Astellas Pharma To Buy Iveric Bio For $5.9 Billion

The Astellas Pharma Inc. headquarters in Tokyo. Photographer: Akio Kon/Bloomberg

(Bloomberg) -- Japanese drugmaker Astellas Pharma Inc. has agreed to acquire Iveric Bio Inc., which develops drugs to treat age-related blindness, for about $5.9 billion.

The deal, which will be funded by cash and debt, is for 100% of Iveric Bio for $40 per share, a premium of 75% to the drugmaker's 30-day volume-weighted average price through end-March 31, the companies said in a statement on Monday. Iveric Bio shares closed at $32.89 on Friday.

The acquisition gives Astellas a key product to offer therapies for blindness and eye conditions, a growth area identified by the company as it seeks to make up for declining sales of other products. Iveric Bio is developing a drug to treat geographic atrophy, a condition that leads to the loss of retinal tissue in the eye.

“The drug has a potential to be the standard of care” for a leading cause of blindness, where 40% of those afflicted end up losing their sight, Naoki Okamura, Astellas's chief executive officer, said in a briefing. The acquisition will help Astellas enter a large market where patients have long waited for treatments and boost its presence there, he added.

Shares in Astellas rose 2.2% on Monday, leaving them up 4.3% this year.

Astellas said it will pay for the deal with bank loans and by issuing commercial paper of about ¥800 billion yen total, in addition to cash on hand. The debt will be repaid within five to seven years, the company said, adding that there will be no change to its dividend policy.

The drug will be a pillar for growth to buffer a decline in sales when Astellas's biggest-selling cancer drug Xtandi faces generic competition in the US from 2027, Okamura said.

“Astellas has a mixed record when it comes to M&A,” Stephen Barker and Naoya Miura, analysts at Jefferies Japan Ltd., wrote in a note following the announcement of the Iveric Bio deal. They cited the successful 2016 acquisition of Ganymede, and the 2019 purchase of gene therapy company Audentes, which generated “a lot of impairment.”

“This deal, however, is mainly about a soon-to-approved asset, and seems less likely to generate impairment losses,” the Jefferis analysts wrote.

(Updates with detail of deal.)

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