Chugai Shares Drop After Roche Said to Decide Against Bid

Aug 25, 2014 2:45 am ET

(Updates with closing share price in second paragraph.)

Aug. 25 (Bloomberg) -- Chugai Pharmaceutical Co. fell the most in three years in Tokyo trading after Roche Holding AG was said to decide against bidding for the almost 40 percent of the Japanese drugmaker that it doesn’t already own.

Chugai dropped 9.2 percent, the biggest decline since March 2011, to 3,325 yen at the close in Tokyo. Roche decided not to bid and instead focus on its $8.3 billion acquisition of InterMune Inc., according to a person familiar with the matter.

As it worked on the InterMune deal announced yesterday, Roche had also been considering a Chugai bid, the person said, asking not to be named because the talks were private. The Swiss company dropped those plans after the Japanese drugmaker’s management signaled opposition, the person said.

Roche, which owned 62 percent of Chugai as of June 30, was in talks to acquire the rest of the shares for about $10 billion, people familiar with the matter said on Aug. 15. Chugai later said it is “in no way in the process of reviewing any plan to become a wholly owned subsidiary of Roche.”

The InterMune deal gives the Basel, Switzerland-based drugmaker access to what may be the first drug in the U.S. for a lung disease that can be fatal within five years of diagnosis. Roche’s decision to buy InterMune instead can also benefit Chugai, said Satoshi Takaoki, a senior analyst at SMBC Friend Securities Co.

“The acquisition will probably help the company get more great drugs to sell in Japan, on top of its earnings, which are already looking better than expected,” Takaoki said.

Arthritis Medicine

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. Chugai’s operating profit rose 13 percent to 43.1 billion yen ($414 million) for the six months ended June 30.

Chugai wasn’t in talks with Roche and declines to comment on market speculation, Koki Harada, a spokesman at Chugai in Tokyo, said by telephone today, reiterating a statement the drugmaker released Aug. 16.

When asked on a conference call yesterday whether Roche would still make a bid for Chugai, Chief Executive Officer Severin Schwan declined to comment.

--With assistance from Hideki Sagiike in Tokyo.