Takeda to Pay Billions to Get Into Biotech
Millennium Deal Gives
Japanese Firm Presence
In Cancer-Drug Market
By DAVID ARMSTRONG and ANDREW MORSE
April 11, 2008
Japan's Takeda Pharmaceutical Co. agreed to buy U.S. biotech company Millennium Pharmaceuticals Inc. for $8.8 billion, giving Takeda a major presence in the lucrative cancer-drug market while also adding a number of promising drug candidates to its pipeline.
Takeda, Japan's biggest drug maker by revenue, will buy Millennium, which is based in Cambridge, Mass., for $25 a share. The price represents a 53% premium to Wednesday's $16.35 closing price for Millennium shares. The deal, the largest acquisition by Takeda, is structured as a tender offer and is conditional upon a majority of shareholders accepting the terms.
Shares of Millennium soared 49% on the news, closing up $7.99 to $24.34 as of 4 p.m. Nasdaq Stock Market composite trading. Takeda shares fell 2.5% Thursday to 5,410 yen. The deal was announced after the close of trading in Japan.
The purchase comes as many of the world's largest pharmaceutical concerns are exploring deals for companies and drugs that will boost their own flagging pipelines. Many drug makers face a dearth of promising drugs under development and the prospect of the expirations of the patents for many of their biggest-selling medicines. This situation has many of them casting about for revenue sources to make up those gaps.
By acquiring Millennium, Takeda will help address a revenue problem it will likely face soon. The patents on two of Takeda's biggest-selling products -- ulcer drug Prevacid and diabetes treatment Actos -- expire in 2009 and 2011, respectively. Revenue from Millennium's best-selling product, blood-cancer treatment Velcade, is growing quickly and is expected to reach as much as $345 million this year.
Sales of Velcade could get another big boost this summer when the U.S. Food and Drug Administration rules on an application from Millennium to sell the drug as a first-line treatment for multiple myeloma. Currently, the drug's labeling indicates it should be used only with patients who have already tried another medicine first. A label allowing for broader usage of the drug would likely result in more patients using Velcade for longer periods of time.
Millennium also has seven compounds in clinical trials, or tests on human subjects. Its most-promising treatment is for Crohn's disease, an intestinal disorder that can cause severe stomach pain and serious bleeding. The medicine, an antibody that works by binding to cells believed to play a role in the genesis of inflammatory-bowel diseases such as Crohn's, is slated to begin final-stage testing later this year.
Other drugs in development include treatments for cancer and multiple sclerosis.
The acquisition, which grew out of a visit Millennium Chief Executive Deborah Dunsire paid to Takeda in July, is part of an aggressive campaign by Takeda President Yasuchika Hasegawa to spend a good chunk of the roughly $20 billion the company has in cash on acquisitions or licensing agreements.
Last year, the company set aside $10 billion as part of a strategic fund to help it expand into overseas markets. In February, Takeda struck a deal to buy biotech giant Amgen Inc.'s Japan unit, as well as gain marketing rights to 13 Amgen drugs for Japan and elsewhere in Asia. Last month, it bought out partner Abbott Laboratories' share of a U.S. joint venture.
Dr. Dunsire, who joined Millennium in 2005, said Mr. Hasegawa moved quickly once it became apparent a licensing partnership, the original idea, could be expanded upon. The discussions accelerated over the past three weeks, she said.
She said Millennium wasn't looking for an acquirer and had recently become profitable. "This was not part of our business plan going forward," she said of the purchase. With $891 million in cash on hand at the end of the year, Dr. Dunsire said the company was well funded to explore deals of its own.
Dr. Dunsire said she and her management team would stay on after the acquisition and that Millennium will operate as a stand-alone business.
Millennium was once one of the highest-flying biotech firms on Wall Street. The company generated a lot of buzz with its research of a potential obesity drug that purportedly worked by boosting fat burning. Mice that received the drug failed to gain weight even when on high-fat diets. But human testing of the drug was disappointing and Millennium abandoned the research in 2003.
Takeda, whose 1.3 trillion yen ($12.77 billion) in sales is 41% more than No. 2 rival Astellas Pharma Inc.'s, specializes in diabetes, cardiovascular and anti-infective drugs.
The pact represents a rare acquisition by a Japanese drug company of a U.S.-based pharmaceutical concern and its value is more than double the value of Eisai Co.'s acquisition last year of cancer company MGI Pharma Inc. for $3.9 billion. It could also signal more visibility in the U.S. for Takeda, which, like its home-country rivals, generally has kept a low profile in the world's biggest drug market. Japanese drug makers have joined with several U.S. companies to develop and market several prominent drugs. Examples include Eisai and Pfizer Inc., with their Alzheimer's-disease drug Aricept, and Daiichi Sankyo Co. and Eli Lilly & Co., who are co-developing the anticlotting drug Prasugrel.
--Ron Winslow contributed to this article.
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