Otsuka Sets Price for $2.4 Billion Tokyo IPO at the Lower End of Its Range

Japan’s Otsuka Holdings Inc., preparing for the world’s biggest healthcare initial public offering since at least 2006, priced shares at the lower end of its range to entice investors.

The Tokyo-based drugmaker set a price of 2,100 yen a share, compared with an indicated range of 2,000 yen to 2,400 yen, it said in a statement today. At that price, the sale would raise 198 billion yen ($2.4 billion) including overallotment.

Chief Executive Officer Tatsuo Higuchi said Nov. 26 he will use proceeds from the IPO to buy drug and health-food businesses, according to two people briefed on the plan. Investors considered the fair value of the shares to be 2,400 yen, said Makoto Kikuchi, chief executive officer at Myojo Asset Management Japan Co., a Tokyo-based hedge fund advisory firm.

“They thought they wouldn’t be able to book a gain unless they bought at the lower end,” Kikuchi said.

The discoverer of the Abilify schizophrenia treatment sold by Bristol-Myers Squibb Co. in the U.S. would have a market capitalization of about 1.17 trillion yen based on its outstanding stock after the IPO. That would rank Otsuka as Japan’s fourth-largest drugmaker by value, trailing Takeda Pharmaceutical Co., Astellas Pharma Inc. and Daiichi Sankyo Co. The company said Nov. 12 it planned to sell 94.5 million shares including overallotment.

Stock Exchange Listing

A listing on the Tokyo Stock Exchange is scheduled for Dec. 15. Morgan Stanley, UBS AG and Nomura Holdings Inc. are managing the share sale.

The drugmaker set a price range of 2,000 yen to 2,400 yen a share on Nov. 25. In its prospectus on Nov. 12, Otsuka gave an indicative price of 2,400 yen.

Otsuka has no comment on pricing, spokeswoman Yukie Shibata said by telephone today.

Net income at Otsuka climbed 43 percent to 67.4 billion yen in the year ended March. Sales increased 13 percent to 1.08 trillion yen, of which 45 percent came from outside Japan.

Global sales of Abilify rose 31 percent to $4.67 billion yen last year, according to IMS Health Inc., a market research firm in Norwalk, Connecticut. Otsuka gets royalties from Bristol-Myers linked to the sales.

Otsuka, which derives two-thirds of sales from pharmaceuticals, also makes Pocari Sweat drinks and Soyjoy nutrition bars. The company’s assets include the Ridge Vineyard in California and a ceramic art museum in Japan.

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

To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net

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