TOKYO -- Takeda Pharmaceutical aims to restore health to its balance sheet within five years after taking on hefty debt to finance the $58 billion-plus purchase of Ireland's Shire, Takeda's CEO told Nikkei on Nov. 6.
"Of course we are very much aware of the risk, but we concluded that it was an opportunity that we couldn't pass" on, Christophe Weber said of the massive deal that won shareholder approval the day before.
Looking relieved for the first time since announcing the purchase plan in May, Weber cracked a smile while recalling how a proposal to issue new stock to help fund the purchase garnered nearly 90% of the vote at the meeting. Now the company is preparing for a U.S. listing as it plans to turn Shire into a wholly owned subsidiary in January, Weber said.
Takeda's interest-bearing debt will shoot up to five times the company's EBITDA -- earnings before interest, taxes, depreciation and amortization -- when it makes the 46 billion pound ($58.7 billion) purchase that uses a mix of newly issued stock and loans. The goal is to bring the ratio back down to around double EBITDA by the year through March 2023, Weber said.
Toward this end, the company is hurrying to strengthen its earning capacity -- starting by expanding in the U.S. market, which Takeda expects to become its top source of income. American operations will be integrated in the Boston area, Weber said. Takeda's marketing hub in Illinois will be closed and its 1,000 employees reassigned near the northeastern city within half a year.
The area around Boston has both a Takeda research center and Shire sales and development facilities, said Weber, who plans to improve efficiency by consolidating U.S. management resources. The company intends to create additional synergies by integrating redundant facilities, such as in Switzerland.
The Shire purchase was among some "very courageous" decisions to ensure Takeda's success over the next decade, Weber said. Takeda's debt load will surge beyond 5 trillion yen ($44.5 billion), and earnings from Shire's mainstay products could decline. To minimize any adverse effect, Takeda will firm up its financial footing by unloading up to $10 billion in mainly noncore assets.
Weber sees core businesses making up 75% of Takeda's portfolio in the future, and discussions on what assets to sell are still ongoing for the remaining 25%, he said. Product offerings will be streamlined to pick up the pace of debt repayment, the CEO said.
Selling off ophthalmological therapies marketed by Shire has been seen as a possibility. But unloading candidate drugs for inflammatory bowel disease will come first, Weber said. The aim is to shed products that overlap with Takeda's to improve the efficiency of development and sales.
Takeda once boasted a lineup of four blockbuster drugs each generating 100 billion yen or more annually. But since their patents expired, the company's research has failed to yield successors, and earnings have faltered. Weber, brought in to get the company back on its feet, implemented drastic reforms to revive Takeda's R&D. But the results were not immediate, and the company sold off businesses and real estate to eke out profits.
Takeda was drawn to Shire's strength in blood products, which are highly profitable, and their complex manufacturing process makes it difficult for newcomers to enter the market.
With a high market share, Shire is believed to generate about 40% of its net profit from the field.
With corporate Japan's executive compensation practices in the spotlight since the arrest of now-former Nissan Motor Chairman Carlos Ghosn, the highly paid Weber faced shareholder questions on corporate governance at the meeting on Dec. 5. Takeda has "very solid governance" even from a global standpoint, the CEO said.
Eight of Takeda's 12 board members are external directors, and the company plans to add three more outside directors from Shire, bringing the total to 11 out of 15.
Some have lumped Weber in with Ghosn, since both men are French nationals leading Japanese companies. But "I think there is no reason to mix up the two," Weber said of Takeda and Nissan. They are "different situations, different companies" with "no reason to be associated," he argued.
"I'm not a friend of him," Weber said of Ghosn.
"Before I joined Takeda I met him once," while working as an executive at U.K.-based GlaxoSmithKline.
Ghosn, a star executive in the auto industry, presided over the Renault-Nissan-Mitsubishi Motors alliance. Weber said that for his part, "I don't want to become a star. And I don't have a big ego." He described himself as working "very much with a team."