Diagnostics Unit Changes Hands

Less than two weeks after gaining control of drugmaker Schering AG, Bayer has announced plans to sell its own diagnostics business to Siemens for just under $5.4 billion.

"This decision is fully in line with our strategy for systematically aligning our health care business," says Bayer board Chairman Werner Wenning. "We are concentrating on pharmaceuticals for both humans and animals and products that can be promoted directly to patients."

The business being sold has an emphasis on hardware, information technology networking, and equipment service, Wenning explains. This emphasis makes the business subject to success factors that are different from other Bayer HealthCare divisions, he says.

The consumer-influenced diabetes care division is not affected by the transaction, Wenning adds, nor is Schering's diagnostic imaging business, which concentrates on contrast agents. That diagnostics business will become part of Bayer Schering Pharma, being formed by combining newly acquired Schering with Bayer HealthCare.

For Siemens, the acquisition provides an opportunity to help build what Erich R. Reinhardt, chief executive officer of Siemens Medical Solutions, envisages as "the industry's first integrated diagnostics company that combines diagnostic imaging, laboratory diagnostics, and clinical information technology under one roof right along the value chain."

Bayer's diagnostics business had about $1.8 billion in sales last year, up 8.4% from 2004. It employs more than 5,000 people worldwide.

Although Bayer insists that the diagnostics deal was being pursued independently of the Schering acquisition, the company notes that the proceeds from the sale will help pay for Schering. "The effect of this divestment is to substantially reduce our debt, thus helping to improve our credit profile," Wenning says.