Sosei to acquire Activus Pharma

Deal marks Sosei’s continued efforts to grow through non-organic means

Jeffrey Bouley
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TOKYO—Late June saw Sosei Group Corp. announce that it has reached an agreement to acquire Activus Pharma Ltd., a privately held biopharmaceutical company based in Chiba, Japan, with the aim of taking Activus' core technologies in drug formulation—which uses a form of proprietary nanoparticle processing—to establish the basis of Sosei's new platform technology.

Gaining a platform through an acquisition rather than organically fits in with Sosei's stated business model that is primarily based on identifying new uses for established drugs and exploiting the company's presence and connections within Japanese, European and North American pharmaceutical markets by acquiring compounds from those markets and bringing them into Japan.

The probability of success with drug development in the pharmaceutical industry is significantly lower than product development success in other industries and markets, notes Shinichi Tamura, president and CEO of Sosei. As such, establishing a risk-controlled portfolio is essential for pursuing effective research and development, "with limited resources and in an environment where a failure or delay in development of even one product may negatively affect business management."

As such, Sosei decided to halt in-house product discovery activities and thereby achieve a more appropriate cost base and risk-reward balance for the business, with a focus on in-licensing and reprofiling to enhance corporate value.

The strategic rationale for the Activus acquisition comes down to the fact that Activus' Pure Nano-particle Technology (APNT), unlike other nanoparticle processing technologies, keeps compounds virtually free from contamination, according to Sosei. At the same time, the technology reportedly can yield pharmaceutical ingredients with particle sizes ranging from 50 to 300 nanometer levels.

Thus, APNT enables the development of injections, ophthalmic solutions and inhalations with poorly soluble compounds where high purity is required, Tamura notes, adding that the needs for nanoparticle technology within the pharmaceutical industry are still largely unmet, and therefore, "the technology can be expected to generate new development candidates for Sosei, and partnership with other pharmaceutical companies will allow Sosei to realize revenue from this technology in a relatively short period of time."

The deal is structured around the acquisition of 100 percent of the issued share capital of Activus through a stock exchange, but there will be no issuance of the new stocks to the current shareholders of Activus. In exchange for the acquired shares, Sosei will offer two separate forms of cash consideration.

Preference shareholders will receive cash consideration of just over 5 billion yen; however, in case the net cash balance of the day preceding the day of share exchange is below the above sum, the net cash balance will be paid to preference shareholders, while common shareholders will be paid 1 yen per share.

In the second tier of cash consideration, common shareholders will be paid the difference between the net cash balance of the day preceding the day of share exchange and the cash considerations provided to preference shareholders.

Additionally, a part of the gross profit generated from the acquired Activus assets will be split among common shareholders up to five years effective from the day of the enforcement of the deal, or until the gross profit amounts to 1 billion yen, whichever comes sooner, the company reports.

Activus Pharma is a 2006 spin-out venture from global chemical company Dainippon Ink and Chemicals, more commonly known as DIC, and was founded with a concept of developing antioxidant pharmaceuticals that regulate biological redox reactions.

Jeffrey Bouley

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