetes Care business to Panasonic Healthcare for ~€1.0 billion (~$1.2 billion). The closing of this transaction is expected to occur in 1Q16.
  • Bayer Diabetes Care recorded sales of €909 million (~$1.2 billion) last year, making the deal fairly cheap a 1.0 x previous year’s sales. Historically, .
  • Included below is a SWOT analysis of the acquisition and Close Concerns’ questions for Panasonic

Early this morning, Bayer announced the divestment of its Diabetes Care business to Panasonic Healthcare for ~€1.0 billion (~$1.2 billion). The deal represents the culmination of months of speculation that first tied Panasonic to Bayer in February 2015. The news is not altogether unsurprising considering: (i) the business’s shrinking profitability over the past 24 months; (ii) management’s lack of confidence in the future of the device business in recent financial updates (1Q15; 4Q14); and (iii) the company’s larger efforts to refocus on prescription and over-the-counter drugs. The closing of this transaction is expected to occur in 1Q16.

At first glance, the acquisition seems like a very good deal for Panasonic as Bayer Diabetes Care recorded sales of just €909 million (~$1.2 billion) last year – for comparison with previous M&A in the diabetes technology space, see our table of select deals below. That said, we would probably say the price is just about right, considering what Panasonic is buying: the company is already the exclusive sales and distribution partner for Bayer’s Contour Next product line, meaning that the benefit to Panasonic is really just the full margin with Bayer out of the equation – perhaps, too, some reps, a little shelf space, and some OUS payers (though not too many US payer contracts). Indeed, we wonder whether the price was simply the amount Bayer had left on a contract especially given the tough market. Looking ahead, we are curious to see how aggressively Panasonic dives into glucose monitoring considering the challenging reimbursement environment and competition from Abbott (potentially disruptive), J&J, Roche, and store brands. For context, Panasonic Healthcare’s activities to date have consisted primarily of manufacturing and selling medical equipment through partners. We have reached out to the companies for more details, though it has been challenging to gain any insights.

Notably, Bayer has been reshuffling its business portfolio for the past year. The company sold its vascular catheter business to Boston Scientific for $415 million in May 2014 and completed the $14.2 billion acquisition of US Merck's over-the-counter operations in October. Bayer will still remain involved in diabetes, but on a mch smaller scale with Eylea (aflibercept) for diabetic retinopathy and the alpha-glucosidase inhibitor Glucobay. The company also has a mineralocorticoid receptor (MR) antagonist finerenone for diabetic nephropathy that is entering phase 3.

It is challenging to say what this transaction means for Bayer BGM users and the field more broadly. From a quality perspective, the Counter Next brand is one of the most accurate on the market, and we are hopeful this standard will be maintained under new management. According to high-level executives within Bayer, Panasonic has every intention of pursuing the glucose monitoring business vertical seriously. We are hopeful the new organization will bring some of the consumer electronics experience to the BGM business, which is in need of innovation and new solutions for patients. We know that Panasonic management is a sharp group and we are looking ahead to see where this organization will move.

  • For Panasonic, Bayer’s Diabetes Care business does have a handful of attractive elements: accurate strips, a worldwide presence (> 125 countries), and a partnership with Medtronic. On the latter, Bayer launched the Next Link 2.4 meter with Medtronic’s MiniMed 640G system in Australia earlier this year. The meter is now available for purchase throughout the EU. As a reminder, the device’s key innovation relative to the first-gen Next Link is the remote bolus feature, a convenience and discretion win for patients that is particularly welcome by parents .
  • That said, the acquisition does have some drawbacks, most notably Panasonic’s entrance into a tough glucose monitoring market with a portfolio that has limited market share. For context, combined 1Q15 global revenue for the Big Four BGM companies (Abbott, Roche, J&J, Bayer) totaled ~$1.6 billion, falling ~6-9% YOY against an easy comparison to pooled revenues in 1Q14 (down ~5-7% YOY). Sequentially, global pooled revenues fell a staggering ~13-17% relative to 4Q14 (when sales reached ~$1.8-1.9 billion). We also estimated that Bayer had the lowest or second-lowest market share by sales for the 1Q15 (~17-19%) on par with Abbott (~17%) and behind J&J (~30-31%) and Roche (34-35%). The split is relatively similar for the full year 2014. See Table 1 below for more details.

Table 1: Estimated Market Share Worldwide (by sales) – 1Q15











  • On the pipeline front, Panasonic is inheriting a relatively lackluster portfolio (in terms of what has been publicly disclosed). We’re not sure if Bayer is still working on a novel CGM, as it has been over two years since our last update on the product (ATTD 2012). This is one place where new management’s creativity and thinking may be able to get the ball rolling. On a positive note, Bayer shared at ATTD 2015 that the company is working on a next-generation Bluetooth-connected BGM. We hope Panasonic will continue to push this innovation forward, particularly with its expertise in consumer electronics.

Table 2: Bayer Diabetes/Panasonic Healthcare –  Strengths, Weaknesses, Opportunities, and Threats (SWOT)


- Accurate strips

- Widely praised USB meters

- Partnership with Medtronic

- International presence (> 125 countries)


- Limited commercialization experience in diabetes

- Short pipeline

- Smaller market share than J&J, Roche


- China / Broader Asia

- Consumer electronics, apps, data management

- CGM or FreeStyle Libre-like device

- Growing patient population requiring SMBG

- Increasing lifespan with diabetes

- Number of patients not at goal

- Overwhelmed providers

- Outcomes based reimbursement


- Payers going single source

- CGM: factory calibrated, cheaper, insulin-dosing claim

- Automated insulin delivery

- Less hypoglycemia causing agents in type 2, move away from mealtime insulin

- Offshore, store brand meters


  • Panasonic Healthcare (shareholder structure: 80% KKR, a global investment firm; 20% Panasonic Corporation) was established in 2014 and is involved primarily in manufacturing and selling medical equipment through partners. The company expertise is quite broad, ranging from the manufacturing of refrigerators for medication to digital charts for managing patient records to cell-cultivating equipment used for regenerative medicine. We wonder how this scale and non-diabetes experience can be leveraged to grow Bayer’s Diabetes franchise.
  • For context, we include below select M&A deals in the diabetes space over the past ~20 years. The Bayer deal is on the higher end of this spectrum, though does not come close to one of the bigger technology transactions in recent memory – Medtronic buying MiniMed for 3x what Panasonic is paying.

Table 3: Diabetes M&A – Select deals over the past 20 years







August 1996

$867 million



January 2001

$40 million



August 2001

$3.5 billion



November 2001

$1.3 billion



November 2001

$140 million



February 2003

$900 million



January 2004

$1.2 billion



December 2005

$500 million



April 2010

$160 million



October 2011

$373 million



February 2013

$166 million



May 2015

$1.2 billion

Close Concerns Questions

  • What does this mean for patients on Bayer meters, and Medtronic customers using Bayer meters?
  • Will Panasonic change the portfolio at all?
  • Where is Panasonic Healthcare’s expertise? Could its experience in consumer electronics translate to Bayer’s Diabetes business?
  • Geographically, where will Panasonic focus its attention?
  • Are there any next-generation R&D projects that Panasonic could aggressively move ahead?

                                                -- by Varun Iyengar, Adam Brown, and Kelly Close