|Takeda Chief Financial Officer François-Xavier Roger|
In the midst of an unprecedented dealmaking spree that has produced $139 billion in pharmaceutical mergers this quarter alone, one country has been conspicuously absent: Japan. Even such giants as Astellas Pharma ($ALPMY) and Takeda Pharmaceutical ($TKPHF), which have led M&A runs in Japan in the past, have stayed on the sidelines. Why?
Takeda's chief financial officer, François-Xavier Roger, tells the Financial Times that Japan's highly fragmented pharma sector could actually benefit from a little domestic dealmaking. "It would make sense to create some stronger players," he said.
But analysts surmise that Japanese pharma companies don't possess a burning desire to go overseas. The domestic market is protected by a rapidly aging population that's pushing up demand for drugs--a population that tends to prefer branded products to cheaper generics.
"I am sure they are watching global developments carefully but I don't think Japanese companies are interested in buying," Fumiyoshi Sakai, an analyst at Credit Suisse told the FT.
It wasn't that long ago that Japan was an enthusiastic participant in the Big Pharma M&A wave. Takeda picked up Switzerland's Nycomed in 2011 for $13.7 billion, and in 2008, it bought Boston-based Millennium Pharmaceuticals for $9 billion. Astellas, which was created in 2005 from the merger of Yamanouchi Pharmaceutical and Fujisawa Pharmaceutical, bought Mellville, NY-based OSI Pharmaceuticals in 2010 for $4 billion. That deal brought Astellas the blockbuster cancer drug Tarceva.
But integrating those purchases hasn't always been easy for Japan's big players. Two years after acquiring Nycomed, for example, Takeda had to pull out of a troubled drug-development partnership with Immunomedics ($IMMU)--a deal for which Nycomed had paid $40 million up front. The integration challenges came at what's already a difficult time for Takeda, which is also fighting a series of lawsuits claiming that it hid a bladder cancer risk associated with its diabetes drug Actos. Although it has won most of the cases so far, a Louisiana jury did slap Takeda and its marketing partner Eli Lilly ($LLY) with a $9 billion damages award in April.
The Japanese pharma companies are far from alone in their decision to sit out the current M&A spree. Sanofi ($SNY) CEO Chris Viehbacher has been quite vocal of late about his ambivalence towards making big deals. His company has been mentioned as a possible white knight for rare disease player NPS Pharmaceuticals ($NPSP), not to mention Allergan ($AGN), which has been looking for a way out of Valeant's ($VRX) aggressive pursuit. But Viehbacher told the FT he prefers to focus on internal growth, and he's optimistic about the company's multiple drugs and vaccines that are in late-stage trials or awaiting regulatory approvals. "We're starting to use a lot of muscles that haven't been exercised for a long time," he said.