We just turned the page on 2018, with many Big Pharma companies having planned to exit the consumer health business, but Takeda doesn’t intend to join the party even though it’s in pressing need of money after a $58 billion acquisition.
Takeda won't sell its Japan-based over-the-counter business to help pay off some $31 billion in debt it’s taking to finance the Shire takeover, CEO Christophe Weber said at a news conference on Monday, Reuters reports. Instead, it'll be looking to hive off lagging businesses beyond its home country.
“It’s not our first priority,” Weber said of making a move on the consumer unit, as quoted by Reuters. “We have some businesses outside of Japan where we are not really performing.” And though some European OTC assets may be on the table, Weber said he was “very pleased” with Takeda's consumer business.
To hear Weber tell it, the reason he pushed for the Shire deal against some high-profile investor objections is for a healthy cash flow, which can help support its R&D efforts. And the deal follows a typical pharma pattern of turning to dealmaking to beef up pipelines and fund research.
“If you look at the top 10 pharmaceutical companies today, not a single one didn’t come from an M&A,” Weber said, as quoted by Bloomberg. “M&A is always a key part of the industry. Why? Because we are in an industry which invests enormously in R&D, at risk.”
Weber's decision to focus on asset sales outside Japan is probably as a response to criticism that he’ll push Takeda too far away from its home country as he further globalizes the legacy Japanese drugmaker. That obviously doesn’t include the Japanese OTC business, even though it is “noncore” and there’s an ongoing industry exodus from consumer healthcare.
Operated as Takeda Consumer Healthcare in Japan, the unit is relatively small by sales compared with Takeda’s prescription drug business. The Shire deal will boost the combined company’s annual revenue to about $31.3 billion, Takeda said in the media presentation. In comparison, for the fiscal year ended in March, Takeda's top six consumer products generated sales of only 53.4 billion Japanese yen ($490 million).
Make no mistake, however: Takeda is looking for some cash to cut debt. It is looking to sell off up to $10 billion worth of assets, multiple media outlets have reported. The ax could fall on its European OTC business, as the company could collect around $1 billion from such a sale, The Japan Times reported in October.
In addition, Takeda has already divested its majority stake in a Chinese joint venture with Shanghai Pharma for $280 million after reaching the Shire deal. It’s reportedly looking to collect $5 billion by selling some Shire drugs including the relatively new eye med Xiidra. And as a condition to win EU approval for the gigantic buyout, it will sell inflammatory bowel disease candidate and potential Entyvio rival SHP647, which Takeda said could attract “a number of potential buyers.”
Last year was marked by several consumer deals as drugmakers rush to focus on innovative medicines instead. It started off with Novartis handing its stake in a consumer joint venture back to GlaxoSmithKline, only to culminate in GSK announcing a plan to combine that business with Pfizer’s now, aiming for a spinoff in three years. Merck KGaA, Bristol-Myers Squibb and Bayer have all joined the fray.