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Chugai soars on Roche buyout rumours

Reports circulating that Swiss company is poised to make $10bn offer
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Shares in Japanese pharma company Chugai are riding high amid growing speculation that Roche is poised to buy out the firm.

Roche already owns 62 per cent of Chugai, but rumours continue that it is planning a $10bn offer to take complete control of the company, despite assertions by the Japanese company that no negotiations are ongoing.

Shares in Chugai rose 15 per cent yesterday on the Tokyo Stock Exchange, but have started to slide back today, likely on profit-taking by investors. Roche's offer would represent a premium of around 40 per cent on Chugai's share price ahead of the rumours and – if it goes through – would be the Swiss group's largest M&D deal since it took control of Genentech for $44bn in 2008.

Chugai's R&D operations have provided a steady stream of new products for Roche, including arthritis therapy RoActemra/Actemra (tocilizumab), which grew more than 20 per cent in the first half of this year to reach 568m Swiss francs (around $625m) on the back of a new subcutaneous formulation – available in the US and rolling out in Europe – that has made the drug a more attractive option for patients.

Chugai was also the originator of Alecensa (alectinib; RG7853), a drug in the new ALK inhibitor class which was approved last month in Japan for non-small cell lung cancer and could be third to market in Europe and the US after Pfizer's Xalkori (crizotinib) and Novartis' Zykadia (ceritinib).

Gaining outright control of Chugai would also give Roche complete ownership of a number of well-regarded pipeline projects at the Japanese company, including haemophilia treatment ACE910.

Roche has been making targeted acquisitions of late – offering $450m for gene silencing company Santaris earlier this month, $1.7bn for cancer company Seragon Pharmaceuticals in July and $350m for sequencing specialist Genia in June – and according to recent comments by chief executive Severin Schwann remains open to other deals.

Analysts appear divided on the chances of the takeover being consummated, with some suggesting there is no value to either party to change the terms of their relationship, particularly at the price being bandied around, while others say Roche sees benefit on outright ownership of Chugai's portfolio.

Article by
Phil Taylor

19th August 2014

From: Sales

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