Monday, 7 July 2008

Kirin Diversifying into Pharmaceuticals

Howard wrote in a while back that his "fave Japanese beer maker is diversifying," sending in a story from the WSJ (no link available), which I am finally getting around to posting:

While brewers in the U.S. and Europe are buying each other to remain competitive, some Japanese beer makers are taking a different approach: They are expanding in a range of businesses, including pharmaceuticals.

The latest foray by a Japanese brewer came early Monday, when Kirin Holdings Co., Japan's biggest brewer by market capitalization, said it will offer to buy a 50.1% stake in Kyowa Hakko Kogyo Co., a midsize drug company, for 1,500 yen ($13.09) a share in a friendly tender offer. The deal could value Kyowa Hakko, which makes allergy medications and cancer therapies, at roughly $5.2 billion. In its fiscal year ended in March, Kyowa Hakko reported net income of 12.6 billion yen ($109.9 million) on revenue of 354.2 billion yen.

It may seem odd for a beer maker to be keen to acquire a pharmaceutical company. But Kirin already has a sizable pharmaceutical operation that generates 10% of its operating profit and is counting on the business to become a growth area.

The diversification of its portfolio should allow Kirin to better weather tough times, and considering that alcohol is technically a drug anyway, the move doesn't seem that odd at all. The Wall Street Journal notes a further synergy:

Many modern drugs, particularly complex protein therapies, are made using technology similar to the fermentation technology the beer companies employ.
As the technology behind bioreactors and synthetic genomics advances, these synergies will only become more compelling.

The original story sent in is a bit out of date, so I dug around and found that this acquisition did in fact go through, and a new strategic alliance is in the works:
Through this strategic alliance, the two groups will endeavor to build a global leader in the research and development-driven life sciences business based in Japan, which is centered on pharmaceutical operations with strengths in biotechnology. The new company Kyowa Hakko Kirin Co., Ltd. will start operating on October 1, 2008.

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