Mitsubishi Chemical to sell drug business to Bain

Chemical companies in the US and Europe began exiting the pharmaceutical industry in the mid-1990s, when the British firm ICI spun off its Zeneca drug business. In Japan, many major chemical companies have stayed in the drug business and even enhanced their presence, but this era may be coming to an end.

Mitsubishi Chemical Group, Japan’s largest chemical company, announced Feb. 7 that it will sell its pharmaceutical subsidiary, Mitsubishi Tanabe Pharma, to the US investment firm Bain Capital for about $3.3 billion. Mitsubishi Chemical says it will invest proceeds from the sale in green specialty chemicals, which it has positioned as a core business, other businesses, and to pay down debt.

Mitsubishi Tanabe has been a wholly owned subsidiary of Mitsubishi Chemical since 2020, when the latter bought out other shareholders. It specializes in drugs for immunological diseases and the central nervous system. One of its key products is Radicava, a treatment for amyotrophic lateral sclerosis.

In a press conference, Mitsubishi Chemical CEO Manabu Chikumoto explained the rational for the sale. “Over the past 5 years, the synergy between our chemical business and pharma business has waned due to the diversification of treatment methods and the decrease in small-molecule drugs,” he said. “Mitsubishi Tanabe Pharma has brought us a lot of revenue, but when we consider mutual growth in the future, it is best for us to part company.”

Bain says it has 37 investments in Japan and 140 in the global health-care sector. “We believe there are promising signs for growth and untapped opportunities in Japan’s life sciences industry as government and regulators have launched several initiatives to accelerate the development and approval of innovative medicines in the Japanese market,” Ricky Sun, a partner at Bain Capital Life Sciences, says in a press release.

The parties expect to complete the transaction in the third quarter, subject to shareholder approval in June.

Several major Japanese chemical companies still have broad business structures ranging from petrochemicals to pharmaceuticals. Sumitomo Chemical, Asahi Kasei, and Teijin all have discovery-based drug operations, though Sumitomo Chemical has already begun the search for a partner for its business.

Mikiya Yamada, a chemical stock analyst at Mizuho Securities, suggests that all Japanese chemical companies should consider a similar split. “Chemicals, which focus on capital expenditure, and pharmaceuticals, which aim at drug discovery and for which R&D expenditures are important, are incompatible within a single capital structure,” he says.