Chugai Advances Most Since 2000; Roche Said to Mull Buyout

Aug 18, 2014 3:33 am ET

(Updates with closing share price in second paragraph.)

Aug. 18 (Bloomberg) -- Chugai Pharmaceutical Co. jumped by the most in more than 14 years after parent Roche Holding AG was said to be in talks to buy out the Japanese drugmaker to secure full control of its cancer and arthritis drugs.

Chugai gained 15 percent to close at 3,825 yen on the Tokyo Stock Exchange, the biggest advance since Jan. 6, 2000. The jump brought the company’s market value to about 2.14 trillion yen ($20.9 billion).

Roche, which owned 62 percent of Chugai as of June 30, is in talks to acquire the rest of the shares for about $10 billion, according to people familiar with the matter who asked not to be identified because the plans are private. Drugmakers generated about $238 billion in acquisitions this year, more than triple last year’s total and the highest since at least 2001, according to data compiled by Bloomberg.

Chugai’s Actemra arthritis treatment, Alecensa for lung cancer and hemophilia treatment ACE910 show the drugmaker’s “development prowess,” Ryoichi Urushihara, an analyst at Nomura Holdings Inc. said today in a note to clients. Roche wants control of drugs Chugai developed in-house and may emulate its model of investing in next-generation drugs, should the talks lead to a deal, he said.

This Week

The transaction may be announced as early as this week, though no final decision has been made, one of the people said. The acquisition would be Roche’s largest since the $44 billion deal for Genentech Inc. in 2008, and would bring the Swiss drugmaker’s total this year to the most since then, according to data compiled by Bloomberg.

Roche rose 1.3 percent to 263.20 Swiss francs at 9:30 a.m. in Zurich, giving the company a market value of 226 billion francs ($250 billion).

Last month, Roche, the world’s largest maker of cancer drugs, agreed to buy Seragon Pharmaceuticals Inc. for as much as $1.7 billion to gain a new generation of experimental treatments for breast tumors. The company is still seeking “targeted” acquisitions amid a pharmaceutical and biotechnology deals environment in which valuations are high, Chief Executive Officer Severin Schwan said on July 24.

Roche had about 10.3 billion Swiss francs in cash, near cash and short-term investments as of June 30, up about 32 percent from a year earlier, according to data compiled by Bloomberg.

Chugai isn’t in talks with Roche, spokeswoman Chisato Miyoshi said today, reiterating a statement the Tokyo-based drugmaker released Aug. 16. Representatives for Basel, Switzerland-based Roche declined to comment.

Deal Making

Roche bought 50 percent of Tokyo based Chugai in 2002 and boosted the holding to 59.9 percent in 2008. The drugmakers sell the Avastin, Herceptin and Tarceva tumor treatments and developed the Actemra arthritis medicine together.

Roche agreed in June to buy Genia Technologies Inc. for as much as $350 million, part of a strategy to piece together its own sequencing portfolio after being rebuffed about two years ago by Illumina Inc., then the world’s second-biggest maker of DNA sequencers.

The Swiss drugmaker last month said first-half profit fell 7 percent as the strength of the franc offset rising sales of new medicines. Net income declined to 5.5 billion francs in the period, while sales fell 1.4 percent, the first drop since 2011.

Chugai profit decreased 36 percent to 10 billion yen ($97 million) in the three months ended June, as sales fell about 11 percent, the first quarterly drop since 2012.