Why are companies like Hisamitsu Pharmaceutical going private?

Companies are privatizing to gain more management flexibility, reduce costs, and invest for the long term, away from short-term investor scrutiny and government price cuts.

Is Hisamitsu Pharmaceutical's privatization a unique event?

No, Hisamitsu's move is seen as part of a broader trend of privatization among Japanese drugmakers, with others like Mitsubishi Tanabe Pharma also delisting.

What pressures are affecting Japanese drugmakers?

Japanese drugmakers face pressure from short-term investor demands, government-forced prescription drug price cuts, and the need to manage costs effectively in an aging population.

Home / Business and Economy / Hisamitsu Leads Japan Pharma Delisting Wave

Hisamitsu Leads Japan Pharma Delisting Wave

8 Jan

•

Summary

Drugmakers opt for privatization to escape scrutiny and price cuts.
Hisamitsu's delisting is one of the largest in Japan's pharma sector.
Several Japanese drugmakers are undervalued, prompting buyout considerations.

Hisamitsu Leads Japan Pharma Delisting Wave

Japan's pharmaceutical sector is witnessing a significant shift as companies opt to leave public markets. Hisamitsu Pharmaceutical Co.'s ¥457 billion privatization plan exemplifies this trend, driven by the desire to escape short-term investor pressures and government-imposed drug price cuts. This move grants greater management flexibility for cost reduction and long-term investment.

Over the past two years, other major players like Mitsubishi Tanabe Pharma Corp. and Taisho Pharmaceutical Holdings Co. have also been taken private. Analysts suggest that the current undervaluation of many Japanese drugmakers, with some trading below a price-to-book ratio of one, could spur further delisting activities. Potential targets include Kissei Pharmaceutical Co. and companies with specific ownership structures.

The broader context includes a declining number of firms on the Tokyo Stock Exchange and rising interest rates that increase borrowing costs for potential buyouts. Pharmaceutical companies face intense scrutiny due to government policies aimed at controlling healthcare costs, including prescription drug price reductions and the promotion of generics, impacting overall profitability.