Thursday, September 5, 2013
DJ: Japan's Otsuka To Buy U.S. Cancer Drug Maker Astex for $886M
TOKYO--Japanese drug and food maker Otsuka Holdings Co. (4578) said it will acquire U.S. cancer drug maker Astex Pharmaceuticals Inc. for about $886 million as it looks to beef up its product pipeline ahead of the patent expiry of its blockbuster antipsychotic drug Abilify.
The move by Japan's fourth-biggest drug maker by pharmaceutical sales is the latest in a flurry of acquisitions carried out in the sector as companies globally grapple with the sharp revenue fallout from expiring patents and the influx of generic drugs.
The deal--to be funded by cash at hand--is the biggest-ever overseas purchase by Tokyo-based Otsuka in the pharmaceutical sector and the largest for the company since it bought a 49% stake in French mineral water maker Alma SA for $1.2 billion in 2008.
The acquisition of California-based Astex with revenue of $83.2 million and a pipeline of leukemia and other cancer drugs under development will help Otsuka to strengthen its oncology business. In New York trading Wednesday, Astex shares closed up 24% at $8.27, bringing its market capitalization to $785 million.
Otsuka said Thursday it will launch a tender offer for $8.50 per share in cash--a 48% premium on Astex's closing price over a 30-day period--within 10 business days from Thursday and expects to close the transaction early in the fourth quarter of 2013. It said it will buy all shares tendered provided the amount is more than 50% of outstanding shares, but it may extend the bid if the response is weaker than that.
Analysts and investors had long expected Otsuka to step up its acquisition activity following its $2.4 billion initial public offering in 2010. The company is preparing for the 2015 patent expiry of Abilify, a treatment for schizophrenia and depression, which makes up more than a third of its $12 billion in annual revenue.
"It depends on timing and acquisition opportunity, but if we can find technological and business value, we will continue to actively invest," Otsuka Chief Executive Tatsuo Higuchi said at a press conference in Tokyo.
Satoru Takaoki, an analyst at SMBC Friend Research Center said the deal size is not significant compared with other pharmaceutical deals in the past.
"Otsuka itself has various new drugs in its pipeline, but the more you have the better," Mr. Takaoki added.
Still, analysts say pharma deals in the future will likely be smaller in scale and concentrate on venture firms since most large-scale acquisitions have already run their course in the past few years. Japan's biggest drug maker Takeda Pharmaceutical Co. (4502) acquired Switzerland's Nycomed for $13.7 billion in 2011, while rival Astellas Pharma Inc. (4503) purchased U.S.'s OSI Pharmaceuticals Inc. for $4 billion in 2010.
Worldwide, market valuations of even small and midsize biotechnology companies are rising. Amgen Inc., for example, struck a deal last month to buy fellow biotech Onyx Pharmaceuticals Inc. for $10.4 billion, a purchase price significantly above its initial offer.
While Otsuka faces the risk of a patent cliff like most other drug makers worldwide, the company also isn't entirely a pharmaceutical company. About 20% of its sales come from its Pocari Sweat sports drinks, Calorie Mate and Soyjoy food bars and other nutritional products.
Analysts such as Mr. Takaoki also say the sales drop from the patent expiration is likely to be mitigated for a few years after U.S. regulators earlier this year approved a once-monthly injectable form of Abilify, to be sold by Otsuka and Danish pharmaceutical company Lundbeck.
On Thursday in Tokyo, Otsuka shares closed down 1.0% at Y2,950 versus the Nikkei Stock Average's 0.1% gain following a local media report on the acquisition earlier in the day.
Goldman Sachs advised Otsuka on the deal while Astex was advised by Jefferies LLC.