Japanese companies Sankyo and Daiichi are considering merging in October this year in a deal that would create the country’s second largest drugmaker as competition in this market continues to intensify, according to Industry reports.
Consolidation in the Japanese market is continuing at a pace, with the Sankyo-Daiichi deal speculation coming hot on the heels of the mergers between Yamanouchi and Fujisawa [[25/05/04b]], and Dainippon and Sumitomo [[26/11/04c]]. However, analysts at Datamonitor question whether the deal is simply a “quick fix” for Sankyo, which it claims has a “bleak future and weak pipeline prospects.”
Over the last few years, the report notes that Sankyo’s and Daiichi’s growth has relied heavily on in-house products to achieve sales growth, with over 77% of 2003 ethical sales for both companies derived from proprietary products. It notes that the merger presents the opportunity for both firms to bolster research and development productivity, but cautions that the companies will still need to look to further licensing opportunities to maximise the return of currently marketed drugs at a global level.
Prior to the announcement of the merger, Datamonitor had forecast Sankyo’s ethical sales to increase from around $3.9 billion dollars in 2003 to just over $4 billion in 2010. Daiichi had a far worst outlook, with sales expected to grow from $2.2 billion in 2003 to $2.3 billion. However if the merger goes ahead, Datamonitor forecasts the new company’s combined sales of $6.1 billion in 2003 will rise to $6.3 billion in 2010. As such, the analysis claims Sankyo will hope the deal will “[broaden] its product portfolio in the common areas of infectious disease and cardiovascular conditions, while accelerating Daiichi’s US market penetration through an extended sales force in comparison.”
In its report, Datamonitor notes that Sankyo will likely take the lead in the deal with Daiichi, and will put up more than half the resulting company’s capital. Although neither firm has confirmed deal talks, the report notes that even with a merger, the two companies would only command third place in the Japanese market by 2010, behind Takeda (with revenues of $9 billion), as Astellas – the merged Yamanouchi and Fujisawa – becomes the leading Japanese global operator (expected to record $9.2 billion).