Millennium suits Takeda

Largest Japanese pharma to buy Millennium in $8.8 billion, all-cash deal

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CAMBRIDGE, Mass.—Making the strongest statement yet that a large chunk of its future lies in the oncology market, Japan's Takeda Pharmaceutical Co. Ltd. said in early April that it will acquire Millennium Pharmaceuticals Inc. for $8.8 billion through a cash tender offer of $25.00 per share of Millennium stock. With the acquisition, Takeda picks up the fast-growing oncology drug Velcade as well as a pipeline of numerous drug candidates in clinical trials targeting oncology and inflammation.

"Takeda is committed to becoming a global pharmaceutical company," says Yasuchika Hasegawa, president of Takeda. "Based on the analysis of the market, its potential and where Takeda should be placed within it, oncology has become a key area in which we have been aiming to establish critical mass for ourselves."

Snapping up Velcade is a good start. Approved and marketed in 85 countries, Velcade's worldwide sales topped $500 million last year, which added $80 million in royalties to company coffers last year via its co-development agreement with Johnson & Johnson, which handles international sales. In conjunction with the announcement of the planned sale to Takeda, Millennium also reported first quarter U.S. sales for Velcade were $83.5 million. Domestic Velcade sales for 2008 are expected to fall in the $320 million to $345 million range.

"Velcade will become a blockbuster in short order and will continue to expand that position significantly as new indications come online," says Deborah Dunsmore, Millennium's president and CEO.

In a report published on, Chris Raymond, an analyst with Chicago-based Raymond W. Baird & Co., said Velcade has the potential to generate $1 billion in U.S. sales and $2 billion worldwide. "For Takeda, the logic has to have been wait until the positive Velcade data came out and the front-line approval was assured then get in at the start of this sales trajectory," he notes.

There is ample reason for such projections. Velcade has already gained market approval for multiple myeloma and mantle cell myeloma and is also in Phase III studies for a number of other combination therapies for myeloma, as well as for efficacy in previously untreated myeloma. Further, Millennium is currently conducting Phase I and Phase II trials with Velcade to determine its efficacy as a treatment for other forms of cancer including non-Hodgkin's lymphoma and solid tumors associated with lung, breast, ovarian and prostate cancers.

While the Velcade franchise is the most obvious attraction in a deal of this magnitude, it was not the only area where the two companies found complementary capabilities, says Anna Protopapas, senior VP of corporate development for Millennium and one of the architects of the deal.

"There are some other synergies between the two companies combining Takeda's GI capabilities along with our candidates in IBD and Crohn's disease," notes Protopapas. "We think that this will accelerate our own assets in these areas and allow us to take advantage of the global reach of Takeda to maximize our potential."
Takeda must have agreed with this assessment. Its $25.00 per share tender off was more than 50 percent higher than the closing price of Millennium stock on the day before the deal was announced and registered a whopping 68 percent more than the trailing 30-day average.

"This is one of the highest premiums paid for a multi-billion-dollar buyout," says Protopapas. "There have been higher premiums paid for companies that were smaller, but none of this magnitude."
Some investment analysts sniffed at the rich premium paid, but the deal also follows a recent trend of Asian companies taking advantage of the weak dollar to make targeted acquisition in the U.S.
For Takeda, though, there was a lot more involved than this. First, the company faces its biggest revenue generator, the diabetes drug Actos, going off patent next year and Velcade's sales trajectory should keep the cash flowing. Second, as evidenced by its recent buyout of Amgen's Japanese division along with rights to it promising cancer candidates and the recent dissolution of its TAP join venture with Abbott, Takeda is serious about oncology. This despite the fact the company has not had much luck on its own advancing oncology therapies.

To that end, Millennium held the cards. As a result, the company will maintain its name, its management, including Dunsire, and virtually all of it 1,000 employees, operating as a stand-alone business unit of Takeda.

"Currently, Takeda does not have a strong franchise in oncology," says Hasegawa. "I believe that Millennium's outstanding know-how across all capabilities in the oncology field will help accelerate the launch of differentiated prominent oncology drugs."

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