Takeda to Buy Nycomed for $9.1 Billion to Fill Sales Gap
Takeda Pharmaceutical Co. (4502) agreed to buy closely held Nycomed for 6.3 billion euros ($9.1 billion) in the largest takeover by a Japanese drugmaker to cushion the blow of losing patent protection on its best-selling diabetes pill and expand in emerging markets.
Asia’s biggest pharmaceutical company will pay cash for Zurich-based Nycomed, which is controlled by Nordic Capital and Credit Suisse Group AG’s private-equity unit, Osaka-based Takeda said in a statement today.
Nycomed will bring a remedy for smokers’ cough, an irreversible lung disease that afflicts 80 million people worldwide, and operations in China, India and Latin America to reduce Takeda’s reliance on sales in Japan and the U.S. The transaction may not suffice to buffer revenue once generic versions of Takeda’s best-seller Actos reach pharmacy shelves next year, analysts said.
“Takeda is buying time with this acquisition, it was slow to enter emerging markets,” said Atsushi Seki, an equities analyst at Barclays Plc in Tokyo. “However, it’s an expensive purchase and may not be enough to make up for revenue that will be lost from Actos.”
The announcement came after the close of trading in Japan. Takeda’s American depositary receipts rose 12 cents to $23.22 in over-the-counter trading of 1,225 shares at 10:05 a.m. New York time. Takeda’s Japanese shares have shed 5.1 percent this year.
The purchase values Nycomed at 9.6 billion euros including net debt. On that basis, Takeda is paying 11.3 times last year’s adjusted earnings before interest, taxes, depreciation and amortization. Purchasers paid a median multiple of 8.6 times profit in drug acquisitions of $2 billion or more over the past two years, according to data compiled by Bloomberg.
Takeda, which had 874.2 billion yen ($10.8 billion) in cash, deposits and short-term investments as of March 31, will fund part of the transaction through a loan of about 600 billion yen to 700 billion yen, it said.
Buying Nycomed will increase Takeda’s annual revenue and per-share earnings by more than 30 percent and bolster operating income, excluding certain items, by more than 40 percent, the Japanese drugmaker said. The transaction will help save 30 billion yen annually by the third year after completion.
“Nycomed enables Takeda to maximize the value of our portfolio and gives us an immediate strong presence in the high-growth emerging markets,” said Yasuchika Hasegawa, the company’s president and chief executive officer.
Access to emerging markets is key for Takeda, which generated 85 percent of its 1.42 trillion yen of revenue in Japan and the U.S. in the last fiscal year.
Drug sales in the 17 fastest-growing emerging markets will expand 13 percent to 16 percent annually over the next five years, reaching as much as $315 billion by 2015, the IMS Institute for Healthcare Informatics in Parsippany, New Jersey, said yesterday. That compares with growth of 1 percent to 4 percent in developed economies.
Emerging economies accounted for 39 percent of Nycomed’s 3.17 billion euros in revenue last year. The Swiss manufacturer aims to increase that proportion to 60 percent by 2015, Chief Executive Officer Hakan Bjorklund said in an interview in March.
Nycomed agreed in February to buy Laboratorios Farmacol SA of Colombia and in November said it had bought a majority stake in Chinese biotechnology company Techpool Bio-Pharma Co. Nycomed has about 12,500 employees, four research and development centers in Europe and India, and 15 production facilities and two joint ventures in 13 countries, according to its website.
Nycomed earned 850.5 million euros before interest, taxes, depreciation and amortization last year, excluding some costs. It sells pantoprazole for heartburn and the smokers’ cough drug roflumilast in Europe as Daxas and as Daliresp in the U.S., where revenue is shared with Forest Laboratories Inc. (FRX)
Takeda “put a lot of value” on Daxas, Bjorklund said on a conference call today. “This deal was not about synergies.”
Nycomed has suffered setbacks in recent years. Ebitda slid 23 percent last year as pantoprazole faced competition from low-cost generics in Europe. The drug lost patent protection in the U.S. in January. Meanwhile, U.S. regulatory approval for Daxas, Nycomed’s most promising new medicine, was delayed by almost a year after a Food and Drug Administration panel questioned whether its benefits justified risks of suicide and weight loss.
FDA approval in March was for patients with chronic bronchitis and a history of flare-ups, a smaller patient group than Nycomed had originally requested. About 2.8 million U.S. COPD patients have chronic bronchitis, according to Nycomed, a fraction of the 12 million people diagnosed with smokers’ cough.
Skin Unit Goes It Alone
The transaction, slated for completion by the end of September, excludes Nycomed’s U.S. dermatology business, which had revenue of 332.9 million euros last year, according to the company’s annual report. The unit will become independent and retain its current ownership structure, Bjorklund told reporters. He declined to comment on the future of the business.
The Japanese company, which traces its origins to a medicine wholesale business opened in Osaka in 1781, bought Millennium Pharmaceuticals Inc. for $8.9 billion in 2008. Actos, first sold in the U.S. in 1999 and now the world’s best-selling diabetes medicine, accounted for 27 percent of Takeda’s sales last year.
From Norway to Switzerland
Nordic Capital, based in Stockholm, owns 41 percent of Nycomed, while Credit Suisse’s DLJ Merchant Banking unit holds 26 percent, according to the company’s website. London-based Coller Capital has a 9.7 percent stake and New York-based Avista Capital Partners owns 8.9 percent.
Nycomed was founded in Norway in 1874 by pharmacist Morten Nyegaard as an agent for imported pharmaceutical products. The company has changed hands repeatedly over the past 12 years, moving in the process from Norway to Denmark and then, in 2007, to Switzerland.
Takeda was advised by Deutsche Bank AG. Goldman Sachs Group Inc. and Credit Suisse Group AG advised Nycomed. Deutsche Bank and Nomura Securities Co. provided fairness opinions.
Moody’s placed Takeda’s Aa1 credit rating on review for a possible “multi-notch” downgrade, saying the transaction would weaken the company’s balance-sheet liquidity. Standard & Poor’s followed suit, noting that “Takeda’s financial profile will deteriorate because it plans to cover the cost of the acquisition with liquidity on hand and bank borrowings, although the acquisition will strengthen the geographic diversification of the company’s business.”
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