Otsuka Said to Hire Morgan Stanley, Nomura, UBS to Manage Drugmaker's IPO
Otsuka Said to Hire Morgan Stanley, Nomura, UBS
Tomohiro Ohsumi/Bloomberg
The Otsuka Pharmaceutical Co. logo is displayed on a vending machine in Tokyo. The company has applied to the Tokyo Stock Exchange to trade its shares and the bourse may decide on approval as early as November, said the people, who declined to be identified.
The Otsuka Pharmaceutical Co. logo is displayed on a vending machine in Tokyo. The company has applied to the Tokyo Stock Exchange to trade its shares and the bourse may decide on approval as early as November, said the people, who declined to be identified. Photographer: Tomohiro Ohsumi/Bloomberg
Otsuka Holdings Inc., Japan’s largest privately owned drugmaker, hired Morgan Stanley, Nomura Holdings Inc. and UBS AG to manage an initial public offering that may take place before year-end, four people familiar with the matter said.
The company has applied to the Tokyo Stock Exchange to trade its shares and the bourse may decide on approval as early as November, said the people, who declined to be identified because the information isn’t public. Tokyo-based Otsuka may hire more underwriters for the global offering, they said.
Otsuka’s market value may surpass 1 trillion yen ($12 billion), bigger than that of Eisai Co., its larger drug rival by sales, according to Kazumi Tanaka, an IPO analyst at T&C Financial Research Inc. in Tokyo. Otsuka, also the owner of the Ridge Vineyard in California and a ceramic art museum in Japan, posted a 43 percent profit gain last year and gets two-thirds of sales from pharmaceuticals.
“We are interested to know how Otsuka will use the money raised,” said Yoshihisa Okamoto, who helps oversee about $34 billion at Tokyo-based Mizuho Asset Management Co., whose assets include drug stocks. “The stock may be popular with investors anticipating future growth if the company focuses on globalizing its business such as through M&As.”
The people said Otsuka hasn’t decided on the size of the IPO. Spokespeople at Otsuka and the investment banks declined to comment.
Pharma Index Decline
Investors may sell other pharmaceutical stocks for cash to buy Otsuka shares, Okamoto said by telephone yesterday. The 33- member Topix Pharmaceutical Index in Japan has dropped 8.5 percent in the past 12 months, compared with a 13 percent decline for the benchmark Topix index.
The company is Japan’s fifth-largest drugmaker by revenue, trailing Takeda Pharmaceutical Co., Astellas Pharma Inc., Daiichi Sankyo Co. and Eisai. Otsuka, also the maker of the Pocari Sweat drink, Soyjoy nutrition bar and industrial chemicals, set up a holding company in 2008 and has swapped shares with its units in preparation to go public.
Sales in the year ended March increased 13 percent to 1.08 trillion yen, of which 45 percent came from overseas. Net income at Otsuka, which discovered the Abilify mental-illness treatment sold by Bristol-Myers Squibb Co. in the U.S., rose to 67.4 billion yen.
Chemical Maker
The company began operating in 1921, when Busaburo Otsuka set up a factory to make chemical compounds in Naruto city, southwestern Japan, according to its website. It entered the drug market in 1946 by producing intravenous solutions and expanded overseas 27 years later with a Thai subsidiary and an office in the U.S., the world’s largest drug market.
Otsuka plans to issue 1.292 million stock options to its directors and auditors that must be exercised between July 23, 2012, and July 31, 2015, according to a document filed with Japan’s finance ministry on June 30. Management, including board members of the holding company and units, may exercise the options at 1 yen each, the document showed.
An external group hired by the drugmaker calculated the exercise price for other option holders at 2,100 yen, using the stock’s asset value and company earnings, according to the document.
The option exercise price is a “good indicator” of the IPO price given that it was calculated recently, T&C Financial analyst Tanaka said. Based on Otsuka’s outstanding shares of 519.2 million as of June 30, provided in the company’s filing, its market value may exceed 1 trillion yen, he said.
Price to Earnings
At 2,100 yen, Otsuka would be trading at about 16 times last fiscal year’s earnings. That compares with a price-earnings ratio of 22 for Eisai and 28.5 for Daiichi Sankyo, according to data compiled by Bloomberg.
“Otsuka’s IPO will get attention as it’s a well-known company and it will be a big share sale,” Tanaka said by telephone from Tokyo. “Individual investors in Japan will buy because they know the company’s brand names, and foreign investors will be interested as well because Otsuka’s revenue from overseas isn’t small.”
To contact the reporters on this story: Kanoko Matsuyama in Tokyo at at kmatsuyama2@bloomberg.net; Takahiko Hyuga in Tokyo at thyuga@bloomberg.net.
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