Is pharma ready to capitalize on vitamin market shakeup?

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When Bayer agreed to buy U.S.-based vitamin-and-OTC drug maker Schiff ($SHF), the company's reasoning went something like this: Let's supplement our risky pharma business with some steady, reliable, low-risk revenue. It's less profitable and less sexy, but sometimes, less can be more.

The German drugmaker pulled out of that deal when Reckitt Benckiser trumped its offer, but the reasoning stands. In fact, as The Wall Street Journal reports, other drugmakers have been expanding in vitamins and supplements for precisely the same reasons. And the nutritional supplement world is rather fragmented--offering opportunities for consolidation, the WSJ points out. The top 10 companies account for less than a quarter of market share.

GlaxoSmithKline ($GSK) and Sanofi ($SNY) have been among the leaders in the charge toward consumer healthcare, and both have made new deals in the nutritional supplement field recently. Sanofi teamed up with Coca-Cola to sell a line of beauty-and-nutrition drinks. Just last week, GSK amped up its investments in its Indian and Nigerian consumer health businesses, which market some very successful nutrition drinks in addition to OTC meds. Pfizer, which sold off its nutrition business to Nestlé, still markets vitamins and other supplements through its consumer healthcare unit.

The WSJ also points out that more diversified consumer products companies, a la Reckitt, are eyeing expansion in the supplements business, too. No wonder: The global market for vitamins and minerals was $84 billion last year, Euromonitor figures. But will "nutraceuticals" efforts such as Nestlé's and Unilever's--and rival bidders such as Reckitt--end up pricing pharma out of that industry consolidation? Stay tuned.

- read the WSJ piece (sub. req.)

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