Sciele's sales network the main attraction for Shionogi
This article was originally published in Scrip
Shionogi's $1.4 billion acquisition of the US firm Sciele Pharmaappears to be aimed squarely at securing access to a ready-made sales network in the US, where the Japanese company is planning to launch a number of new products over the next few years.
Sciele's sales capability was a focus of new Shionogi president Dr Isao Teshirogi's comments on the deal at a Tokyo press conference, in which he noted that sales reps accounted for 770 of the company's 920 employees, and provided nationwide coverage. Shionogi was looking to tap into this expertise to bring its major new drugs to the US market, he said.
Given Sciele's business model, which is to acquire and develop generics and niche projects at mid-clinical development, the acquisition will add little to Shionogi's basic research capabilities. Some observers have suggested that the move may have been aimed at staving off a potential acquisition of Shionogi, which has struggled with lacklustre sales in its mainstay domestic antibiotics business in recent years.
Whatever the reasons, Dr Teshirogi pointed to Sciele's stable growth and profitability, and noted that its revenues had grown at a compound annual rate of 36% between 2004 and 2007, although net profit had been static (at $45 million) for the past two years.
Shionogi's $31 per share tender offer represents a 57% premium over Sciele's average share price over the past six months. The plan is to finance the acquisition through a mix of ¥47 billion in cash in hand and ¥110 billion in bridge loans, for which Shionogi is considering a range of financing options, the executive explained.
Given the sizeable goodwill and in-process R&D components of some recent Japanese pharma deals, notably Eisai's acquisition of MGI Pharma, analysts will be keeping a close eye on these aspects of the alliance, which Shionogi will announce later. The Japanese firm intended to maintain its current policy of shareholder returns and had left unchanged its 35% dividend payout ratio target for fiscal 2009, Dr Teshirogi said.
Shionogi already has a US subsidiary in New Jersey which oversees the development of new products. The Japanese firm told Scrip that it had no plans at present to combine the subsidiary with Sciele, which is based in Atlanta.