Dainippon to Buy Sumitomo Business

PHARMACEUTICALS

Consolidation in the japanese drug sector continues with Dainippon Pharmaceutical's announcement that it will acquire Sumitomo Chemical's drug business in a stock transaction valued at $2.2 billion. The deal, expected to close next October, will put Dainippon among the top 10 Japanese pharmaceutical companies.

The transaction calls for Sumitomo Chemical to hold no more than 50.1% of the voting stock in the new company for 10 years. The companies target annual sales of $2.7 billion in current dollars by 2007 and anticipate synergy-driven cost reductions of close to $100 million.

Hiromasa Yonekura, president of Sumitomo Chemical, says his firm is committed to the pharmaceutical business as a core operation and will support the new company "to maximize its value as a leading-edge R&D-driven pharmaceutical company."

Though Dainippon will still be small relative to major international drug companies, the acquisition lends critical strength at a time when the Japanese government is pushing the domestic drug industry to become more competitive.

Dainippon plans to focus its annual R&D budget of about $440 million in the areas of diabetes and central nervous system disorders. With a sales force of about 1,500, the company says it will seek to strengthen earnings by focusing on its four leading drugs: Amlodin (amlodipine), a heart disease therapy; Gasmotin (mosapride citrate), a gastrointestinal agent; Prorenal (limaprost alfadex), a circulatory agent; and Meropen (meropenem), an antibiotic.

Another recent merger in the Japanese drug market is scheduled to close in April, when Yamanouchi Pharmaceutical completes its acquisition of Fujisawa Pharmaceutical. That $7.8 billion purchase will create Japan's second largest drug company after Takeda Chemical Industries.