Takeda Pharmaceutical Co. is considering selling off its over-the-counter (OTC) drug subsidiary, Takeda Consumer Healthcare Co., which deals in cold medicine Benza Block and other products.
The company intends to reduce its debt from the acquisitions of overseas companies and focus its resources on developing more profitable prescription drugs.
Takeda Consumer Healthcare, a wholly-owned subsidiary of Takeda Pharmaceutical, was formed in 2016 as a separate unit of Takeda's OTC drug business and fiscal year-end sales ending March 2019 stood at 64.1 billion yen with a net profit of 9.6 billion yen. The subsidiary has a number of high-profile products, including vitamin drug Alinamin EX Plus.
According to sources, several companies including a domestic OTC drug giant and a U.S. investment fund are in the process of acquiring the company, and the value of the deal has the potential to reach somewhere in the 300-400 billion yen range.
The reason for Takeda Pharmaceutical to sell the profitable subsidiary is to cut debt. After acquiring Irish pharmaceutical company Shire plc in January 2019 for about 6.2 trillion yen, net interest-bearing debt, which is interest-bearing debt minus cash on hand, totaled about 5.4 trillion yen. To make up for this, Takeda is moving forward with a 10 billion dollars (approximately 1.07 trillion yen) asset sale plan.
As part of the plan, up to 7.7 billion dollars has been reached with the combined sales of its dry eye treatment business and other assets. If Takeda's OTC business sells at a higher-than-expected price, then the total sales amount could exceed the plan's original target.
Also, Takeda is focusing its R&D efforts in the oncology and gastroenterology fields, which are among the company's core prescription drugs administered at hospitals.
Shire has strengths in rare diseases and blood products, and this complements the areas in which Takeda has not had much success. Such synergies are unlikely to be achieved through the continuation of its OTC drug business, which in Japan has been growing at a sluggish pace due to population decline.
Accounting for only a few percent of the Group's total sales, Takeda's OTC drug business is no longer a core business. However, as President Christophe Weber has said the value of the brand built over years is high, the OTC business is such a strong one that it would still make economic sense for Takeda Pharmaceutical to keep as part of its group.
The focus going forward will be on whether Takeda and bidders can come to an agreement on the sale price and other terms.
"If the price is low, there is no reason for Takeda to rush to sell the business," said one financial source.
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