beyondbrics

By Mai Mizuta and Natasha Khan of mergermarket

Taisho Pharmaceutical has become the latest in a string of Japanese pharma companies to acquire an emerging market counterpart, as companies search for better prospects as their consumer bases shrink at home.

On Thursday Taisho, the prescription and over-the-counter drug maker, announced the acquisition of Malaysia-based pharmaceutical company Hoepharma Holdings (HOE), which specializes in dermatological products, for nearly ¥10.4bn (US$ 122m).

“Taisho acquired HOE to gain further access to emerging markets,” a Taisho spokesperson said.

With this recent acquisition, Taisho plans to use HOE’s sales channels to sell OTC drug trademarks which HOE acquired from Bristol-Myers Squibb in 2009, the spokesperson said. He noted that Taisho is also on the lookout to acquire other assets in emerging markets.

While HOE’s dermatology line is less well-known in its main market of Malaysia, it offers Taisho access to distribution channels,  Soumitra Sharma, senior health division consultant at Frost & Sullivan Asia Pacific said. Strategically the move makes considerable sense, Sharma explained; with 28 million people, Malaysia’s market is modest, but it’s proximity to Thai and Indonesian markets is a big plus.

Morgan Stanley analyst, Mayo Mita, said, “This could be the start of a trend for Japanese companies in the pharmaceutical space,” referring to the potential for future acquisitions by Japanese pharmas in Asia and emerging markets. Many Japanese pharmas have traditionally looked to Western countries for acquisitions, she noted. “This particular deal makes sense and is no surprise because Taisho acquired Bristol-Myers Squibb Indonesia in 2009,” she continued. “Taisho will likely continue to look for further acquisitions in these emerging markets.”

HOE has synergies with Taisho and as the Japanese pharma has been operating in Southeast Asia for the past two years, this deal looks smart, JPMorgan analyst Masayuki Onozuka told mergermarket. He noted that Japanese companies are eyeing Indian and Chinese assets, which may shape the growing trend. Onozuka said Southeast Asia, and Indonesia in particular, has seen a lot of growth in infrastructure and government spending.

Taisho Pharma acquired PT Bristol-Myers Squibb Indonesia Tbk in Indonesia for US$ 150m in September 2009. Taisho is one of the few Japanese pharma companies to acquire an asset in Southeast Asia; the most popular investment destination for Japanese pharma has been the US.

According to mergermarket data, Japan has been the fourth biggest bidder country in the pharmaceutical sector after US, Germany and UK. Since 2006, 71 deals have been sealed between Japanese and American companies, amounting to a total value of US$26.9bn.

Twenty-seven of those deals, worth US$16.4bn, were outbound deals. The biggest deal was the acquisition of Ranbaxy by Daiichi Sankyo in June 2008 for US$ 5.5bn. The four major Japanese pharma companies: Takeda, Eisai, Daiichi Sankyo, and Astellas acquired a total of 22 companies in the same period.

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EM deal file, beyondbrics