Chugai Denies Talk of Roche Bid, but Market Unconvinced

NEW YORK (The Deal) -- Despite a denial from the target and silence from the potential suitor, shares of Japanese drug company Chugai Pharmaceutical continue to climb as investors bet on the years-long consolidation of global drugmakers.

Chugai's stock gained 15.4%, or ¥510, to ¥3,825 Monday, amid reports majority owner Roche Holding (RHHBY) , the Swiss oncology giant, hopes to soon take the company private with a $10 billion approach. Chugai is now worth ¥2.14 trillion ($20.9 billion), though Roche has a 62% stake.

"Chugai is in no way in the process of reviewing any plan to become a wholly-owned subsidiary of Roche, nor discussing with Roche about such a transaction. Roche, as usual, is not commenting on any market rumors," Chugai said in a brief statement.

True to Chugai's word, Roche refused to comment.

Investors believe in the deal despite the deflections because drug companies around the world, including Roche, have been in a dealmaking mood for years. In just the last two months Roche itself has agreed to buy former Aragon Pharmaceuticals unit Seragon Pharmaceuticals, of San Diego, and Copenhagen-based Santaris Pharma for as much as $425 million.


Seragon is developing a new breast cancer treatment and Santaris is developing technology to target mutations in RNA, also to battle cancer.

Roche first bought a majority of Chugai in 2002 to move into Japan. It then increased the holding in 2008.

Swallowing the company would allow Roche to gain all the proceeds from Chugai's Alecensa lung cancer treatment and Actemra arthritis drug and eliminate the headache of complying with the Japanese listing regulations.

Bloomberg originally broke the story of a potential offer and claimed a deal may be announced this week - or not at all.

The deal would be Roche's biggest since it flopped down $46.8 billion to buy its former South San Francisco-based drug development partner Genentech and become the world's biggest oncology company.

Roche shares gained 2 Swiss francs to Sfr261.90 ($289.59) in mid-day Zurich trading.

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