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Pharma giant Astellas to invest $1.8bn in M&A diversification bid

Japanese company scouts startups for new drugs as old patents set to expire

Astellas is going to tap into its ample cash holdings to fund a new round of acquisitions. (Photo by Tsuyoshi Tamehiro)

TOKYO -- Japan's second-largest drugmaker, Astellas Pharma, is set to use its strong cash position to invest 200 billion yen ($1.86 billion) over the next three years to obtain promising new drugs through acquisitions of startups.

With patents due to expire for a group of flagship products in 2019, Astellas is keen to diversify, and is willing to tap into its cash holdings of 330 billion yen, as of December 2017, said Chief Financial Officer Chikashi Takeda.

"Sixty percent of our cash holdings will be devoted to large-scale business investments, especially in mergers and acquistions," Takeda told Nikkei.

The company is "actively strengthening" its presence in cancer treatments and is constantly on the lookout for promising assets, said Takeda. Astellas could even take on new debt to fund acquisitions, he added.

A central player among Japan's global pharmaceutical companies, Astellas temporarily lost its No. 2 spot by market capitalization to Chugai Pharmaceutical last year, and faces some challenges ahead.

From 2019, patents for two of its flagship products used to treat overactive bladders, Vesicare and Betanis, will expire.

Investors have also expressed concern over a potential decrease in profitability despite key earner Xtandi, a prostate cancer drug that raked in more than 100 billion yen in annual revenue, bolstering company earnings.

The latest commitment to invest follows a run of acquisitions over the past two years. In 2016, the company acquired Ganymed Pharmaceuticals, a German producer of cancer antibody drugs, for approximately 48 billion yen. Last year, its buyout of Belgian drug-discovery company Ogeda cost about 59 billion yen.

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