BOSTON Japanese drugmaker Dainippon Sumitomo Pharma Co Ltd (4506.T) plans to offer about $2.7 billion to acquire U.S. drugmaker Sepracor Inc SEPR.O, a source with knowledge of the situation said on Wednesday.
Dainippon would gain Sepracor's insomnia drug Lunesta and asthma drug Xopenex, as well as an experimental epilepsy drug and Sepracor's sales force of more than 1,000.
The purchase is the latest in a series of acquisitions by Japanese drugmakers of U.S. rivals as they seek a bigger foothold in the world's largest pharmaceuticals market.
News of the proposed transaction was first reported in the Japanese business daily Nikkei.
Dainippon, which sells the hypertension drugs Amlodin and Prorenal, said last month that its experimental schizophrenia drug, lurasidone, worked significantly better than a placebo in a late-stage clinical trial.
If approved, the company could use Sepracor's sales force, which is familiar with central nervous system disorders, to market the drug in the United States.
"Sumitomo is seeking to develop and commercialize in the United States a late-stage candidate for schizophrenia, but they have no sales and marketing infrastructure," said Piper Jaffray analyst David Amsellem. "For a Japanese company looking to build a commercial presence in the U.S., this is an easy way to do so."
The deal would value Sepracor's shares at around $23 each, based on the number of shares outstanding at the end of July. That would represent a premium of more than 27 percent from the company's closing share price of $18.03 on Tuesday.
The expected price was reflected in a 26.5 percent rise in the company's shares to $22.80 before they were halted on Nasdaq, pending news.
Sepracor has long been the subject of takeover speculation. The company could face generic competition to Lunesta as early as 2012 if a generic drugmaker successfully challenges the company's patent, which expires in 2014. Xopenex is set to face generic competition in 2012.
To some, the deal appears expensive.
Based on projections for 2013, the deal values Sepracor at 3.5 times sales, compared to 3.1 times for the average of other specialty pharmaceutical and generic drug industry acquisitions, said Aaron Gal, an analyst at Sanford Bernstein.
It also values Sepracor at 19.4 times EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) compared to an average of 15.1 times for other deals, he said.
"Arguably, Dainippon is buying a U.S. sales force which it can leverage to promote its current and pipeline products," said Gal. "We are unconvinced that this is the most sensible option for the company given the alternatives of building a sales team internally or acquiring a higher performing sales team at a more rational price."
Sepracor was not immediately available for comment. A U.S. representative for Dainippon Sumitomo declined to comment.
Last year, Japanese drugmaker Takeda Pharmaceutical Co Ltd's (4502.T) acquired U.S. biotech Millennium Pharmaceuticals for $8.9 billion, and Eisai Co Ltd (4523.T) acquired MGI Pharma for $3.9 billion.
Shionogi & Co Ltd (4507.T) also said last year it would buy Sciele Pharma Inc for $1.1 billion.
Sepracor, which is based in Marlborough, Massachusetts, reported 2008 sales of $1.3 billion.
(Reporting by Toni Clarke, Deena Beasley and Lewis Krauskopf; editing by Richard Chang, Andre Grenon and Tim Dobbyn)