Takeda's Spree Peaks With Millennium Buy
The Japanese are coming!
Well, to be exact, one Japanese drugmaker, Takeda Pharmaceutical, is coming. And the big question is whether its recent buying spree -- capped by its $8.8 billion acquisition of the biotech Millennium Pharmaceuticals announced today -- will leave it looking more like Godzilla or one of the unfortunates squashed during the saurian's rampages through Tokyo. If I had to guess, I'd pick the latter.
Virtually alone among Japan's once all-but-dead pharmas, Takeda has been expanding internationally at a rapid pace. In just the past three months, it has committed almost $1.5 billion for Asian rights to a bundle of Amgen's drugs, buying the embattled biotech's Japanese unit in the bargain, as well as for worldwide rights to an unproven cancer vaccine from biotech Cell Genesys.
Its purchase of Millennium is similarly rich: Takeda paid a roughly 50 percent premium to acquire a company with a single approved drug, the blood-cancer treatment Velcade, which may bring in a whopping $345 million in sales this year, five years after it was approved. Although a reasonable success, Velcade is only used against the rare cancer multiple myeloma, which affects roughly 55,000 people in the U.S. -- only half of which are currently eligible for the drug in any event.
Takeda CEO Yasuchika Hasegawa clearly has global ambitions, but also some monstrous problems: The company's two blockbusters -- one for diabetes, one for heartburn -- will face generic competition in just a few years. So you can see why Hasegawa has been spending freely from the company's $20 billion war chest.
Plenty of folks are busily spinning out scenarios to justify the Millennium deal, but they all sound pretty weak to me. Did Takeda get a boost from the yen's strength against the dollar? Sure, but the Japanese currency is only up about 21 percent against the greenback since last June -- a nice cushion, but hardly the "tremendous advantage" some are making it out to be.
What's more, for Takeda's big bets to pay off, almost everything has to go right for the next five years or so -- which is tremendously unlikely, to put it lightly. Velcade would have to expand easily into new but still-small markets, Millennium's other experimental drugs will have to sail through clinical trials, and Amgen's battered drug portfolio -- hardly the cash cow it used to be, thanks to the company's overaggressive promotion of its core anemia treatments -- would need to stage a tremendous rally.
Even then, Takeda won't benefit much from non-U.S. sales of Velcade, which are owned by Johnson & Johnson. Millennium's most advanced experimental drug is highly unlikely to be approved earlier than 2011.
In short, the Millennium deal looks a lot like the sort of magical thinking that seems to afflict many biotech investors. It's eerily similar in that respect to AstraZeneca's $16 billion purchase of MedImmune almost exactly a year ago, which saddled another teetering drugmaker with a middling biotech and a bagful of dreams. Such deals are a good measure of Big Pharma's desperation, but not a whole lot more than that.
Historical note: Seven years ago, Millennium and MedImmune were the companies playing Big Spender. Millennium acquired Cor Therapeutics for $2 billion the same week in December 2001 that MedImmune snapped up Aviron for $1.5 billion. My favorite headline at the time was from Forbes: "Millennium Buys Cor, Wants to Be Merck." I think it's safe to say that idea didn't work out as planned.