UPDATE 1-Japan's Otsuka to raise $2.8bln in record pharma IPO

* To sell as many as 94.5 mln shares at about 2,400 yen each

* Expects to debut on Tokyo exchange in December

* Ranks as Japan’s No.2 drug firm by revenue

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TOKYO, Nov 12 (Reuters) - Japanese drugmaker Otsuka Holdings said on Friday it will sell about $2.8 billion worth of shares in December, the world’s largest initial public offering in the pharmaceuticals sector.

Japan's IPO market has been in the doldrums with the exception of Dai-ichi Life Insurance Co's 8750.T $11 billion listing in April, which was the biggest IPO in Japan this year.

Otsuka Holdings, a two-year-old umbrella company for 145 subsidiaries and affiliates with 39,000 employees, is expected to list on the Tokyo Stock Exchange to fund rising costs for developing drugs and expanding its operations globally.

The firm will sell 80 million shares at 2,400 yen each, including 41.3 million treasury shares, while shareholders will sell 10 million shares. Otsuka will also sell as many as 4.5 million in a possible green shoe option.

Otsuka is 12.4 percent owned by its founder and family members, according to an earlier company filing.

The estimated offer price would value the company at more than 1 trillion yen ($12 billion), ranking Otsuka behind only three other drugmakers in Japan -- Takeda Pharmaceutical 4502.T, Astellas Pharma 4503.T and Daiichi Sankyo 4568.T -- and roughly on a par with Eisai Co 4523.T, Japan's No.4 drugmaker.

Otsuka's IPO would top Merck KGaA's MRCG.DE $1.7 billion offering in 1995 as the world's biggest pharmaceuticals IPO, according to Thomson Reuters data.

Otsuka had a net profit of 67.4 billion yen on revenues of 1.08 trillion yen in the year to March 2010, making it Japan’s second-biggest pharmaceuticals group after Takeda in terms of revenues.

Otsuka Pharmaceutical, the biggest unit of the holding firm, developed schizophrenia drug Abilify and teamed up with Bristol-Myers Squibb BMY.N to sell it in the U.S. and other markets. It also sells sports drinks, instant meals and skincare products.

Research and development costs at Otsuka have been on the rise, in line with trends in a broader drug industry that is staging an increasingly costly race to develop successors to major drugs losing patent protections.

Otsuka Holdings spent 152 billion yen on research and development, mostly on drugs, last business year, up 12 percent from the year before.

The drug business traces its roots to the Japanese island prefecture of Tokushima, where founder Takesaburo Otsuka started a small chemical factory in 1921.

Tatsuo Higuchi, 60, the president of Otsuka Holdings, took the helm in July 2008 when the holding firm was established.

Born in Tokyo, he studied fishery and food chemistry at a graduate school of Hokkaido University in northern Japan and joined Otsuka Pharmaceutical in 1977, hoping to someday globalise the firm, which barely operated outside Japan at that time. (Reporting by Yumiko Nishitani and Junko Fujita; Editing by Lincoln Feast and Joseph Radford)