Prioritizing nutrition: DSM sells pharma joint venture, takes majority stake in start-up

02 Jul 2018 --- Royal DSM has announced the proposed sale of DSM Sinochem Pharmaceuticals (DSP) – a pharmaceutical joint venture with China’s Sinochem Group – to Bain Capital. The move comes days after the Dutch company announced that it is seeking to streamline its portfolio and has set aside about €3 billion to expand its nutrition business. It suggests that further funds will become available for strategic moves within the nutrition arena, as DSM moves further away from its heritage chemical positioning and further cements itself as a leading nutrition powerhouse. 

Exemplifying its interest in nutrition, the company has also acquired an equity stake in personalized nutrition company Mixfit, making DSM the start-up's largest shareholder with approximately 50 percent of shares.

DSM and Sinochem Group each own 50 percent of the shares of DSP, which produces intermediates, active pharmaceutical ingredients and finished dosage form pharmaceuticals. In 2017, DSP reportedly generated sales of approximately €440 million.

The transaction is expected to be completed in the fourth quarter of this year, subject to customary regulatory approvals and consultations. DSM is reportedly to receive about €250 million for its equity stake, excluding an earn-out (estimated at around €50 million) and transaction costs. 

Bloomberg quotes sources familiar with the matter as saying that the joint venture was expected to fetch about €600 million, including payments conditional on the future performance of the business.

“DSM and Sinochem have been great supporters of our vision to be the global leader in generic pharmaceuticals,” says Karl Rotthier, Chief Executive Officer of DSM Sinochem Pharmaceuticals. “Bain Capital is now the ideal partner to drive DSP into its next stage of global development, given its deep healthcare expertise and operational skills across its worldwide team.”

Nutrition focus
In its 2018 outlook presented on June 20, DSM CEO Feike Sijbesma highlighted the company’s intention to pursue “enhanced organic growth, with a purpose-led coherent set of business activities, with value-creating acquisitions predominantly in Nutrition.”

Financial details regarding the Mixfit deal have not yet been disclosed. The investment builds on the previously announced partnership between DSM and Mixfit, which sought to combine DSM's expertise in essential micronutrients with the technological edge of Mixfit to analyze health data in real-time and address nutritional gaps. 

The company has spotlighted personalized nutrition as one of its DSMs key pillars for future growth and differentiation. 

The investment will allow DSM to utilize technologies such as Artificial Intelligence (AI) and blockchain to advise consumers on their personal health status and deliver personalized solutions at home. 

At Vitafoods Europe, Mixfit presented its Intelligent Nutrition Assistant (Mina). After analyzing a person's unique makeup, alongside their diet, lifestyle and health goals, Mina dispenses beverages containing a customized mix of DSM's Quali Blends. 

“As consumers across the world become more engaged in their health and well-being, there is a growing need for a more personalized approach to nutrition,” comments Jeremy Xu, President of DSM Human Health & Nutrition. “This acquisition connects the complementary and unique expertise of both DSM and Mixfit to support consumers in achieving their nutrition goals and to support our mission to help keep the world's growing population healthy. It is an important milestone in the execution of our personalized nutrition strategy to build a platform and extend it to the consumer.” 

“Personalization is the future of nutrition. By combining DSM's scientific background and high-quality micronutrients with Mixfit's unique digital knowledge and experience in personalized nutrition, we are ensuring that Mina improves the lives of health-conscious consumers worldwide. We're happy to expand into targeted, health-oriented boosters for specific health benefits with DSM as our largest shareholder,” adds Reza Zanjani, Mixfit President & CEO.

By Lucy Gunn