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Multinational corporation Johnson & Johnson (J&J) reportedly has plans to sell its diabetes care unit to Sinocare Inc., a Chinese diabetes device manufacturer.
In January 2017, the New Jersey-based healthcare business disclosed that it was considering to divest some of its diabetes care companies, such as Lifescan Inc., Animas Corp., and Calibra Medical Inc., from its portfolio.
This consideration stemmed from the declining revenues of J&J’s diabetes care unit since 2012, according to reports. In fact, sales took a 7.7% nosedive in the first nine months of 2017 as compared to previous years. In addition, J&J continues to face tough competition against rival companies like Bayer AG and Novo Nordisk.
Sinocare Inc. has publicly expressed its interest in obtaining J&J’s diabetes care unit, but there is no final word on the agreement and no specific details have been disclosed yet. However, insiders have said that the deal could reach up to $4 billion.
According to George Lin, chief financial officer of diabetes drug developer Hua Medicine, the number of diabetes patients in China has already exceeded 110 million. He added that the current global market for diabetes is at $50 billion, while its market in China is predicted to increase from 2016’s $6.6 billion to $20 billion by 2025.
Meanwhile, a Hong Kong-based healthcare business consultant believes that the sale of J&J’s diabetes care unit might be more value-adding to a Chinese company than to a multinational business. He explained that the former tends to have a different benchmark in terms of profitability. Therefore, it is usually more flexible and amenable to a profit that is not within multinational standards.