Analysts abuzz over rumors that Takeda may acquire Nycomed

According to sources close to Takeda, the Tokyo-based company is in discussions to acquire Swiss rival Nycomed for something in the neighborhood of $11 billion to $14 billion.

Jeffrey Bouley
TOKYO—As we've already noted in our Aprilissue, Japanese pharma and biotech companies seem increasingly keen on acquiringcompanies abroad to increase their global footprints, and now comes word fromsources close to Takeda Pharmaceutical that the Tokyo-based company is in discussionsto acquire Swiss rival Nycomed for something in the neighborhood of $11 billionto $14 billion.
 
 
Nycomed is considered by many to be a good target for Takedabecause it would allow the Japanese company, known for its diabetes and heartdisease therapies, greater reach into developing markets and—with Nycomed'sproducts for heartburn and smokers' cough—to increase its product offerings aswell and offset the threat of generic competition. One of the notable drugswould be lung-disease drug Daxas, recently approved in the United States, aswell as a range of over-the-counter consumer drugs.
 
 
"The suggested price looks high, but in the sector M&Ais starting to happen and there are not enough companies to buy," notes TeroWeckroth, analyst with Kepler Capital Markets, adding that "mid-cap pharma is areal sweetspot for M&A."
 
 
"The continued strength of the Japanese yen in the globaleconomy, fast-approaching generic pressures and a strong strategic rationaleall contribute to the validity of this rumored deal," says John Shortmoor, apharmaceutical company analyst at Datamonitor. "This would be the largestacquisition in Takeda's history, surpassing the $8.8 billion purchase ofMillennium."
 
 
A merger with Nycomed would be a deviation from the recentM&A strategy exhibited by Japan's number-one ranked drug manufacturer,Shortmoor admits, with Takeda having been active in deal-making that has beenfocused largely on obtaining intellectual property in the biotech and oncologysectors. The acquisition of Millennium, which added the drug Velcade, is oneexample of this.
 
 
"However, while Takeda's larger acquisitions have followed afirm therapeutic route, it has also steadily utilized its strong cash positionto gain development and commercial rights for products specifically in theEuropean markets," Shortmoor notes. "It is in this context that an acquisitionof Nycomed would fit well with Takeda's corporate strategy; the day before therumor emerged, Takeda's president Yasuchika Hasegawa reaffirmed the company'sdesire to grow its commercial footprint in the emerging markets, naming Russia,India and Brazil as key targets to this end. Of course, while this may haveserved as a trigger for the Nycomed speculation, with Russia and Brazil beingtwo of the many unique territories where the Swiss-headquartered Nycomedoperates, there are other strategic and financial indicators that would supportsuch a deal."
 
Or, as Credit Suisse analyst Fumiyoshi Sakai has put moresuccinctly in comments to the media: "Takeda has to survive as a global player.It's not in a position to go backwards."
 
 
Analysts have also noted that Nycomed is well-positioned todeliver result in emerging markets, which made up almost two-fifths of itsrevenue in 2010 and are projected to account for as much as 60 percent of salesby 2015.
 
 
Takeda and Nycomed have declined any kind of comment on thedeal, and the unnamed sources admit that the process of bringing such a deal tofruition could take a while.
 
 
Nycomed has more than 12,000 employees and spans numerousnations, with four European and Indian research and development centers, 15 productionfacilities and two joint ventures.
 
 
Shortmoor notes that the expanded global footprint would beimportant, as Takeda's current business model relies predominately oncommercial activities in the current major markets. The U.S. and Japan marketsalone account for more than 75 percent of Takeda's total prescription pharmasales.
 
 
Not that Nycomed represents the company's only opportunityfor global expansion, of course. Takeda is readying itself to launch 11 newdrug entities in the five main European markets—France, Germany, Italy, Spainand the United Kingdom—and the rest of world over the next six years, "greatlyenhancing its commercial potential beyond its core U.S. and Japanese markets,"Shortmoor says.
 
 
Based on today's exchange rates, with the Yen and Eurohaving both strengthened significantly against the U.S. dollar, bringingNycomed into the fold would elevate Takeda into the top 10 in the globalprescription pharmaceutical rankings for the first time, Shortmoor says, "leapingahead of leading biotech company Amgen and Israeli generics giant Teva andputting it on a par with major U.S. drug companies J&J, Abbott, Eli Lillyand Bristol-Myers Squibb. Moreover, Takeda will leave its nearest Japanesepeers Daiichi Sankyo and Astellas trailing behind."

Jeffrey Bouley

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