Global Healthcare Analyst

Tina Banerjee

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sawai-group-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:35512:1" rel="noopener">Sawai Group Holdings (4887 JP)</a> is negatively impacted by drug reimbursement pricing in Japan. H1FY23 revenue, operating profit, net profit decreased 1%, 36% y/y, and 29%, y/y, respectively.</li>
<li>Generic pharmaceutical companies are more affected by the drug price revisions than their branded counterparts. In addition, APIs are impacted by increases in the cost of oil and exchange rates.</li>
<li>The sustainability of the U.S. business rebound is still uncertain. We want to watch Sawai from sidelines and wait for full-year FY23 results, FY24 guidance, and NHI pricing decision.</li>
</ul>



Sawai Group Holdings (4887 JP) is negatively impacted by drug reimbursement pricing in Japan. H1FY23 revenue, operating profit, net profit decreased 1%, 36% y/y, and 29%, y/y, respectively.
Generic pharmaceutical companies are more affected by the drug price revisions than their branded counterparts. In addition, APIs are impacted by increases in the cost of oil and exchange rates.
The sustainability of the U.S. business rebound is still uncertain. We want to watch Sawai from sidelines and wait for full-year FY23 results, FY24 guidance, and NHI pricing decision.


Sawai Group Holdings (4887 JP): Continued Price Erosion Is Weakening Earnings Prowess

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>Sumitomo has increased its all-cash offer by c. 19% to $27/share, a 50% premium, 4.6x EV/Fwd Revenue and corresponds to an implied equity value of $1.7 billion and EV of $2.9 billion.</li>
<li>The Board of Myovant recommends the offer, which should close in Q1 2023. The market has bought into the deal: USD turnover on 24 October has been $585 million.</li>
<li>As a result of the improved offer, I increase my TP to $27 (vs $22.84 formerly). Gross spread is 0.78% and the estimated annual return is 1.83%.</li>
</ul>


Sumitomo has increased its all-cash offer by c. 19% to $27/share, a 50% premium, 4.6x EV/Fwd Revenue and corresponds to an implied equity value of $1.7 billion and EV of $2.9 billion.
The Board of Myovant recommends the offer, which should close in Q1 2023. The market has bought into the deal: USD turnover on 24 October has been $585 million.
As a result of the improved offer, I increase my TP to $27 (vs $22.84 formerly). Gross spread is 0.78% and the estimated annual return is 1.83%.


Sumitomo/​Myovant: Agreed Minorities Takeout at $27

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sumitomo-dainippon-pharma-co" target="_blank" data-smartkarma-citation="entities:1935:1" rel="noopener">Sumitomo Dainippon Pharma Co (4506 JP)</a> offered to acquire <a href="https://www.smartkarma.com/entities/myovant-sciences-ltd" target="_blank" data-smartkarma-citation="entities:36419:1" rel="noopener">Myovant Sciences (MYOV US)</a>, which was rejected due to low valuation. The company is unlikely to revise its offer for Myovant.</li>
<li>As Sumitomo’s in-house drug candidates are still in clinical stages, the company needs Myovant’s already marketed products to maintain its growth momentum post Latuda patent expiry.</li>
<li>Sumitomo is not expected to sell its existing 52% stake in Myovant. This will ensure that Myovant’s marketed products Orgovyx and Myfembree should continue to remain as Sumitomo’s growth drivers.  </li>
</ul>



Sumitomo Dainippon Pharma Co (4506 JP) offered to acquire Myovant Sciences (MYOV US), which was rejected due to low valuation. The company is unlikely to revise its offer for Myovant.
As Sumitomo’s in-house drug candidates are still in clinical stages, the company needs Myovant’s already marketed products to maintain its growth momentum post Latuda patent expiry.
Sumitomo is not expected to sell its existing 52% stake in Myovant. This will ensure that Myovant’s marketed products Orgovyx and Myfembree should continue to remain as Sumitomo’s growth drivers.  


Sumitomo Dainippon Pharma Co (4506 JP): Myovant Is Crucial for Post-Latuda Growth Momentum

<ul>
<li>
<a href="https://www.smartkarma.com/entities/myovant-sciences-ltd" target="_blank" data-smartkarma-citation="entities:36419:1" rel="noopener">Myovant Sciences (MYOV US)</a> rejected $2.5 billion takeover offer from its largest shareholder, <a href="https://www.smartkarma.com/entities/sumitomo-dainippon-pharma-co" target="_blank" data-smartkarma-citation="entities:1935:1" rel="noopener">Sumitomo Dainippon Pharma Co (4506 JP)</a>, as the bid significantly undervalues the company.</li>
<li>Amid its tight cash situation, upcoming patent cliff, and ongoing late-stage clinical trials, Sumitomo is not expected to revise its offer upward.</li>
<li>New acquisition offer from marketing partner Pfizer is the most likely scenario. Even if the company does not receive any takeover offer, Myovant is capable of running its operating activities.</li>
</ul>



Myovant Sciences (MYOV US) rejected $2.5 billion takeover offer from its largest shareholder, Sumitomo Dainippon Pharma Co (4506 JP), as the bid significantly undervalues the company.
Amid its tight cash situation, upcoming patent cliff, and ongoing late-stage clinical trials, Sumitomo is not expected to revise its offer upward.
New acquisition offer from marketing partner Pfizer is the most likely scenario. Even if the company does not receive any takeover offer, Myovant is capable of running its operating activities.


Myovant Sciences (MYOV US): Rejects Sumitomo’s $2.5B Bid; Remains Open for Better Offer

<ul>
<li>
<a href="https://www.smartkarma.com/entities/otsuka-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:12292:1" rel="noopener">Otsuka Holdings (4578 JP)</a> started 2022 on a strong note, with 13% y/y revenue growth in Q1. Growth was driven by four global products, which contributed 36% of total revenue.</li>
<li>Otsuka has terminated its global license agreements with Akebia Therapeutics related to vadadustat for the treatment of renal anemia and recorded an impairment loss of ¥24 billion.</li>
<li>Despite the impairment losses related to vadadustat, Otsuka reiterated 2022 guidance and expects double-digit growth in operating and net profits.</li>
</ul>



Otsuka Holdings (4578 JP) started 2022 on a strong note, with 13% y/y revenue growth in Q1. Growth was driven by four global products, which contributed 36% of total revenue.
Otsuka has terminated its global license agreements with Akebia Therapeutics related to vadadustat for the treatment of renal anemia and recorded an impairment loss of ¥24 billion.
Despite the impairment losses related to vadadustat, Otsuka reiterated 2022 guidance and expects double-digit growth in operating and net profits.


Otsuka Holdings (4578 JP) 1Q22: Global Products Continued Double-Digit Revenue Growth

Japan

Sumitomo Dainippon Pharma Co., Ltd. mainly manufactures and markets pharmaceuticals for human and veterinary use. The Company also produces and sells livestock feeds, food additives, and chemical products, as well as conducts clinical pathology tests for animals. Sumitomo Dainippon Pharma conducts businesses across worldwide.

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Sumitomo Pharma (4506 JP)

Sawai Group Holdings (4887 JP): Continued Price Erosion Is Weakening Earnings Prowess

In H1FY23, revenue from Japan declined 7%, mainly due to drug price revisions in several consecutive years. Generic drug makers are more affected...

Tina Banerjee

Sumitomo/Myovant: Agreed Minorities Takeout at $27

There is a willing buyer, Sumitomo, which has increased its offer by 18.7% vs. the initial approach. The market believes the offer will succeed and...

Jesus Rodriguez Aguilar

Sumitomo Dainippon Pharma Co (4506 JP): Myovant Is Crucial for Post-Latuda Growth Momentum

As Sumitomo is not expected to launch any new in-house product until FY24, the company needs Myovant’s already marketed products to maintain its...

Tina Banerjee

Myovant Sciences (MYOV US): Rejects Sumitomo’s $2.5B Bid; Remains Open for Better Offer

Myovant has turned down acquisition offer from its largest shareholder, leading to share price volatility. A revised offer or a fresh offer from...

Tina Banerjee

Otsuka Holdings (4578 JP) 1Q22: Global Products Continued Double-Digit Revenue Growth

Otsuka reported 13% y/y revenue growth in Q1, driven by four global products and reiterated 2022 guidance. Despite recent pipeline blues, Otsuka’s...

Tina Banerjee

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Sawai Group Holdings (4887 JP): Continued Price Erosion Is Weakening Earnings Prowess

In H1FY23, revenue from Japan declined 7%, mainly due to drug price revisions in several consecutive years. Generic drug makers are more affected...

Tina Banerjee

Sumitomo/​Myovant: Agreed Minorities Takeout at $27

There is a willing buyer, Sumitomo, which has increased its offer by 18.7% vs. the initial approach. The market believes the offer will succeed and...

Jesus Rodriguez Aguilar

Sumitomo Dainippon Pharma Co (4506 JP): Myovant Is Crucial for Post-Latuda Growth Momentum

As Sumitomo is not expected to launch any new in-house product until FY24, the company needs Myovant’s already marketed products to maintain its...

Tina Banerjee

Myovant Sciences (MYOV US): Rejects Sumitomo’s $2.5B Bid; Remains Open for Better Offer

Myovant has turned down acquisition offer from its largest shareholder, leading to share price volatility. A revised offer or a fresh offer from...

Tina Banerjee

Otsuka Holdings (4578 JP) 1Q22: Global Products Continued Double-Digit Revenue Growth

Otsuka reported 13% y/y revenue growth in Q1, driven by four global products and reiterated 2022 guidance. Despite recent pipeline blues, Otsuka’s...

Tina Banerjee

Sumitomo/Myovant: Agreed Minorities Takeout at $27