M&A returns as Dainippon buys out rival
DAINIPPON Sumitomo Pharma agreed yesterday to buy US drugmaker Sepracor for $2.6bn (£1.5bn), in the fourth major buyout deal this week.
The deal spurred hopes that activity is seeping back into the M&A market. It is the latest in a string of overseas acquisitions by Japanese drugmakers keen to grow outside a mature home market and build product pipelines before key drug patents expire.
Dainippon, Japan’s seventh biggest drugmaker by revenues, will gain a sales force of 1,200 that are familiar with central nervous disorders as it looks to promote its experimental schizophrenia drug Lurasidone, which has performed well in late-stage trials.
It will also acquire Sepracor’s insomnia drug Lunesta, asthma drug Xopenex and an experimental epilepsy drug.
“We anticipate our business will shrink if we focus only on Japan, where medical prices are under pressure,” Dainippon Sumitomo President Masayo Tada said.
“Even if the US carries out healthcare reform, it’s not as if the market is going to halve. It will remain the world’s biggest drug market.”
The deal is the fourth-largest overseas acquisition by a Japanese drugmaker, and the second-biggest this year by any Japanese company
Japanese firms have spent $41bn on acquisitions so far this year, slowing from $64.5bn a year ago.
Jainippon will pay $23 cash for each share, a premium of 27.6 percent on Tuesday’s close, before talk of the deal sent Sepracor’s stock surging to $22.8 on Wednesday. The acquisition cost is roughly equal to Dainippon’s annual sales.
“It’s a very expensive deal for a company of Dainippon Sumitomo’s size and also very risky, given the series of patent expirations on Sepracor’s mainstay drugs in the next few years,” said Credit Suisse analyst Fumiyoshi Sakai.
“Dainippon must be extremely confident in Lurasidone, although I have some doubts,” he said, adding the deal would not have been possible without the backing of the Sumitomo Group, which owns Sumitomo Mitsui Financial Group, Japan’s third-biggest bank.