Takeda Pharmaceutical : Astellas ramps up M&A, buys U.S. biotech Xyphos for as much as $665 million

Astellas Pharma Inc has bought U.S.-based Xyphos Biosciences Inc to expand its immuno-oncology business, a deal worth up to $665 million including potential development milestones and its second acquisition announced this month.

Japan's second biggest drugmaker by sales paid $120 million upfront for Xyphos and the rest will be milestone payments, the companies said in a statement.

Astellas also said this month it had agreed to purchase Audentes Therapeutics Inc for about $3 billion to expand its push into genetic medicines. The deal is due to close in January.

Immuno-oncology, which seeks to use the body's own defense systems to fight cancer, is a primary focus for Astellas and under the deal, the Japanese firm will gain Xyphos' cell therapy technology platform and its research team.

"Combining this technology with our capabilities in cell therapy that we have been working on so far, we can create next-generation high-function cells and maximize the value of our technology," Astellas President Kenji Yasukawa said in the statement.

Xyphos' proprietary molecules can be delivered to natural immune cells or to engineered Chimeric Antigen Receptor (CAR) cells to generate immunotherapies for oncology.

Xyphos' first CAR cell product candidate is in preclinical development and is scheduled to be tested in a first-in-human clinical study in 2021, the statement said.

Both Xyphos and Audentes are based in San Francisco, a hub for biotech companies that are fetching huge premiums for global pharma companies eager to bolster their drug pipelines.

Japanese companies have agreed to more than 30 overseas acquisitions worth about $6 billion in the healthcare sector this year, according to Refinitiv data. That's still dwarfed by the $59 billion takeover of Britain's Shire Plc by Japanese market leader Takeda Pharmaceutical Co Ltd announced in 2018.

Astellas' purchase of Audentes was its second biggest on record after its 2010 purchase of OSI Pharmaceuticals Inc for $3.8 billion.

In the wake of the Audentes deal, Moody's put its A1 ratings on Astellas under review for a downgrade, saying the company's willingness to use debt to fund the purchase, worth 8 times the target's book equity, signaled an "an urgency for Astellas to feed its long-term product pipeline."

Shares in Astellas gained 0.7%, outperforming a largely flat broader market <.N225> ahead of the New Year holiday.

By Rocky Swift