Takeda leads Asia's acquisitive charge in 2012/13

Out of a total of 19 corporate acquisition or financing deals completed in Asia over the April 2012-March 2013 period, it comes as no surprise to see Asia's largest homegrown pharma firm, Japan's Takeda, take home the prize for sheer number of transactions.

In the same period, which aligns with the company's fiscal year, it completed four major acquisitions of complete companies, as opposed to products, R&D projects or technology. These had a total combined value (including upfront and other payments) of $1.5 billion, still some way below the $13.7 billion it paid in May 2011 to complete the purchase of just one firm, Nycomed.

A number of Chinese and Indian companies were also active in the merger and acquisitions/financing sphere or were targets themselves, with US generic group Mylan's $1.6 billion purchase (plus $250 million in additional conditional payments) of the Agila Specialties arm of India's Strides Arcolab the largest transaction during the period.

Takeda's June 2012 deal for the US firm URL Pharma bagged second place, being valued at $800 million upfront plus other performance-based earn out payments beginning in 2015.

Mylan beat several other suitors, reportedly including Pfizer and Novartis, to snap up Agila, which will boost it into a global top three position in the injectables sector. The transaction was seen by some as expensive, valuing Agila as it did at 18.7 times estimated earnings before income taxes, depreciation and amortization (EBITDA).

However, the pay-offs were multiple: it gives Mylan around 70% of regulated market demand for such products; a marketing network across 70 countries; and at a stroke will nearly double the US firm's injectables business in the first full year.

The global generic injectables market is also expected to grow at 13-15% annually and is marked by a shortage of products in some markets like the US, where the FDA has issued warning letters to a number of producers, hitting output.

As for Takeda, the acquisition of URL was a strategic move to bolster its position in gout through Colcrys (colchicine), an anti-inflammatory for the acute form of the disease, which added to its existing longer-term treatment Uloric (febuxostat; licensed from Teijin).

Colcrys is the only FDA-approved single ingredient oral product of its type in the US, where it was approved in 2009 based on new safety and dosing data that enabled it to stay on the market while other colchicines were withdrawn. The drug has exclusivity out to 2029 and annual sales at the time of the acquisition were around $430 million.

By contrast, Takeda's deal for the Brazilian branded generics and over-the-counter products firm Multilab in July 2012, for BRL500 million upfront up to BRL40 million in future milestones (a total of around $268 million), was designed to give a leg up to sales and distribution infrastructure in a key emerging market where Takeda/Nycomed had an under-developed presence. The buy put Takeda into the local top ten.

LigoCyte (now Takeda Vaccines (Montana)) followed in October, for which Takeda paid $60 million upfront to acquire the only norovirus vaccine in clinical trials, along with platform technology in virus-like particles. LigoCyte also has other preclinical candidates against flu, rotavirus and respiratory syncytial virus.

The move was clearly targeted as bolstering Takeda's efforts to build its business in novel vaccines following the setting up of a dedicated division at the beginning of 2012.

Lastly, the $140 million paid for private US drug discovery technology company Envoy Therapeutics in November brought with it "bacTRAP" technology to label and extract cell protein-producing components. Ribosomal mRNA can be captured and gene expression measured, enabling the identification of novel therapeutic targets expressed in disease-relevant cells.

Envoy also has preclinical programs in Parkinson's disease and cognitive impairment associated with schizophrenia.

While it was not in the time frame covered by this analysis, Takeda has more recently continued with its acquisitive streak, in May this year snapping up another private US firm, the vaccines specialist Inviragen, for $35 million upfront and up to $215 million in development and commercial milestones.

The main attraction was that Inviragen has a promising Phase II stage candidate for dengue virus, DENVax, which is a four-strain recombinant product for the prevention of infection by the mosquito-borne disease. The firm also has other vaccines in the pipeline for human enterovirus 71 hand, foot and mouth disease (Phase I) and a preclinical product for the mosquito-borne virus chikungunya, along with virus-like particle and cell culture technologies.

Notably, four out of these five Takeda deals were for US-based firms, indicating both the concentration of attractive technology and the size of the market in this country, which proved compelling draws despite the Japanese firm's already well-established presence.

The other driving factor behind Takeda's string of deals over the past few years has been the loss of US exclusivity for former top product Actos (pioglitazone) in August 2012. Global sales of the oral antidiabetic slumped by 59% to JPY122.9 billion ($1.21 billion) last fiscal year, hit also by generic competition in Japan.

But over the same period, the various acquisitions added around JPY202 billion in net sales to Takeda's group figure, with Multilab and Nycomed boosting total net sales in emerging markets 1.9-fold.

China/India activity

China also stood out as an important site of M&A activity in the period. Although there were no very large transactions, foreign firms including Daiichi Sankyo, Cardinal Health and NeoStem, as well as domestic players Shanghai Fosun and huge state-owned conglomerate Sinopharm, all completed deals.

Sinopharm's $252 million purchase of 57% of Hong Kong-based Winteam Pharma stands out for its size, and boosted the acquirer's capabilities on the mainland in R&D, production and sales, and also in the important field of traditional Chinese medicines.

Of the two outbound deals involving the Indian firms Dr Reddy's Laboratories and Sun Pharmaceutical, the latter was notable for its $230 million purchase of the Canadian dermatology firm Dusa Pharmaceuticals in November.

This was designed to give Sun access to the photodynamic skin therapy sector through Levulan (aminolevulinic acid), which is already approved in the US for non-hyperkeratotic actinic keratoses of the face or scalp.

Despite some opposition from law firms and analysts who questioned the fair value of the deal, Sun completed its tender offer at the original price of $8 per share in December.

Dr Reddy's pursued the Dutch firm OctoPlus to strengthen its capabilities in technology capabilities in drug delivery and the custom pharmaceutical services business. Its quarry's expertise in injectable speciality generics such as liposome and microsphere formulations was also an attraction.

Asian M&A deals April 2012-March 2013

Buyer	Country	Target	Country	Focus	Price offered and/or paid	Date announced	Date completed
Takeda Pharmaceutical	Japan	URL Pharma	USA	Generic pharmaceutical research, development, and manufacturing company	$800 million	Apr-12 (Ongoing)	-
Daiichi Sankyo	USA	Shanghai Xinshengyuan	China	Distribution of generic drugs	Undisclosed	Apr-12 (Completed)	Apr-12 (Completed)
Takeda Pharmaceutical	Japan	Multilab	Brazil	Manufacturer of generics and OTC (over-the-counter) pharmaceutical products	$500 million	May-12 (Ongoing)	-
Takeda Pharmaceutical	Japan	URL Pharma	USA	Generic pharmaceutical research, development, and manufacturing company	$800 million	Apr-12 (Ongoing)	Jun-12 (Completed)
Cardinal Health	USA	Zhejiang Dasheng Medic	China	Drug distributor	$157 million	June-12 (Completed)	June-12 (Completed)
Adcock-Ingram	South Africa	Cosme Pharma	India	Manufacturing and marketing of finished pharmaceutical formulations	Undisclosed	Jul-12 (Completed)	Jul-12 (Completed)
Complete Genomics	China	BGI	China	Merger	$117.6 million	Sep-12 (Ongoing)	-
BGI-Shenzen	China	Complete Genomics	USA	Develops and commercializes a DNA sequencing platform for human genome sequencing and analysis	Undisclosed	Sep-12 (Ongoing)	-
Takeda Pharmaceutical	Japan	LigoCyte Pharmaceuticals	USA	Biopharmaceutical company	$60 million	Oct-12 (Ongoing)	-
Dr Reddy's Laboratories	India	OctoPlus	Netherlands	Develops and manufactures drug delivery technologies	$36 million	Oct-12 (Ongoing)	-
Sun Pharmaceuticals	India	DUSA Pharmaceuticals	Canada	Marketing photodynamic therapy	$230 million	Nov-12 (Ongoing)	-
NeoStem	USA	Suzhou Erye Pharmaceuticals	China	Generic drug maker	Undisclosed	Nov-12 (Ongoing)	-
Takeda America Holdings	USA	Envoy Therapeutics	USA	Discovering new drugs for neurological and psychiatric diseases	$140 million	Nov-12 (Ongoing)	-

Source: Scrip Market data

This article forms part of the 2013 Scrip Asia 100, due to be released in June 2013.

The full Scrip Asia 100 includes league tables of Asia's top pharmaceutical players, interviews with leaders of multinational companies, ventures and regulatory agencies, and insight into clinical research, market access and financial issues in the region.