Mitsubishi Tanabe to pay $1.1bn for Israeli drugmaker
Nasdaq-listed Neuroderm is testing a treatment for Parkinsons
Mitsubishi Tanabe Pharma became the latest Japanese company to target the US’s $450bn drug market by agreeing a $1.1bn takeover of a US-listed Israeli group that is testing a treatment for Parkinson’s disease.
The Japanese company announced it would pay $39 in cash per share to acquire NeuroDerm. The transaction has an enterprise value of a little over $1bn after accounting for NeuroDerm’s excess cash position, or $1.1bn including advisory costs.
Mitsubishi Tanabe, which hopes to establish a franchise around neurological and autoimmune diseases, will separately make its first foray into the US next month with the launch of a treatment for motor neurone disease.
Globally, Japan’s drug market is second only to the US, but the deal is one of an increasing number by Japanese companies trying to diversify away from the domestic market where the government’s sweeping review to make drug prices more affordable to the country’s ageing population threatens earnings. It also represents part of the broader demand for overseas growth that drove foreign acquisitions by Japanese buyers to a record ¥10.9tn ($97.9bn) in the fiscal year ended March 31.
If completed, the NeuroDerm deal would be the third-biggest outbound Japanese drug acquisition this year behind Takeda Pharmaceuticals’ $5.2bn purchase in January of Boston-based cancer drugmaker Ariad, and Sawai Pharmaceuticals buying generics maker Upsher-Smith Laboratories for $1.05bn.
The offer from Mitsubishi Tanabe, which has a market capitalisation of ¥1.49tn, represents a 17.5 per cent premium to NeuroDerm’s closing price on July 21, but a 79 per cent premium to its close on June 9 before media reports that the Tel Aviv-based company was considering a sale.
“We believe that this transaction will yield important benefits for NeuroDerm’s shareholders and the Parkinson’s disease patients that urgently need new therapies,” said Oded Lieberman, NeuroDerm’s chief executive.
The Japanese drugmaker generated ¥22.7bn, or a little more than 5 per cent of total revenue, from overseas sales in the fiscal year ended March 31 and hopes the NeuroDerm deal will “enable” it to achieve its US sales target of ¥80bn by the end of its 2020 fiscal year.
“The model used by pharmaceutical manufacturers has been to cover their fixed costs in the Japanese domestic market and to earn profits in overseas markets, with the US as the main target. We expect the shift in focus to overseas markets to gather momentum,” noted Fumiyoshi Sakai, an analyst at Credit Suisse.
NeuroDerm, which had 77 employees as of March, will become the sole entity within Mitsubishi Tanabe’s Israel-established subsidiary, which would make it a wholly-owned subsidiary of the Japanese company in a so-called reverse triangular merger.
Mitsubishi Tanabe said it had secured the support of three of NeuroDerm’s directors who collectively own 33.7 per cent of the company’s stock.
The deal, which is subject to shareholder approval, would be one of the biggest in Israeli corporate history. Earlier this year tech giant Intel bought Mobileye, a developer of self-driving car technologies, for $15.3bn, the largest takeover in Israeli history.
Shares in Mitsubishi Tanabe Pharma closed 1.2 per cent lower in Tokyo on Monday, a little more than double the decline for the broader Japanese stock market. Shares in Neuroderm shot up 15 per cent in premarket New York trading to just below $39.