Bayer to buy Chinese traditional herbal medicine maker Dihon Pharmaceutical

German drug giant Bayer yesterday agreed to buy privately-held Chinese traditional herbal medicine (TCM) maker Dihon Pharmaceutical Group Co, as China becomes the new frontier for Western pharmaceutical firms to add traditional medicines to their portfolio.

Bayer said that deal is subject to fulfillment of certain conditions, including regulatory approval, and is expected to close in the second half of 2014.

Bayer, based in Leverkusen, Germany, did not disclose the deal price, but German private investment bank M.M. Warburg estimated that Bayer paid around €500 million ($680 million).

The deal comes a day after Bayer closed its $2.9-billion acquisition of Norwegian cancer drug company Algeta, the maker of prostate cancer drug Xofigo.

Bayer said that the Dihon acquisition will complement its 2013 purchase of Steigerwald Arzneimittelwerk, a German herbal medicine company.

''We aim to strengthen our Life Sciences portfolio with strategic bolt-on acquisitions globally. We are very pleased to have identified a consumer health care company in China with such a strong track record of success built by its dedicated employee base,'' said Dr. Marijn Dekkers, CEO of Bayer.

 ''Adding the strong OTC brands from Dihon to our portfolio will significantly advance our business in China and positions us well for future growth,'' said Dr. Olivier Brandicourt, CEO of Bayer. ''Equally important is the foothold we will gain in TCM, which makes up about half of the OTC segment in China.''

Kunming Yunnan, China-based Dihon specialises in over-the-counter (OTC) and herbal traditional Chinese medicine products in dermatitis, acne, recurrent oral ulcer, hyperosteogeny, and endometriosis.

Dihon is a leading player in China's OTC industry with products such as Kang Wang for the treatment of dandruff and other scalp disorders and Pi Kang Wang, an antifungal cream, as well as TCM product Dan E Fu Kang for the treatment of various women's health indications.

In addition to operations in China, Dihon brands are also sold in Nigeria, Vietnam, Myanmar and Cambodia.

Dihon, which has several manufacturing sites throughout China, employs approximately 2,400 people and generated sales of €123 million in 2013.

''Self-care is a critically important component of healthcare in China and internationally, and OTCs are an important tool to help people live happier, healthier and longer,'' said Dr. Zhenyu Guo, chairman & CEO of Dihon.''

Buying Chinese traditional OTC medicine makers has been the recent target of Western healthcare firms, who are trying to get a pie of $18-billion Chinese OTC industry.

Medtronic Inc acquired China Kanghui Holdings in 2012, while Pharmacy chain Alliance Boots is planning to buy 12 per cent in distributor Nanjing Pharmaceutical Co.

Other recent acquisitions done by Western drug companies in China were GlaxoSmithKline's 2010 acquisition of specialist drugmaker Nanjing MeiRui Pharma, and the purchase of generic injectable antibiotics maker Guangdong BeiKang Pharmaceutical by AstraZeneca in 2011.