Takeda Pharmaceutical Company Limited TKPYY and Teva Pharmaceutical Industries Limited TEVA provided a detailed overview of their new business venture in Japan, which was announced last month. Under the new business venture, Teva will offer its high-quality generic medicines while Takeda will provide some of its long listed products to patients and health care professionals in Japan.
Financial Details
As part of the deal, Takeda will split off its off-patented and data exclusivity expired products business (long listed products business) by means of a triangular absorption-type split among Teva Pharma Japan Inc. and Taisho Pharm. Ind., Ltd., as well as Takeda.
In this particular type of split, Takeda will be the splitting company while Taisho Pharm will be the succeeding company. Moreover, Takeda's long listed products business will be transferred to Taisho Pharm and it will allocate shares of Teva Pharma, which will become its parent company, to Takeda as a consideration for the company split. The name of Taisho Pharm, which will succeed Takeda's long listed products business and also continue its generics business, will become Teva Takeda Yakuhin Ltd., and the name of Teva Pharma, which will continue its generics business, will become Teva Takeda Pharma Ltd. Both companies will jointly conduct the new business.
While Teva will hold 51% of Teva Pharma's shares through Teva Holdings KK, the Japanese subsidiary of Teva, Takeda will hold 49% of Teva Pharma's shares. Additionally, about 60 employees, particularly from Takeda’s sales department, are to be placed in the new companies associated with the company split.
Takeda expects the transaction to be both earnings and cash flow accretive in 2016 and over the long term due to growth of the generic business and the addition of products from Takeda and Teva to the new business venture.
The new business venture will be immediately accretive to Teva's earnings in 2016 and beyond. Meanwhile, a detailed impact of the transaction will be included in Takeda's outlook for 2016, to be provided in May 2016.
Other Details
Some of the important products that are scheduled to be transferred to the succeeding company include Blopress (hypertension, excluding fixed dose combinations), Takepron (peptic ulcers, excluding fixed dose combinations) and Basen (type II diabetes) among others. However, prostate cancer drug, Leuplin, will not be a part of this transfer.
Moreover, total sales of the products to be transferred were 125 billion yen in FY2014, accounting for 7% of Takeda's global revenue. Owing to this transaction, Takeda expects its FY2016 revenue to decrease by about 50 billion yen.
The new business venture that is expected to come into effect in or after Apr 2016 is expected to become a leading off-patent product (including generic medicines and long listed products) company in Japan leveraging Takeda's corporate brand and unique distribution network in Japan and Teva's wide product portfolio and cutting-edge business efficiency.
Currently, both Takeda and Teva are Zacks Rank #3 (Hold) stocks. A couple of better-ranked stocks in the health care sector are Achillion Pharmaceuticals, Inc. ACHN and Anika Therapeutics Inc. ANIK. Both carry a Zacks Rank #1 (Strong Buy).
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