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Swiss deal worth $3B could inject life into Japanese pharma giant

Leah Hodgson

Pharmaceutical giant

Sumitomo Dainippon Pharma has agreed to acquire a 10% stake in Swiss drugmaker

Roivant Sciences for $3 billion. The deal will see the Japanese business take over Roivant's interest in five biopharmaceutical companies, with the possibility of acquiring interests in an additional six.



The businesses included in the transaction focus on a broad range of health issues such as urinary diseases, rare pediatric conditions and respiratory disorders. If all 11 companies are acquired, SDP will take ownership of 25 clinical programs which are expected to produce several product launches in the next few years.



The move is the latest step in SDP's shifting of its focus from its home country to the global market. In 2007, 91% of the group's business originated inside of Japan; 10 years later, 60% of its revenue came from overseas, notably due to its North American drug Latuda, which treats schizophrenia. SDP's revenue rose sharply in 2017 and remained nearly flat YoY, standing at 459.3 billion yen (about $4.3 billion), but its aforementioned blockbuster drug is reportedly set to lose its US market exclusivity in 2023, which is likely to impact the financials.



The timing for this deal, therefore, comes at an opportune moment for the Japanese acquirer as it looks to open up new drug lines to offset the loss of Latuda's exclusivity. And Roivant is an ideal target. Since its inception in 2014, the Basel-based group owns a total of 16 companies and has raised billions of dollars from investors. Its last financing took place in November, when it secured $200 million from investors including

NovaQuest Capital Management and

RTW Investments, giving Roivant a valuation of around $7 billion. In 2017, the company received backing from another Japanese investor:

SoftBank, which led a $1.1 billion round for Roivant via its Vision Fund.



There has been a glut of interest from Japanese investors for European pharmaceutical companies in the past couple of years. In January,

Takeda completed its $62 billion takeover of Dublin-based

Shire in the

largest-ever acquisition of a European company by an Asian strategic investor, per the PitchBook Platform. Additionally, competitor

Taisho Pharmaceuticals wrapped its $1.6 billion purchase of

Bristol-Myers Squibb's consumer health business,

UPSA, in July.



Despite being in one of the world's largest pharmaceutical markets, the Japanese pharmaceutical industry has been facing increased pressure due to tighter pricing regulation. A 2017 study from US lobbying group PhRMA suggested that drug sales in the country could fall by 30% through 2025 due to annual price reviews. If the estimates become reality, access to foreign markets, such as those in Europe, could be vital to maintain a healthy balance sheet.



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