Takeda Tries to Soothe Debt-Load Fears -- WSJ

CEO says drugmaker will show discipline in its spending after recent big acquisition

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 6, 2017).

TOKYO -- Takeda Pharmaceutical Co. Chief Executive Christophe Weber said another multibillion-dollar acquisition was unlikely soon, allaying fears Japan's largest drugmaker was building up too much debt after paying nearly $5 billion for a U.S. company in January.

The deal for Ariad Pharmaceuticals, Mr. Weber's first major acquisition since taking the reins at Takeda three years ago, drew concern from credit-ratings firms, with some lowering their outlook for Takeda debt. Takeda paid a 75% premium over Ariad's closing price before the deal was announced.

In an interview, Mr. Weber said Takeda was following a disciplined approach and the rewards of the Ariad purchase outweighed the risks. In April, Ariad won regulatory approval in the U.S. for a lung-cancer therapy that Takeda says could generate as much as $1 billion in sales a year.

After borrowing money to buy Ariad, Takeda's gross debt as of March 31 stood at nearly four times the company's earnings before interest, tax, depreciation and amortization, or Ebitda. That ratio was up from two times a year earlier. Banks use the ratio to assess a company's ability to service its debt. The higher the ratio, the lower the chance lenders advance loans, constraining the company's ability to borrow cash.

"We don't want to be overstretched. We want to be between two to three times Ebitda," Mr. Weber said.

While Takeda will continue to closely monitor promising startups, Mr. Weber said to investors: "Don't expect an announcement very often. We are very risk-aware."

Takeda is faced with a shrinking pool of patent-protected products, much like its Western counterparts. Actos, the company's blockbuster diabetes drug, lost patent protection in 2012. Acid reflux medication Dexilant is expected to lose exclusivity in 2020, paving the way for cheaper generic copies.

The company has forged more than 50 partnerships in the past three years, and on Monday it said it would join a Japanese biotechnology startup to co-develop a cancer therapy of the type known as CAR-T, which involves modifying patients' immune cells so they are programmed to attack their tumors. Novartis AG last week won approval for the world's first CAR-T therapy.

Despite the patent expirations, Mr. Weber said Takeda was poised for solid growth over the next few years on the back of recently introduced products including Ninlaro, a multiple myeloma treatment poised to become the company's best-selling cancer product. The drug came from Takeda's $8.8 billion acquisition of Millennium Pharmaceuticals Inc. in 2008. Takeda later spent roughly $14 billion to buy Switzerland's Nycomed A/S.

A former GlaxoSmithKline PLC executive, Mr. Weber is the first non-Japanese CEO at 236-year-old Takeda and one of the few foreigners leading a large Japanese company. He has named non-Japanese executives to many of Takeda's top posts.

His appointment initially ruffled the feathers of longtime shareholders. Shortly after he was hired in 2014, a group of shareholders said the ascension of a Frenchman was akin to " a hijacking by foreign capital."

One of those shareholders, Yujiro Hara, said things have turned out better than he expected. Mr. Weber "listens to others well," said Mr. Hara. "The mood seems to have improved."

Mr. Weber has shed noncore businesses, and reduced Takeda's focus to a small group of diseases. The company consolidated research into two main sites -- in Boston and Shonan, south of Tokyo -- and said it expected annual savings of $164 million once the restructuring concludes next year. Its stock price has risen 26% over the past year.

Mr. Weber said he was conducting town halls, roundtables and lunches to better understand employee concerns amid the restructuring. "We have passed this phase of huge uncertainty," he said. "Now it's time for us to stabilize."

Chieko Tsuneoka contributed to this article.

Write to Preetika Rana at preetika.rana@wsj.com

(END) Dow Jones Newswires

September 06, 2017 02:47 ET (06:47 GMT)