UPDATE 3-Japan’s Otsuka picks low price end for No.1 pharma IPO

* Otsuka prices shares at lower end of range

* Otsuka to sell total $2.4 bln worth of shares

* 2nd-biggest Japan IPO this year after Dai-ichi Life

(Adds comments)

By Junko Fujita and James Topham

TOKYO, Dec 6 (BestGrowthStock) – Japan’s Otsuka Holdings
priced its $2.4 billion initial public offering at
the lower end of its range, reflecting worries the drugmaker
will struggle to find a successor for its schizophrenia drug,
Otsuka has until April 2015 until Otsuka’s patent on
Abilify expires and investors said the company has no
comparable products to replace it so far. By going public now,
Otsuka will acquire a war chest that may give it the
ammunition to shop around for a new hit remedy.
“I get the feeling it’s being discounted
because it’s future is unclear due to a lack of growth drivers
and its heavy dependence on Abilify,” said Yutaka Kakizaki, an
analyst at Chibagin Asset Management.
“It has been hard for the (pharmaceutical) sector to
bring out new drugs, so acquisitions would be a plus (in
securing growth drivers),” he said.

Otsuka, which also sells sports drinks, instant meals and
skincare products, will sell shares at 2,100 yen in its
initial public offering. Otsuka is Japan’s second-biggest
pharmaceutical group by revenue after Takeda
Pharmaceutical .

Otsuka, which developed and tied up with Bristol-Myers
Squibb to sell Abilify in the U.S. and other markets,
had sounded out investors with a price range of 2,000-2,400
yen per share, compared with its indicative price of 2,400 yen.

The conservative pricing suggests underwriters wanted to
ensure investors gain profits from what will be the largest
pharmaceuticals IPO, with the shares likely to hover above the
offer price at a time when other Japanese IPOs have made a
disappointing debut.

“Given the pricing at the lower end of the range, as well
as Otsuka’s name recognition, the stock will definitely be
popular and should perform well in the secondary market,” said
Hiroyuki Fukunaga, president of Investrust.

Earlier this year, Dai-ichi Life Insurance Co ,
Japan’s second-largest life insurer, went public with an $11
billion IPO. The shares, which were also priced cautiously,
have been trading below the IPO price for almost six months.
“Overall it’s hard to find IPOs by growing companies
these days because Japan’s economy is not growing,” said
Katsuhiko Mori, a fund manager at Daiwa SB Investments. “Most
companies which try to go public are already grown,” he

Otsuka will sell a total of 198.6 billion yen ($2.4
billion) worth of shares, exceeding Merck KGaA’s
$1.7 billion 1995 debut, previously the largest
pharmaceuticals IPO on record.

At 2,100 yen, Otsuka shares will trade at 14.7 times
expected future earnings, while Takeda trades at about 12.7

Shares of Takeda, Japan’s top drugmaker, have fallen
1.7 percent since Otsuka Holdings announced its IPO plans on
Nov. 12, prompting Otsuka to pick the lower end of its price
range, a Tokyo-based fund manager said.
Otsuka said last month it expects net profit to
grow 18 percent to 79.7 billion yen in the year to March 2011
on revenue of 1.14 trillion yen, up 5 percent.

The listing by Otsuka, which owns Ridge Vineyards in
California, will be the second-biggest in Japan this year
after that of Dai-ichi Life Insurance.

The company said it would sell 80 million new shares,
including 56.7 million shares outside Japan. Shareholders will
sell 10 million existing shares.

It has also earmarked 4.5 million shares for a green shoe
option. Otsuka shares will start changing hands on the Tokyo
bourse on Dec. 15.
(Additional reporting by Yumiko Nishitani; Editing by
Michael Watson and Tim Kelly)

UPDATE 3-Japan’s Otsuka picks low price end for No.1 pharma IPO