Ypsomed Holding AG (YPSN), a maker of devices for diabetes patients, is interested in buying Bionime Corp. (4737) of Taiwan to gain control of the blood-sugar strips that are the Swiss company's main profit driver, said Simon Michel, Ypsomed's head of marketing.
Ypsomed has sold Bionime's strips in Europe since 2008, and buying the Taiwanese company would give it the ability to sell the products in all 60 countries in which it operates, he said in an interview at the company's headquarters in Burgdorf, near Bern. Ypsomed holds 8.7 percent of Bionime, which has a market value of NT$3.6 billion ($120 million), according to data compiled by Bloomberg.
An acquisition would allow Ypsomed to expand in one of the fastest-growing disease areas. Rising obesity rates globally are spurring a surge in Type 2 diabetes. About 346 million people globally have the illness, and the number of deaths may double from 2005 to 2030, the World Health Organization says.
Buying the rest of Bionime is "certainly something we look at," said Michel, who is the son of Ypsomed Chief Executive Officer Willy Michel. Still, while Bionime shares are cheap, it's "the wrong time to raise capital" because of a slump in Ypsomed's stock price, and because the company has a policy of not borrowing from banks, he said.
The two companies aren't in talks over an acquisition, he said. Marina Lai, a spokeswoman for Bionime, said she wasn't aware of Ypsomed's interest in acquiring the company.
Bionime rose 0.5 percent to close at NT$81.90 in Taipei trading. Shares of the Taichung-based company have dropped 28 percent from a record close of NT$113 on Sept. 16. Bionime sells for 19.6 times profit for the past year, compared with an average price-earnings ratio of 26.1 over the past five years. The company has recorded average sales growth of 50 percent for the past five years, according to Bloomberg calculations.
Ypsomed rose 0.9 percent to 51.50 francs at 3 p.m. in Zurich, giving the company a market value of 651.5 million francs ($680.9 million). The stock peaked at more than 210 francs in 2006.
Ypsomed, founded by Michel's father, who is also chairman and the main shareholder, is reinventing itself after the company's main customer, Sanofi, decided in 2006 to make its own insulin pens. Sales slumped to 248.6 million Swiss francs in the year ended March 31 from a peak of 310 million francs six years ago.
The company has pursued a strategy of selling the pumps, glucose monitors, infusion sets and other equipment that diabetics need to inject the hormone that keeps their blood sugar in check.
"The market hasn't appreciated the time for the transition," Michel said. "They expected we could handle it in three years, and it took five, and this was not acceptable to the market."
Bayer AG (BAYN), Roche Holding AG, Abbott Laboratories and Johnson & Johnson control 85 percent of the $12 billion market for blood-glucose strips, the disposable cards for inserting in glucose monitors to measure the level of sugar in a person's blood, Michel said. While Ypsomed sells monitors, the strips are the biggest contributor to profit, he said.
Michel expects the company to return to profit growth in the second half of the year, he said.
Type 2 diabetes, largely the result of excess body weight and lack of exercise, accounts for 90 percent of cases, according to the WHO.