IHS Global Insight Perspective | |
Significance | After a series of media reports on the rumour, both Takeda and Nycomed have announced that the board of directors on both sides reached an agreement for the Japanese pharma to acquire the Swiss pharma. |
Implications | Nycomed's strong presence in emerging markets and significant business platform in Europe has attracted Takeda which has been eager to expand its business in emerging markets. |
Outlook | Although Takeda recorded negative top-line growth in fiscal year 2010 and forecast grim performance in coming years, the acquisition will make an immediate and positive impact on Takeda's business. |
Japanese pharma major, Takeda finally admitted a rumour that it would acquire Swiss pharma, Nycomed today (19 May) and the two companies jointly announced that the boards of directors from both pharmas have unanimously agreed to Takeda's acquisition of Nycomed for EUR9.6 billion (USD14 billion). The cash-free, debt-free transaction is expected to be completed within 90-120 days, currently scheduled to close at the end of September this year, being subject to antitrust clearance. With the completion of the transaction, Nycomed will be a wholly-owned subsidiary of Takeda except for Nycomed's dermatology business in the United States.
Access to Emerging Markets, Strengthening EU Business
Zurich-based privately owned pharma, Nycomed commercialises a wide range of branded products in the area of gastroenterology, respiratory and inflammatory diseases, pain, osteoporosis and tissue management, as well as over-the-counter (OTC) drugs, in over 100 countries. The company has strong presence in emerging markets which attracted the Japanese pharma. As more than 80% of Takeda's net sales in fiscal year 2010 were recognised from Japan and the Americas where the company has established its commercial network (see Japan: 12 May 2011: Takeda Records Decline in Top and Bottom Lines, Paves Way for Recovery by 2015), global expansion especially in emerging markets was committed in its mid-range management plan during 2011-13. Countries such as Russia, India, and Brazil in particular were highlighted as an area to strengthen its commercial presence, hence Nycomed's infrastructure and business expertise in emerging markets will bring access to the regions for Takeda's innovative products. Recently Nycomed has widened its presence in emerging markets (see Switzerland: 3 March 2011: Nycomed Revenues Down 1.8% in 2010 But Strong Emerging-Markets Growth Reported; China – Switzerland: 2 November 2010: Nycomed Acquires Majority Stake in Guangdong Techpool Bio-Pharma and Switzerland – Colombia: 7 February 2011: Nycomed to Acquire Colombian Pharma Farmacol) and recorded strong growth from emerging markets (see Switzerland: 3 March 2011: Nycomed Revenues Down 1.8% in 2010 But Strong Emerging-Markets Growth Reported). In Europe, Nycomed's strong pan-European business platform will help the EU operation which suffered from negative growth (10.2% year-on-year drop in Japanese yen) affected by an unfavourable currency exchange rate. Another expected contribution to Takeda is a first-in-class treatment for chronic obstructive pulmonary disease (COPD), roflumilast (Daxas) which is expected to be a driver for revenue growth.
Outlook and Implications
The rumour about Takeda's acquisition of Nycomed has been circulated in the media since last week and finally has been confirmed by the two companies. The transaction is the largest merger and acquisition (M&A) for Takeda, exceeding the deal to acquire US oncology speciality pharma, Millennium for USD8.8 billion completed in 2008 (see Japan: 15 May 2011: Takeda Completes Millennium Acquisition). Among Japanese companies' foreign acquisitions, it is likely to be the third largest followed by Japan Tobacco's acquisition of UK tobacco company, Gallaher (UK) and telecom major, Softbank acquiring Vodafone Japan, showing Takeda's intention to seal the deal. After the completion, Takeda will be likely to position as the 10th largest pharmaceutical company, jumping up from current 15th rank. As the company has been suffering from patent expiries, unfavourable currency exchange, slow growth in international markets, the fiscal year 2010 top-line result declined and the forecast in coming years was grim until 2015, when the company has committed to bring revenues back to the level of 2010. Thanks to this acquisition, the immediate financial contribution will reshape the company with more than a 30% increase in annual revenue and 40% increase in operating income excluding special factors from business acquisition. Considering the synergy especially in European and emerging markets where Takeda has been weak compared with other multinational pharmas, the benefits will be higher, therefore the goal could be achieved much earlier than planned.