J&J attracts Chinese interest for diabetes business in potential $3B to $4B deal: Sources

Chinese bidders are circling a diabetes care business owned by the globe’s largest health-care company Johnson & Johnson in a deal that will could fetch up to $4 billion, 5 people with direct knowledge told Reuters.

completely new Brunswick, N.J.-based J&J said in January last year the item was evaluating options for its diabetes care companies, specifically LifeScan, Animas, as well as also Calibra Medical. One option was a sale of the business, the item said.

Chinese interest from the J&J unit comes as the market for diabetes care in China is actually required to grow rapidly. Almost one in three of the globe’s diabetes sufferers lives in China, according to World Health Organization estimates.

Among the potential bidders is actually a consortium being formed by Shenzhen-listed Sinocare, which develops as well as also manufactures blood sugar monitoring systems, as well as also China Jianyin Investment (JIC), a unit of sovereign wealth fund China Investment Corp. The group has hired an advisor to work on a bid, according to two sources.

“The evaluation of potential strategic options for LifeScan Inc. as well as also Calibra Medical Inc. is actually ongoing as well as also we do not have an announcement regarding these businesses at This specific time,” J&J said in a statement in response to Reuters request for comment.

The company has hired Goldman Sachs to work on the sale, according to three of the people. The bank declined to comment.

Sinocare’s investors relations office said the item could not confirm the information when contacted by Reuters. JIC as well as also CIC did not respond to requests for comment. The sources declined to be identified.

Asia accounts for more than 60 percent of global diabetes cases, with increasing levels of wealth, unhealthy diets, as well as also more sedentary lifestyles sparking “diabetes epidemics” from the region, according to BMI Research.

George Lin, chief financial officer of Hua Medicine, a diabetes-focused drug developer, told Reuters on Wednesday that will according to the most recent market research there were more than 110 million diabetes patients in China alone.

“The market right currently from the globe is actually already close to $50 billion,” he said, referring to diabetes drugs. “In China, the item is actually required to grow via $6.6 billion in 2016 to $20 billion by 2025. This specific is actually a very large, fast-growing market.”

Lin left a senior role at Bank of America/Merrill Lynch to join Hua in December.

the item is actually not yet clear if potential Chinese buyers are interested from the whole of J&J’s diabetes care business or one or more of the member companies.

Sinocare, which carries a market capitalization of about $1.8 billion, in 2015 teamed up with Citic Securities to bid for Bayer’s diabetes devices business that will was eventually sold to Japan’s Panasonic Healthcare, majority-owned by U.S. investment firm KKR.

JIC, wholly owned by CIC, mainly invests from the industrial manufacturing, consumption as well as also information technology sectors, according to its website.

CIC’s vice-chairman as well as also president, Tu Guangshao, said at a panel discussion during the Asian Financial Forum in Hong Kong This specific week that will the item could look for more investment opportunities from the healthcare industry.

The sale of the diabetes business has also attracted interest via global private equity players, according to the people with knowledge of the process. however analysts said China could offer a tonic to J&J’s struggling diabetes care unit as well as also a turnaround opportunity for regional investors.

Revenues at J&J’s diabetes care unit have been falling since 2012, a Reuters study of the company’s financial results found. from the first nine months of 2017, sales slid 7.7 percent year-on-year. In 2016, the item suffered a similar decline.

In October, Animas Corp, the diabetes care unit that will makes insulin pumps, said the item could shut its business from the United States as well as also Canada amid increased competition as well as also after failing to find a buyer.

Any sale by J&J of its diabetes device units could fit having a drive to exit via lower-margin, commoditized categories such as glucose meters as well as also strips, however analysts said Asian buyers may be able to squeeze more out of the assets.

“Could a Chinese company extract more value via This specific than a multinational? the item’s possible because they have different expectations of profitability than multinationals so they can be happy with lower margins,” said Franck Le Deu, Hong Kong-based senior partner at consultancy McKinsey.

“One complication of being in diabetes for a Chinese company is actually that will you need a broad portfolio to be able to compete, as well as also a broad footprint because the item’s a very dispersed market,” he added. “So the investment levels needed to be competitive in diabetes are quite high, the item’s not an easy game to play.”

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