Japan's Daiichi, Sankyo confirm merger plans

Sankyo will be the dominant partner in a new joint holding company, with both firms becoming wholly owned subsidiaries of the new entity, to be called Daiichi Sankyo. The transaction is expected to complete in October.

Explaining the thinking behind the merger, Sankyo and Daiichi said that a global trend to rein in medical expenses and consumers' growing desire for a healthier lifestyle is placing ever-increasing demands on pharmaceutical companies to deliver higher quality. "The Japanese pharmaceutical industry is showing clear delineation between winners and losers and moving to an environment where only the strongest will survive."​ they said in a joint statement.

"Globalisation and borderless markets are contributing to an unprecedented pace of change in the business environment. No longer is it sufficient to seek solutions on a day-to-day tactical level. Pharmaceutical companies must make far-reaching decisions encompassing the entire scope of their businesses."​

The new firm will have combined sales of over Y 911 billion, which is more than the Y 820 billion pro forma turnover of Yamanouchi and Fujisawa, which are in the process of merging to create Astellas Pharma. Daiichi Sankyo will ranks second among the Japanese pharma companies behind Takeda Pharmaceuticals, which has projected revenues of some Y 1,100 billion for the fiscal year to March 2005.

Daiichi Sankyo will not see a complete integration of its ethical pharmaceuticals businesses until April 2007, it said, adding that the future of the over-the-counter (OTC) medicines businesses has yet to be decided.

The companies also pointed out that they share a common focus on priority R&D, especially in the cardiovascular, antibacterial, glucose/metabolism, bone disorders, immunology and anti-allergy sectors, and that integration will allow for increased concentration of research budgets and help facilitate the development of a greater number of compounds within each treatment category.

Moreover, they said that the combination would enhance their domestic strength and bolster Daiichi Sankyo's position as a licensing partner for introducing and cultivating innovative products in the Japanese market. It will also enhance financial strength, thus increasing opportunities to acquire external resources, including making acquisitions, they said.

Daiichi's chief executive, Kiyoshi Morita, said: "the integration of our two businesses will enable us to achieve a level of growth and a range of opportunities that would be out of our reach individually."​

In addition to the Yamanouchi/Fujisawa marriage, Dainippon and Sumitomo Pharmaceuticals also announced plans to merge towards the end of last year, and analysts are expecting additional M&A activity in the years to come.