MergerMarket

Bushu Pharmaceuticals, a Japanese third-party drug manufacturer backed by Baring Private Equity Asia, is seeking more acquisitions in the next three years to grow its business, said Kenneth Albolote, Managing Director of Baring Private Equity Asia.

The contract manufacturing organization (CMO) company, which mainly serves other pharmaceutical companies in drug making, is interested in peers based in Japan or the United States, he said.

“The primary market is still in Japan, it can also support Japanese customers who have plans to sell pharmaceuticals into the US market if Bushu has manufacturing facilities or a partner there,” Albolote said.

CMO targets below 10x earnings before interest, tax, depreciation and amortization (EBITDA) and biologics companies at 10x-12x EBITDA would both be considered, he continued.

Bushu has hired ex-banker Katsuhiko Hatazawa as head of business development to screen potential deals, Albolote added. Financial advisors with quality target referral will be entertained.

It would like to fund potential acquisitions through internal cash or bank borrowings, but Baring may also be involved if it meets larger targets, he highlighted.

Bushu Pharmaceuticals is in the process of transforming to a contract development and manufacturing organization (CDMO) from a CMO, Albolote said. CDMO is more involved in research and development (R&D) discussion with clients in drug development, he explained.

Bushu agreed to acquire Takeda Pharmaceutical Company Limited [TYO:4502]’s chemistry, manufacturing and controls business on 28 February this year.

The move will allow Bushu Pharmaceuticals to strengthen its R&D ability to support clients on pharmaceutical ingredients, and pre-clinical and clinical stage products, he said.

Baring will likely benefit from the transformation given Bushu’s more diversified business model, he said, adding that there is no exit plan in the next three years, though.

He is optimistic on the future growth of Bushu Pharmaceuticals as the company focuses on patterned, long-listed products, which are performing better than global CDMO in a generic market.

Baring Private Equity Asia fully acquired Bushu Pharmaceuticals for JPY 77.3bn (USD 681m) in late-2014, according to a press statement.