Taking on Merck’s eye-care business — and letting the rheumatology one go (2014)

What it means to buy drugs that already sell

The 2014 acquisition and the 2015 divestment point in opposite directions but are two faces of one choice. What Santen bought was the core of ophthalmology — treatments for glaucoma and ocular hypertension — together with the companies needed to sell them country by country. What it gave up was the anti-rheumatic business it had run for 28 years since 1987, and the $371.8M (¥45bn) of proceeds became, directly, the capacity to invest in the eye. Within two years Santen had taken its non-ophthalmic sales to zero and extended its ophthalmic sales across Europe and Asia. The decision to buy and the decision to sell must have passed through separate approvals; seen from outside they sit on the same single line.

The reason this transaction paid off so quickly is, it seems, that what was bought were drugs already selling and the permission to sell them. The contract even assigned Santen part of the profit earned while approvals were being transferred, and 70% of the $574.5M (¥61bn) consideration was recovered in operating profit within two years and nine months. What the same company attempted in the United States was the opposite pattern — buying development assets that ought to sell in future, plus a new sales base — and that ended in the FY2022 impairment and the 2023 withdrawal from the Americas commercial business. Whether an acquisition is well or badly made shows less in the price than in what was bought.