Japan’s largest drugmaker Takeda to buy Swiss Nycomed for $ 13.7 b

Reuters: Japan’s largest drugmaker Takeda Pharmaceutical is buying privately held Nycomed for 9.6 billion euros ($13.7 billion), boosting its presence in emerging markets and adding a newly approved lung-disease drug.

The agreed deal is the biggest overseas purchase by a Japanese company since Japan Tobacco paid $19 billion for Britain’s Gallaher and is Takeda’s second major buy after its $8.8 billion deal for Millennium Pharmaceuticals in 2008.

The acquisition gives Takeda, a mainly Asian- and US-focused maker of drugs, a new treatment for “smoker’s lung” called Daxas and a portfolio of over-the-counter products.

Swiss-based Nycomed will help Takeda expand in Europe and emerging markets, providing an immediate source of stable cashflow at a time when its top-selling diabetes drug Actos faces the upcoming expiry of its US patent.“We have a strong European backbone and, even more importantly, a very strong and rapidly growing emerging markets presence – that, I think, was the key,” Nycomed Chief Executive Hakan Bjorklund told Reuters.

Emerging markets are set to become the main driver for the global pharmaceuticals industry as patents run out on many top drugs and sales in Western markets stall. “In the long-term, this is a strategic fit.  

The question of how to strengthen their presence in emerging markets is one that all major drug firms face,” said Atsushi Seki, Pharmaceuticals Analyst at Barclays Capital.

“But in terms of Takeda’s goal to return to last year’s earnings level by the year ending March 2016, I don’t think this deal quite gets them to the point where they are filling in the gap left by Actos’ patent expiry.”

Nycomed is well-placed in Russia and Brazil and last year bought a majority stake in a Chinese firm. Emerging markets made up nearly two-fifths of its revenue in 2010 and should make up 60 per cent of sales by 2015.

The deal allows Nycomed’s owners to sell their entire stake now, instead of facing a long wait for a flotation where they would initially have to retain significant stakes. A listing had long been mooted by Nycomed management but it was unlikely to have occurred before 2012.

Nycomed is majority owned by four private equity firms, led by Nordic Capital with a 41 per cent. Credit Suisse’s DLJ Merchant Banking has 25.6 per cent, Coller International Partners 9.7 per cent and Avista 8.9 per cent.

After paying off debt, the shareholders will pocket some six billion euros.

Bjorklund said returns would vary between different firms and even between different funds, but his investors were “very satisfied” with the money made on the deal.

Takeda is paying 3.4 times 2010 sales – excluding a US dermatology business, which accounts for 10 per cent of turnover and is not included – and 12.5 times adjusted earnings before interest, tax, depreciation and amortisation (EBITDA).

That compares to 2.13 and 5.86 times sales and EBITDA paid by Teva for Cephalon, and 2.28 and 8.27 paid by Pfizer for King, according to Thomson Reuters data.

Takeda’s cash payment is inclusive of Nycomed’s net debt, which stood at 3.6 billion euros at end-2010, and it will be financed in part with a 600-700 billion yen ($7.3-$8.5 billion) loan. The deal had been expected after being flagged by sources last week.

Nordic Capital managing partner Kristoffer Melinder said in a telephone interview that the shareholders had no immediate plans to sell the US dermatology business.

The deal lifts Takeda’s global ranking to No. 12 from No. 16 and Chief Executive Yasuchika Hasegawa said the drugmaker was open to more acquisitions.

Nycomed’s lung drug roflumilast, known as Daxas in Europe and Daliresp in the United States, is the first in a new class of treatment for chronic obstructive pulmonary disease, a common breathing disorder often caused by smoking.

After some delays, it won US approval in March where Forest Laboratories has the marketing rights. In Europe, Merck & Co has marketing rights.

Takeda has unsuccessfully looked at buying other European drugmakers previously, including Organon and Sweden’s Meda AB, according to sources familiar with the matter.