Is the generic drug market truly commoditized? Nichi-iko’s growth over the past fifteen years might suggest otherwise. Looking at valuations, however, its sizable market discount shows that the view that this space does not offer interesting rewards remains prevalent; as well as suggesting the further view, that Japan’s generics market, having had an easy time of it, is about to enter a period of bigger bets for ever smaller rewards.
Prior to Nichi-iko’s acquisition of Sagent, we were inclined to agree with these assessments. On the one hand, the Japanese generics market was wholly reliant for its growth on the government delivering on its interventionist policies. On the other hand, not only were domestic rivals such as Sawai gearing up to meet this promised potential, but big international generics like Teva were circling, as well as big domestic pharma names like DSK.
This report looks at whether, in one fell swoop, the Sagent deal not only provides global diversification opportunity, but also stands as an insurance against excessive competition – as well as whether the existing discounted valuation for Nichi-iko is still valid, given that, in acquiring Sagent, Nichi-iko paid a 40% premium to the Sagent market price.
Key Points
Nichi-Iko Pharmaceutical is mainly engaged in the manufacture, sale, distribution, import and export of pharmaceutical products, quasi drugs and other medical products. Co. provides its products to medical institutions, such as hospitals, medical clinics and dispensing pharmacies. Its medical products are divided into ethical pharmaceutical products which are formulated according to a prescription, as well as general pharmaceutical products which can be purchased at pharmacies and drugstores without a prescription needed. Co.'s principal products include drugs used for the treatment of circulatory, digestive, respiratory, as well as central and peripheral nervous systems.
Founded in 2009, Pelham Smithers Associates (PSA) provides market intelligence on Asian technology, focusing in particular on Japan. The industries covered by our team of specialists are: consumer electronics, telecomms, pharmaceuticals, internet, electronic parts and materials, automotive technology, retail and capital goods.
PSA produces both company and sector reports. The focus of PSA’s research is to identify winners and losers as new technologies impact the top and bottom lines of corporations. Critical to our research is the clear explanation of how these new technologies work and how they impact companies and industries.
The founding partners have worked closely together for twenty years and the team has more than doubled in size since 2012.
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