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DSP buys Sepracor

Japanese pharma company, DSP, agrees to buy US speciality firm, Sepracor, for $2.6bn

Dainippon Sumitomo Pharma (DSP) has agreed to buy US drug firm, Sepracor for $2.6bn or $23 per share – a 27 per cent premium to the company's closing price on September 1.

The move comes as DSP prepares to launch its schizophrenia drug lurasidone, which last month significantly outperformed placebo in late-stage trials.

Sepracor specialises in central nervous system and respiratory disorder products, and has a number of well-recognised drugs, including Lunesta for the treatment of insomnia. The acquisition gives DSP the sales and marketing infrastructure in the US it needs to commercialise lurasidone. In addition, DSP will boost its profile in the US, increase overseas revenue contribution to around 40 per cent and bolster its pipeline in the States.

"Sepracor has pursued growth through development of its unique pipeline and introduction of innovative pharmaceutical products to the market, a strategy that fits perfectly with our management philosophy," said Masayo Tada, president of DSP. "We expect that Sepracor will become a 'Centre of Excellence' for DSP in the US, and will make a significant contribution to DSP both as a commercialisation infrastructure for our self-developed products and as a strategically important base for business development."

The US firm has long been a takeover target, and could face generic competition to Lunesta as early as 2012 if a generic drug maker successfully challenges Sepracor's patent, which expires in 2014. The company also faces generic competition to Xopenex in 2012.

With annual sales of $2.9bn, DSP is something of a poor cousin when compared to other strong performing Japanese pharma companies, such as Takeda and Daiichi Sankyo. However, the company's shares jumped 21 per cent on September 2, on news of the deal despite scepticism from analysts who believe that DSP could have created a US salesforce either through organic growth or the purchase of a better performing sales team at a more 'rational' price.

Based on projections for 2013, the deal values Sepracor at 3.5 times sales compared to 3.1 times sales (on average) for other speciality pharma and generics industry deals. The acquisition also values Sepracor at 19.4 EBITDA compared to an average of 15.1 for other deals.

Nomura Securities and Thomas Weisel Partners are serving as joint financial advisers to DSP, with Paul, Weiss, Rifkind, Wharton & Garrison serving as legal counsel.

3rd September 2009

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