More ingredient innovation—that's the likely outcome of DSM's E2.25 billion buy-out of Roche, the world's largest supplier of nutritional raw materials.
DSM Managing Board Chairman Peter Elverding said the deal "will lead to a number of new and interesting products," particularly in the functional foods sector. "Roche has shown they are capable of marketing new products continuously, all on the border of food and health—so-called nutraceuticals. We try to develop similar products so it's a good fit."
Roche, with headquarters in Basel, Switzerland, has a long history of innovations: the first synthetic production of vitamin C in 1934, vitamin A in 1947, astaxanthin in 1984 and lycopene in 2000. DSM, meanwhile, was the leading patent filer in the EU this past year. DSM's headquarters are in Kaiseraugst, Switzerland.
"Technologies play an important role in the innovation of new products. You need not just technology, but formulation and application know-how, which is where Roche is very strong,"said Feike Sijbesma, managing director of DSM's life sciences division. "The range of products will expand from this transaction."
Roche's range presently includes vitamins, carotenoids and fine chemicals. DSM's variety includes natural beta-carotene, arachidonic acid, enzymes, PUFAs and yeast extracts.
"It's a very good basis for expansion," said Sijbesma.
DSM expects to increase its sales through organic growth and acquisitions from E8 billion in 2001 to E10 billion by 2005.
"Performance materials are our next target," said Elverding.
Despite the confidence expressed by DSM officials regarding a possible innovation boom, market analyst Scott Van Winkle, principal with Adams, Harkness and Hill in Boston, notes that since the 2000 merger of Royal Numico with Rexall-Sundown and GNC, product innovations "haven't materialised to the point everyone thought."
The Roche/DSM deal is expected to be finalised in early 2003. Present and future liabilities from the 1998 vitamin price fixing case will remain with Roche.