PREVIEW-UPDATE 1-Otsuka may rise in debut after $2.4 bln IPO

* Stock to start trading in Tokyo on Dec. 15

* ‘Defensive’ pharma sector seen out of favour as mkt rallies

* But conservative pricing of IPO is still a draw

* Patent loss on key Abilify drug in 2015 seen a worry

* PE ratio of 14.7 at IPO price, versus Takeda PE of 13 (Rewrites first two paragraphs)

By Junko Fujita

TOKYO, Dec 14 (Reuters) - Japan's Otsuka Holdings 4578.T could rise about 5 percent on its market debut on Wednesday after pricing its $2.4 billion IPO conservatively to reflect investor worries about its heavy reliance on profits from one drug.

Any gains in its trading debut on the Tokyo Stock Exchange will likely be limited, however, as investors shift their focus away from defensive sectors and put money into stocks expected to rise most amid a broad upswing in Japanese shares.

Otsuka, Japan's second-biggest drugmaker by sales after Takeda Pharmaceutical 4502.T, priced its IPO at 2,100 yen ($25.16) a share, the lower end of an initial range of 2,000 to 2,400 yen.

“I am not expecting a big jump in their shares tomorrow,” said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co, who expects the stock to open somewhere between 2,100 yen and 2,200 yen.

“These days the market has got better. Under this environment investors want to stay away from a defensive stock like Otsuka,” Akino added.

Another analyst forecast gains of about 5 percent, while a third one saw a rise of about 9 percent.

Japan's Nikkei average .N225 posted a seven-month closing high on Tuesday and has gained more than 12 percent over the past six weeks as foreign funds have been aggressively buying lagging Tokyo shares.


GRAPHIC-Top 10 global drug firm IPOs:

GRAPHIC-Japan's Top 10

Newsmaker on Otsuka CEO Higuchi: [ID:nTOE6BD04F]



Even a mild pop on the debut would be welcome news for Japanese IPO investors, who have lately grown used to disappointments.

In April, Dai-ichi Life Insurance Co 8750.T, Japan's second-largest life insurer, went public with Japan's largest IPO, worth $11 billion.

The shares, which were also cautiously priced, have been trading below the offer price for almost six months.

And shares of cosmetic maker Pola Orbis Holdings 4927.T, which debuted on Dec. 10, dipped below the IPO price of 1,800 yen on the first day. The shares closed at 1,727 yen on Tuesday.

Otsuka sold 198.6 billion yen worth of shares in the IPO, making it the largest on record in the drug industry, surpassing Merck KGaA's MRCG.DE $1.7 billion IPO in 1995.

Otsuka priced the IPO conservatively in part to allay investor concerns about Abilify, a schizophrenia drug that accounts for a third of the company’s revenue and which helped turn the family-run firm into a global business. The drug is losing patent protection in 2015.

Otsuka’s IPO was five times oversubscribed, with the overseas portion three times covered, according to IFR. Of 90 million Otsuka shares sold, 60 percent have been allocated to overseas investors. A further 4.5 million shares were earmarked for a greenshoe option.

Nomura Holdings 8604.T, UBS AG UBSN.VX and Morgan Stanley MS.N arranged the IPO.

Otsuka said last month that it expected net profit to grow 18 percent to 79.7 billion yen in the year to March 2011 on revenue of 1.14 trillion yen, up 5 percent.

At its offer price, Otsuka, which also sells sports drinks, instant meals and skincare products, will trade at 14.7 times forecast 2011 earnings compared with 12.9 times for Takeda and 19.9 times for smaller rival Daiichi Sankyo 4568.T. ($1=83.45 Yen) (Editing by Muralikumar Anantharaman and Nathan Layne)