Roche acquires Chugai Pharmaceutical controlling stake, expanding in Japan, the world’s second largest pharmaceutical market

Japan’s pharmaceutical market is approx. US$ 80 billion – US$ 120 billion, approx. 10% of the global pharmaceutical market

by Gerhard Fasol

Roche acquires Chugai: Roche KK merges into Chugai in a carefully structured process, with Chugai the surviving company

Roche acquires Chugai in a series of carefully crafted transactions, to expand in the world’s second largest pharmaceutical market, Japan. Japan’s pharmaceutical market size is estimated at YEN 8000 – 1,200 billion (US$ 80 billion – US$ 120 billion), depending on the source and methods of estimation, corresponding to about 10% of the global pharmaceutical markets.

Growth of Japan’s pharmaceutical markets are about 2% per year, thus expected to grow to about US$ 130 billion by 2018. Different studies give different estimates for the size of Japan’s pharmaceutical market.

Roche acquires Chugai. First stage. December 2001/October 2002. Roche acquires 50.1% of Chugai and merges Nippon Roche KK into Chugai

In 2001, Roche and Chugai agreed for Roche to acquire 50.1% of Chugai for YEN 155 – 198 billion (US$ 1.23 – 1.58 billion). Basic agreement was signed in December 2001.

The merger of Nippon Roche into Chugai, which Chugai the surviving company and the full start of the alliance was in October 2002. Chugai maintains autonomous management, and listing on the Tokyo Stock Exchange.

Roche and Chugai entered into a double licensing agreement, where Roche licenses products from Chugai for international distribution, and vv Chugai licenses products from Roche for distribution in Japan:

  • Chugai has first refusal rights to develop and sell Roche products in Japan
  • Roche has first refusal rights to develop and sell Chugai products in Japan, with some territorial exceptions

Also agreed were limits on Roche’s shareholding in Chugai:

  • 1 Oct 2002 – 30 Sept 2007: maximum shareholding 50.1%
  • 1 Oct 2007 – 30 Sept 2012: maximum shareholding 59.9%
  • from 1 Oct 2012: Roche will cooperate to maintain Chugai’s stock market listing in Japan

Roche acquires Chugai. Second stage. 2008 Roche increases share holding in Chugai to 59.9%

Roche acquires Chugai. Third stage: Roche currently holds 61.62% of Chugai

Although there have been press reports speculating that Roche plans to acquire all of Chugai, currently Roche holds 61.62% of Chugai.

Chugai Pharmaceutical Company Ltd (中外製薬株式会社)

Chugai Pharmaceutical Company Ltd is (中外製薬株式会社) listed on the Tokyo Stock Exchange, Code 4519.

Market cap is YEN 2,360 billion (approx. US$ 24 billion) as of 26 May 2017. Chugai employs 7245 people as of 31 December 2016, achieving sales/revenues of YEN 492 billion (approx. US$ 5 billion).

Chugai was founded on 10 March 1925, and established in the current form on 8 March 1943.

Roche in Japan

  • 1899: Roche is the first Western pharmaceutical company to start business in Japan, establishes a network of sales representatives
  • 1904: Karl Rhode Company becomes distributor of Roche in Japan
  • 7 July 1924: Roche incorporates a subsidiary in Japan, Roche Gomeikaisha
  • 1924-1939: Dr Alice Keller, Head of Roche Japan
  • 1932: Nippon Roche KK founded
  • 2001/2002: Roche acquires 50.1% of Chugai, merges Nippon Roche KK into Chugai. Chugai is the surviving company, and remains under autonomous management and listed on the Tokyo Stock Exchange

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