Takeda Expands Cancer Business With $4.66 Billion Ariad Deal

Updated on
  • Deal adds blood cancer pill, experimental lung-cancer drug
  • Takeda to pay 75 percent premium; Ariad shares surge Monday

Takeda Acquires Ariad in $4.66B Deal

Takeda Pharmaceutical Co. will expand its footprint in the U.S. oncology market with the $4.66 billion purchase of Ariad Pharmaceuticals Inc., adding one potential blockbuster in lung cancer and another already on-the-market therapy.

Takeda will pay $24 a share for Ariad, the companies said in a statement Monday, 75 percent more than its Friday close of $13.74. The deal will give it Ariad’s drug brigatinib, an experimental therapy being tested in lung cancer, and Iclusig, which is estimated to have brought in $170.5 million in 2016.

The announcement came at the start of the J.P. Morgan Healthcare Conference in San Francisco, the year’s biggest gathering of health-care investors and companies. Ariad canceled plans to speak at the conference.

In an interview, Takeda’s chief executive officer, Christophe Weber, said that "potentially" more deals could follow although the company will remain disciplined. "We are very strategic and very disciplined buyers," he said. "We are not scared to walk away if we feel all the conditions are not there."

Takeda, based in Osaka, has been on a hunt for new drugs to replenish a flagging pipeline after patents have expired on some of its biggest products. As international drugmakers have spent billions on acquisitions in the last two years, Japanese drugmakers stayed largely on the sidelines. But they are now facing increased pressures at home, as the government attempts to lower the prices of many branded medicines and put a greater focus on generics to manage its health-care spending.

Takeda shares traded 1.2 percent higher at 5,022 yen as of 9:13 a.m. in Tokyo trading on Tuesday. Shares of Ariad jumped 73 percent in New York, the biggest move since 2000.

Ariad has submitted brigatinib to regulators at the U.S. Food and Drug Administration for review, with an expected decision by April 29. Meant to treat a form of non-small cell cancer, the companies said the therapy could have annual peak sales of more than $1 billion.

The Cambridge, Massachusetts-based company’s drug Iclusig treats a rare advanced form of the blood cancer leukemia, and has been the subject of controversy for its pricing of the pill. In October, Senator Bernie Sanders decried the company’s “greed” in setting the list price of the drug at almost $200,000 a year.

"Whether the premium of over 70 percent for the acquisition is justified depends on synergies ahead," Morgan Stanley MUFG analysts wrote in a research note about the Ariad acquisition, pointing to strong competition from other top drugs in the cancer space. Takeda said in the statement that the deal is expected to add to its earnings by its fiscal year ending March 2019.

Domestic Growth

Under Weber, a Frenchman who became its first foreign chief executive officer in 2015, Takeda has been looking abroad as domestic growth slows, and turned its focus on three therapeutic areas -- gastroenterology, oncology and the central nervous system. 

Valeant Pharmaceuticals International Inc. had been in talks to sell its Salix gastrointestinal drugs business to Takeda, although those discussions later broke down because of disagreements over the price, Bloomberg News reported last year, citing people familiar with the matter.

The Ariad deal is complementary to Takeda’s strategy on oncology, which is part of its core with gastroenterology and central nervous system, Weber said in the interview, adding that there are no plans to expand into other therapy areas for now. Takeda "looked at" Valeant’s Salix, he said, declining to comment further.

On a conference call, Weber said there will be no impact on the company’s dividend policy following the acquisition.

Last January, Ariad elevated a new chief executive officer, Paris Panayiotopoulos, amid pressure from activist investor Alex Denner. The drugmaker then slashed 19 percent of the company’s workforce and undertook what it called a “strategic review.”

"We will look at all situations but we are very responsible about all prices," Weber said about drug pricing in the interview.

Takeda said it plans to fund the deal with as much as $4 billion in new debt, and the rest in cash. The transaction is expected to close before the end of February, the companies said.

"Whether the premium of over 70 percent for the acquisition is justified depends on synergies ahead," Morgan Stanley analysts wrote in a research note about the Ariad acquisition, pointing to strong competition from other leading drugs in the cancer space.

Evercore Partners acted as financial advisor to Takeda and Cleary Gottlieb Steen & Hamilton LLP was its legal counsel. J.P. Morgan Securities LLC, Goldman Sachs & Co. and Lazard advised Ariad and Paul, Weiss, Rifkind, Wharton & Garrison LLP was its legal counsel.

— With assistance by Hui Li

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