Sepracor gets a healthy buyout

Posted Sep 3rd 2009 1:00PM by Tom Taulli
Filed under: Deals, Japan

Lately, the Japanese pharma industry has flexed its M&A muscle, trying to find opportunities in global markets. And, the latest deal came this week: Dainippon Sumitomo Pharma agreed to shell out $2.6 billion for Sepracor Inc. (NASDAQ: SEPR). The deal is all-cash.

Why all the interest? There are several drivers. First, the strong yen has made deals fairly cheap. Next, the Japanese market is expected to be slow because of government mandates. And finally, Japanese pharma companies are coming up against expirations of major drugs.

So yes, expanding into new markets does make sense. In fact, the deal for Sepracor will give Dainippon a nice footprint in the U.S., with roughly 1,200 sales people. Over the past year, the company posted revenues of $1.2 billion and earnings of $515 million.

However, Sepracor's growth is expected to be crimped in the future because of competition from generic drug producers, as well as a meager pipeline.

Then again, Dainippon sees Sepracor as a platform to sell its drug for schizophrenia, Lurasidone. The Japanese drug maker hopes to get U.S. approval on the drug next year and then begin the selling efforts in 2011. In other words, this is certainly a big M&A bet for Dainippon.

Tom Taulli is the author of various books, including The Complete M&A Handbook.

Tags: Dainippon Sumitomo Pharma, generic drugs, inthenews, Lurasidone, SEPR, Sepracor