Roche and Chugai create new Japanese research led company

Pharmaceutical companies Roche and Chugai are to enter into an alliance to create a leading research-driven Japanese pharmaceutical company. The new enterprise, to be named Chugai Pharmaceutical, will be formed by the merger of Nippon Roche and Chugai and will be based in Japan with access to global markets. It will be the fifth largest pharma company in Japan with a pro forma 2000 turnover of approximately ¥253bn (US$2bn). The Roche Group will be the majority shareholder with a 50.1% interest.

Under the terms of a jointly agreed governance agreement, Chugai will be an autonomously managed company, closely co-ordinating its operations with Roche. Chugai will be Roche's exclusive pharma representative in Japan and will have rights to develop and market all pharmaceutical products that the Roche Group decides to commercialise in Japan. Roche will have the right to license-in for all Chugai products outside Japan and South Korea for which Chugai seeks a partner.

The combined products will create a balanced portfolio with a strong position in the fast-growing market segments of oncology/hematology, renal and bone diseases and virology. Combined target sales of ¥300bn (US$2.35bn) are expected to be achieved within three years. The combined r&d pipeline will contain 46 new molecular entities of Roche's and 14 compounds from Chugai's portfolio in clinical development.

Immediately prior to implementing the alliance, Chugai will spin off its 100% shareholding in Gen-Probe, its California-based DNA probe diagnostics and blood screening subsidiary, which competes with certain diagnostics businesses of Roche. After the spin-off, Roche will launch a tender offer for approximately 10% of Chugai's then outstanding shares at a price of ¥2,136 (US$16).

'This unprecedented transaction enables Roche to become a leader in the second largest pharmaceutical market worldwide and adds global access to Chugai's solid r&d pipeline,' said Franz B. Humer, chairman and ceo of Roche.

Osamu Nagayama, Chugai's president and ceo, said: 'The combination of Chugai's and Nippon Roche's current product portfolio and pipelines, which are complementary and particularly focused on the growth segments of the Japanese markets, will enable us to create a very solid franchise over the coming years.'