Sawai, Towa Pharma Climb in Tokyo on Speculation of Generic-Drug Mergers

Sawai Pharmaceutical Co. and Towa Pharmaceutical Co. rose in Tokyo trading after Sanofi-Aventis SA said it’s partnering with Japan’s largest generic-drug maker, spurring speculation of further tieups.

Sawai, the nation’s second-biggest producer of copycat medicines by revenue, surged 6.5 percent to close at 7,860 yen on the Tokyo Stock Exchange, the highest since it listed on the main board of the Tokyo Stock Exchange in 2000. Third-ranked Towa gained 7.6 percent to 5,830 yen.

Sanofi and Nichi-iko Pharmaceutical Co. said May 28 they will form a venture to tap Japanese demand for generic drugs. Towa, Sawai and Fuji Pharma Co. should be “carefully watched” as potential targets for partnerships with global drugmakers in Japan, where the government is seeking to reduce health-care costs through greater use of generic medicines, said Ryoichi Urushihara, an analyst at Nomura Holdings Inc.

“More partnerships with domestic generic-drug makers can be expected,” Urushihara wrote in a May 27 note to clients after the Nikkei English News reported the Sanofi partnership. “Globally, drugmakers are emphasizing producing medicines cheaper. Generics are being pushed in Japan.”

Nichi-iko and Sanofi, France’s largest pharmaceuticals maker, said their joint venture aims to capitalize on the Japanese government’s push to increase the use of generic drugs.

Fuji Pharma gained 3.4 percent to 1,725 yen on Osaka’s Jasdaq exchange for small and medium-sized companies.

To contact the reporter on this story: Kanoko Matsuyama in Tokyo at kmatsuyama2@bloomberg.net.

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