Drugmaker Sepracor Accepts $2.6B Buyout Offer from Japan’s Dainippon

9/3/09

In what could become Massachusetts’ largest life science deal of the year, Marlborough, MA-based drugmaker Sepracor (NASDAQ:SEPR) has agreed to be acquired by the Japanese pharmaceutical firm Dainippon Sumitomo Pharma for a whopping $2.6 billion, the companies reported early this morning. The deal would put another Massachusetts-based life sciences company in the hands of a Japan-based company, following Takeda Pharmaceutical Company’s $8.8 billion buyout of Cambridge, MA-based Millennium Pharmaceuticals last year.

The deal was formally announced today after there was news and speculation about the buyout on Wednesday.

Dainippon is proposing to buy Sepracor—maker of the popular sleeping pill eszopiclone, which is marketed as Lunesta—via a tender offer of $23 per share in cash. That offer is a 48 percent premium over Sepracor’s average stock price over the past six months and is 27.6 percent higher than the closing price of the firm’s stock on Tuesday, Sept. 1. The buyer plans to begin the offer on Sept. 15, which should pave the way for a quick takeover of Sepracor unless another bidder emerges. Sepracor is expected to continue operations in Massachusetts and Canada, maintaining its name and branding, after the acquisition, according to a press release.

The Sepracor buyout shouldn’t come as a surprise. With their R&D pipelines failing to yield enough new drugs, large pharmaceutical companies have yearned to acquire companies like Sepracor that have marketed products and predictable revenue streams. This same market dynamic has prompted a string of mergers in the industry, including those between Pfizer and Wyeth, and Merck & Co. and Schering-Plough, to name a couple. Dainippon’s purchase of Sepracor brings the Japanese drug firm a revenue stream from not only eszopiclone but also Sepracor’s line of drugs for respiratory ailments such as ciclesonide (Omnaris), arformoterol tartrate (Brovana), and levalbuterol (Xopenex). Sepracor, which was founded in 1984, reported 2008 revenue of $1.29 billion on sales of these treatments and others.

“Both companies share a common vision, values, and strategy,” said Adrian Adams, president and CEO of Sepracor, in a statement, “and the transaction should enable Sepracor to enhance its product pipeline and enjoy sustainable growth well into the future.”

In addition to product revenues, Dainippon’s buyout would give it Sepracor’s sales force of 1,200 people, who could provide a big boost to Japanese firm’s efforts to sell its existing products in the U.S. market. Dainippon is eying the U.S. market for its experimental schizophrenia drug lurasidone, which faired well in a late-stage clinical trial, the results of which were reported in May.

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