Roche Chugai bid planned

A Roche Chugai bid is set to occur, twelve years after the Swiss pharmaceutical giant paid $1.4 billion for a 50.1% stake in the Japanese drugmaker. With an expected $10 billion offer, Roche, which plans to expand in Asia, would own the whole company.

In 2008, Roche increased its stake in Chugai Pharmaceutical Co., Ltd. to 59.9%.

Bloomberg quotes unnamed people familiar with the situation who believe a deal will be announced next week.

Roche, a busy summer

During the last three months, Roche, the world’s largest maker of cancer medications, has reached deals with:

  • Seragon Pharmaceuticals: The deal includes an up-front cash payment of $725 million plus $1 billion when certain targets are reached. Of interest was its experimental next-generation oral selective estrogen receptor degraders for the treatment of hormone receptor-positive breast cancer. The company was bought by Roche’s subsidiary company Genentech.
  • Santaris Pharma: $250 million plus up to $200 million when certain targets are met. Roche wanted Santaris’ proprietary LNA (Locked Nucleic Acid) platform that has contributed to an emerging era of RNA-targeting therapeutics.
  • Genia Techologies Inc.: $125 million plus up to $225 million when targets are met. The California-based company is developing a single-molecule, semiconductor based, DNA sequencing platform using nanopore technology.

For Roche, 2014 has been its busiest period for acquisitions since it took over San Francisco-based Genentech in 2009 for $47 billion.

Chugai, which specializes in arthritis and cancer medications, posted sales of $4.4 billion in 2013, compared to Roche’s $52 billion (group sales 46.7 Swiss francs).

Roche Chugai

The two companies jointly sell Tarceva (lung and pancreatic cancers), Herceptin (breast and gastric cancers) and Avastin (several cancers). They are also developing the rheumatoid medication Actemra together.

Chugai move a surprise

Roche’s CEO, Severin Schwan, said last year that he could not see any reason to acquire the rest of Chugai. In July this year, he said the company would carry on with its strategy of small, targeted acquisitions and partnerships.

In 2013, Roche generated almost $19 billion of free cash flow. It is predicted to be in a net cash position by the end of this year.

There were rumors that Roche might place offers for Alexion ($20 billion) and BioMarin ($13.5 billion), both rare disease specialists, but nothing came from them.

Roche’s motive for acquiring the rest of Chugai has more to do with consolidating its position in an expanding Asian market than extending its portfolio of medications.