Eisai To Acquire MGI Pharma

JAPAN'S EISAI, looking to enhance its pipeline and increase its presence in the U.S., will spend about $3.9 billion in cash to acquire MGI Pharma, based in Bloomington, Minn.

Through the acquisition, part of its "Dramatic Leap" business plan, Eisai will gain five oncology products—including MGI's lead drug, Aloxi—that are expected to generate annual sales nearing $375 million.

MGI was formed in 1979 as Molecular Genetics, a company focused on animal health and agricultural biotechnology. By 1988, the company had shifted to human pharmaceuticals, and in 1990, it became MGI Pharma. It acquired Guilford Pharmaceuticals in late 2005.

Despite the company's profitability this year, MGI's management said in November that it was exploring strategic alternatives, a decision that led to the Eisai deal.

The deal should allow Eisai to significantly strengthen its oncology franchise and reach targets for revenue and earnings growth under its business plan, Eisai CEO Haruo Naito says. On the basis of sales, Eisai ranks fourth among Japanese drug firms. But its leading product, the Alzheimer's disease treatment Aricept, will lose U.S. patent protection in 2010. Almost two-thirds of Aricept's $2.3 billion in fiscal 2007 sales were in the U.S.

Although Eisai entered the U.S. market just 10 years ago, today it has $2.7 billion in U.S. sales. In October, it opened its new U.S. headquarters in Woodcliff Lake, N.J., and it is building a manufacturing and formulation R&D facility in Research Triangle Park, N.C. In late 2006, Eisai paid Ligand Pharmaceuticals $205 million for four oncology products, and in April 2007, it purchased antibody technology developer Morphotek of Exton, Pa., for $325 million.

Two weeks ago, Astellas Pharma, the number two Japanese drug company, agreed to pay up to $537 million to acquire Agensys of Santa Monica, Calif. Under a strategy similar to Eisai's, Astellas plans to make its acquisition a cornerstone of its oncology business and its expanding biologics efforts. Eisai expects to complete the MGI transaction in first-quarter 2008.