Taisho Pharmaceutical Co. is in talks with Astellas Pharma Inc. to buy its over-the-counter drug unit Zepharma Inc., sources said Thursday.
The two firms will soon make a final decision, the sources said. If the deal is struck, Astellas will withdraw from the OTC drug market and concentrate on prescription drugs.
Taisho, the top domestic manufacturer of OTC drugs, is performing poorly and wants to strengthen its competitiveness by acquiring Zepharma, the sources said.
Zepharma, which ranks eighth in the OTC market, sells the popular Gaster 10 stomach medication.
Astellas wants to sell Zepharma as it is not expecting strong growth in the domestic OTC market and has spoken with other pharmaceutical firms about a possible sale, the sources said.
Astellas said in a statement issued Thursday it is considering several ways to maximize its corporate value, but has not yet made any decisions, including whether it will sell Zepharma to Taisho.
Taisho issued a similar statement on its discussions with Astellas.
A Taisho buyout of Zepharma could boost the realignment of Japan's pharmaceutical industry.
Major OTC makers are expected to face tough market conditions, with other types of health products gaining popularity, industry analysts said.
Astellas was formed in April through the merger of Yamanouchi Pharmaceutical Co. and Fujisawa Pharmaceutical Co. Ahead of that merger, Yamanouchi and Fujisawa integrated their OTC divisions to create Zepharma in October 2004.
Zepharma is expected to post an operating profit of 1.4 billion yen on sales of 23 billion yen for fiscal 2005.
Zepharma was in the red shortly after its creation but its performance has been improving recently.