Japan’s Sawai Pharmaceutical to acquire the generics business of U.S. Upsher-Smith Laboratories.

Sawai Pharmaceutical Co. Ltd., a Japanese generic pharmaceuticals manufacturer, and Upsher-Smith Laboratories, Inc., an established generics manufacturer based in Minnesota, announced the signing of an agreement for Sawai to purchase the generic pharmaceuticals business of Upsher-Smith, from its parent, Acova, Inc.

Upsher-Smith is a privately held U.S. pharmaceutical company, owned by the Evenstad family through their company, Acova. Mark Evenstad is the CEO of Upsher-Smith, and his father, Ken Evenstad is the chairman. Upsher-Smith has a diversified product portfolio of over 30 pharmaceutical products, mainly oral solid preparations, and a pipeline of over 30 products. 

Under the agreement signed Monday, Sawai will purchase all the equity interest in the generic pharmaceuticals business of Upsher-Smith from Acova, for consideration of $1.05 billion. The transaction will be financed by bank loans and available cash. It is expected to close near the end of June 2017, subject to customary regulatory approvals.

Rusty Field, the current president of Upsher-Smith, will continue leading the company. Following the closing, Upsher-Smith’s non-generic pharmaceuticals businesses will remain with Acova. 

The acquisition will mark a major expansion of Sawai’s presence in the U.S. market. Moving forward, Sawai plans to build a U.S. business that leverages its intellectual property and combines R&D capabilities with Upsher-Smith’s manufacturing base, strong distribution network, established commercial relationships and highly respected brand. For Upsher-Smith, the acquisition brings access to Sawai’s manufacturing technology and opportunities to bring its medicines to new markets, like Japan.

Since its founding in 1919, Upsher-Smith has delivered high-value, high-quality pharmaceuticals. The company offers a broad array of generic and branded medications, and through its pharmacist heritage, has built long-standing relationships with pharmacies, wholesalers, retailers and healthcare organizations to distribute its products. 

“Upsher-Smith has developed and delivered crucial therapies to patients, from infants to the elderly, with a broad array of on-market generic pharmaceuticals. We have also built a pipeline that will enable even more patients to get life-changing therapies over the next several years. After owning and operating Upsher-Smith for the past 47 years, my family and I made the decision to sell the largest part of our company, the generic pharmaceuticals business, to Sawai,” said Mark Evenstad, CEO.

With the aging Japanese population, and the increasing focus on bringing down the cost of medicines, in 2015 the Japanese government set a target of raising the share of generic prescriptions to 80 percent by fiscal 2020¹. In August 2016, Sawai announced in its medium-term business plan, “M1 Trust 2018,” focused on providing a stable supply of generics to meet this government goal and maintaining its undisputed number one position among manufacturers of generic medicines. As part of this medium-term business plan, Sawai spelled out its intent to target the U.S., the world’s largest pharmaceutical market, for expansion.

“We are delighted to sign this agreement today with Acova to acquire Upsher-Smith, which is our first overseas investment,” said Mitsuo Sawai, Sawai president. “Upsher-Smith, like Sawai, has a long history as a private family owned generic pharmaceuticals company that is also focused on patient needs, centered on our philosophy of ‘Patients First.’ We look forward to working closely with Rusty and the talented management team to forge a new global chapter in Upsher-Smith’s future together. Most importantly, we are committed to the entire team at Upsher-Smith, and to expanding the opportunities for the U.S. workforce at Upsher-Smith.”

No changes to Upsher-Smith’s operations are currently anticipated, and under the leadership of Rusty Field, the current management team will continue to lead Upsher-Smith from its current headquarters in Minneapolis. 

There will be no effect from this transaction on Sawai’s consolidated business forecast for the fiscal year ending March 31, 2017. Sawai will announce any impact on business results for the fiscal year ending March 31, 2018 when these details are confirmed.

Sawai’s financial advisors are Torreya Partners LLC and SMBC Nikko Securities Inc., and legal counsel is Debevoise & Plimpton. J.P. Morgan Securities LLC and BMO Capital Markets served as financial advisors to Upsher-Smith, and Lindquist & Vennum LLP served as legal counsel to Upsher-Smith.
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¹ Japan’s “Honebuto Policy 2015,” confirmed by the Abe Cabinet in June 2015.

(Source: Sawai Pharmaceutical Co. Ltd.)