April 5, 2011 / 1:53 PM / 9 years ago

Japan pharma to get more aggressive in M&A

NEW YORK (Reuters) - Japanese pharmaceutical companies will become more aggressive in international dealmaking, but the size of the deals will be constrained until Japan drugmakers consolidate among themselves, bankers said.

Frederick Frank, vice chairman of Peter J. Solomon Company, speaks during the Reuters Global Mergers and Acquisitions Summit in New York, April 4, 2011. REUTERS/Brendan McDermid

“Japan has gone through an interesting evolution. In earlier years they were highly protected in their domestic markets. It was very hard for a non-Japanese company to market in Japan given the government relationship with their own companies. That changed about 10 years ago,” said Peter J. Solomon Vice Chairman Frederick Frank.

“So all of a sudden Japanese pharmaceutical companies like Takeda (4502.T) had be looking outwards, not just inwards. So the last couple of years, Japanese companies had to be very aggressive,” Frank said.

Last year, Astellas Pharma (4503.T), Japan’s No. 2 drugmaker, agreed to buy U.S. biotech OSI Pharmaceuticals for $4 billion in cash after an earlier hostile bid was rejected.

“If someone had told me 10 years ago that a Japanese company would do a hostile offer in the United States, I’d have said they need psychiatric help,” Frank said.

The size of Japanese cross-border deals is somewhat constrained by the size of the Japan pharmaceutical companies themselves.

Deal-size is “only going to get bigger if the Japanese companies themselves consolidate and get bigger. There’s lots of impediments to that,” said Evercore Senior Managing Director Francois Maisonrouge.

“They ought to (consolidate). There shouldn’t be more than a couple of pharma companies in Japan,” Maisonrouge said.

There are some hurdles to consolidation in Japan, Frank said.

“It’s hard to get the pride out of the situation,” Frank said.

(Reporting by Jessica Hall)

Editing by Carol Bishopric

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