Dainippon Takes Over Sepracor

Japan’s Dainippon Sumitomo Pharma has agreed to pay $2.6 billion in cash for Marlborough, Mass.-based Sepracor. The deal adds to a recent spate of overseas acquisitions by Japanese drug firms, which are struggling to expand their global presence in the face of a shrinking domestic market.

Dainippon says the purchase of Sepracor will increase its overseas business to be roughly 40% of its overall sales and instantly establish a drug portfolio in the U.S., where Sepracor now sells six central nervous system (CNS) and respiratory products.

More important, Sepracor gives Dainippon a foothold in the U.S. as it prepares to launch a Phase III trial for its schizophrenia drug lurasidone, notes BMO Capital Markets stock analyst Robert Hazlett. “Dainippon will be able to utilize Sepracor’s retooled 1,200-person sales force, which has contributed to the improved profitability of Sepracor’s core respiratory and CNS franchises,” Hazlett points out.

In recent years, Japanese companies have been aggressively looking beyond their country’s borders for growth. Takeda Pharmaceuticals paid a whopping $8.8 billion for Cambridge, Mass.-based Millennium Pharmaceuticals; Daiichi Sankyo bought Indian generic drug firm Ranbaxy Pharmaceuticals; Eisai bought MGI Pharma; and Astellas Pharma bought Agensys.

Sepracor, which had sales of $1.3 billion last year, also brings a solid pipeline of drug candidates. Esli­carbazepine, which FDA is currently considering for approval, is expected to be a strong contender in the epilepsy drug market. The company has four other drugs in late-stage clinical trials.

In its early days, Sepracor made its mark by tweaking the ingredients of popular drugs to enhance their safety or efficacy. Historically, most active pharmaceutical ingredients were racemic, a mixture of left- and right-handed chiral molecules; Sepracor, however, found that one enantiomer often accounted for most of the health benefits, and the other was responsible for side effects.

Sepracor patented a number of these enantiomers and then licensed them to larger companies for development. For example, it licensed a single-enantiomer version of the allergy drug Claritin to Schering-Plough. That single-enantiomer product, Clarinex, brought $790 million in sales for Schering-Plough last year.