With $886M Astex buy, Otsuka joins Japanese rivals in overseas dealmaking

Another Japanese drugmaker is reaching for a deal outside its home country. Otsuka Holdings says it's going to buy California-based Astex Pharmaceuticals for about $886 million. The announcement begs two follow-up questions: Will Otsuka get the sales it needs from the deal? And will another bidder jump in?

Astex is a cancer drug specialist, and cancer drugs are hot. The company developed a leukemia drug--Dacogen, marketed by Eisai and Johnson & Johnson's ($JNJ) Janssen unit--but its allure depends mostly on its oncology pipeline. Otsuka figures that Astex's drug candidates, and some development technology, could give it a solid foothold in a fast-growing field.

The $886 million acquisition would be Otsuka's biggest overseas deal in the pharma business, The Wall Street Journal points out, and another in a string of foreign buys for Japanese drugmakers. The biggest deal came in 2011, when Takeda Pharmaceutical snapped up the Swiss drugmaker Nycomed for $13.7 billion. Otsuka is likely to add further to the list; its $2.4 billion IPO in 2010 was partly aimed at funding acquisitions. 

Otsuka already has a small cancer business. But it needs more sales, wherever it can find them. Like its bigger brethren, Otsuka is preparing to lose patent protection on its biggest product: in this case, Abilify, the atypical antipsychotic. It loses exclusivity in 2015. The company recently won FDA approval for a long-acting, once-per-month injectable version of the drug, which brought in about $4.2 billion for Otsuka last year.

Right now, the Abilify Maintena approval is specifically for schizophrenia patients, but that could change; Otsuka is studying Abilify Maintena in bipolar disorder. The hope is for the long-acting version to draw off at least some Abilify patients before the pill goes off patent.

Astex wouldn't add much to the top line immediately. It might not step up Otsuka's sales significantly until after Abilify goes off patent. But first, Otsuka actually has to make the deal happen. It's planning to offer $8.50 per share, a 27% premium to Tuesday's closing price. Whether that will end up being enough remains to be seen. After all, cancer drugs are hot. As Brean Capital analyst Gene Mack told Bloomberg, "Any oncology company would look at it as a target." Mack figures Astex could end up selling at more than $900 million.

- get the release from Otsuka
- see the Bloomberg story
- read the WSJ piece (sub. req.)
- see FierceBiotech's take

Special Reports: Abilify - The 15 Best-Selling Drugs of 2012 | Otsuka - Top 10 Pharma Advertising Budgets 2012